Coca Cola 2014 Annual Report Download - page 99

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97
The Company uses fair value hedges to minimize exposure to changes in the fair value of certain available-for-sale securities
from fluctuations in foreign currency exchange rates. The changes in fair values of derivatives designated as fair value hedges and
the offsetting changes in fair values of the hedged items are recognized in earnings. The changes in fair values of hedges that are
determined to be ineffective are immediately recognized into earnings. The total notional values of derivatives that related to our fair
value hedges of this type were $1,358 million and $996 million as of December 31, 2014 and 2013, respectively.
The following table summarizes the pretax impact that changes in the fair values of derivatives designated as fair value hedges had on
earnings during the years ended December 31, 2014, 2013 and 2012 (in millions):
Hedging Instruments and Hedged Items Location of Gain (Loss)
Recognized in Income Gain (Loss
Recognized in Income1)
2014
Interest rate contracts Interest expense $ 18
Fixed-rate debt Interest expense 11
Net impact to interest expense $ 29
Foreign currency contracts Other income (loss) — net $ 132
Available-for-sale securities Other income (loss) — net (165)
Net impact to other income (loss) — net $
(33)
Net impact of fair value hedging instruments $ (4)
2013
Interest rate contracts Interest expense $ (193)
Fixed-rate debt Interest expense 240
Net impact to interest expense $ 47
Foreign currency contracts Other income (loss) — net $ 24
Available-for-sale securities Other income (loss) — net (48)
Net impact to other income (loss) — net $ (24)
Net impact of fair value hedging instruments $ 23
2012
Interest rate contracts Interest expense $ 89
Fixed-rate debt Interest expense (42)
Net impact to interest expense $ 47
Foreign currency contracts Other income (loss) — net $ 42
Available-for-sale securities Other income (loss) — net (46)
Net impact to other income (loss) — net $ (4)
Net impact of fair value hedging instruments $ 43
1 The net impacts represent the ineffective portions of the hedge relationships and the amounts excluded from the assessment of hedge effectiveness.
Hedges of Net Investments in Foreign Operations Strategy
The Company uses forward contracts to protect the value of our investments in a number of foreign subsidiaries. For derivative
instruments that are designated and qualify as hedges of net investments in foreign operations, the changes in fair values of the
derivative instruments are recognized in net foreign currency translation gain (loss), a component of AOCI, to offset the changes in
the values of the net investments being hedged. Any ineffective portions of net investment hedges are reclassified from AOCI into
earnings during the period of change. The total notional values of derivatives under this hedging program were $2,047 million and
$2,024 million as of December 31, 2014 and 2013, respectively.