Intel 2008 Annual Report Download - page 90

Table of Contents
INTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Our currency risk management programs include:
Interest Rate Risk
Our primary objective for holding investments in debt instruments is to preserve principal while maximizing yields. We
generally swap the returns on our investments in fixed-rate debt instruments with remaining maturities longer than six months
into U.S. dollar three-month LIBOR-based returns unless management specifically approves otherwise.
Our interest rate risk management programs include:
Equity Market Risk
Our marketable investments include marketable equity securities and equity derivative instruments such as warrants and
options. To the extent that our marketable equity securities have strategic value, we typically do not attempt to reduce or
eliminate our market exposure; however, for our investments in strategic equity derivative instruments, including warrants, we
may enter into transactions to reduce or eliminate the market risks. For securities that we no longer consider strategic, we
evaluate legal, market, and economic factors in our decision on the timing of disposal and whether it is possible and
appropriate to hedge the equity market risk.
81
• Currency derivatives with cash flow hedge accounting designation
that utilize currency forward contracts and currency
options to hedge exposures to the variability in the U.S.-dollar equivalent of anticipated
non-U.S.-dollar-denominated cash flows. These instruments generally mature within 12 months. For these derivatives,
we report the after-tax gain or loss from the effective portion of the hedge as a component of accumulated other
comprehensive income (loss) in stockholders’ equity and reclassify it into earnings in the same period or periods in
which the hedged transaction affects earnings, and within the same line item on the consolidated statements of income
as the impact of the hedged transaction.
• Currency derivatives with fair value hedge accounting designation
that utilize currency forward contracts and currency
options to hedge the fair value exposure of recognized foreign-currency-
denominated assets or liabilities, or previously
unrecognized firm commitments. For fair value hedges, we recognize gains or losses in earnings to offset fair value
changes in the hedged transaction. As of December 27, 2008 and December 29, 2007, we did not have any derivatives
designated as foreign currency fair value hedges.
• Currency derivatives without hedge accounting designation that utilize currency forward contracts or currency interest
rate swaps to economically hedge the functional currency equivalent cash flows of recognized monetary assets and
liabilities and non-U.S.-dollar-denominated debt instruments classified as trading assets. The maturity of these
instruments generally occurs within 12 months, except for derivatives associated with certain long-term equity-related
investments that generally mature within five years. Changes in the U.S.-dollar-equivalent
cash flows of the underlying
assets and liabilities are approximately offset by the changes in fair values of the related derivatives. We record net
gains or losses in the income statement line item most closely associated with the economic underlying, primarily in
interest and other, net, except for equity-related gains or losses, which we primarily record in gains (losses) on other
equity investments, net.
•
Interest rate derivatives with cash flow hedge accounting designation
that utilize interest rate swap agreements to
modify the interest characteristics of some of our investments. For these derivatives, we report the after-
tax gain or loss
from the effective portion of the hedge as a component of accumulated other comprehensive income (loss) and
reclassify it into earnings in the same period or periods in which the hedged transaction affects earnings, and within the
same income statement line item as the impact of the hedged transaction.
•
Interest rate derivatives with fair value hedge accounting designation
that utilize interest rate swap agreements to
hedge the fair values of debt instruments. We recognize the gains or losses from the changes in fair value of these
instruments, as well as the offsetting change in the fair value of the hedged long-term debt, in interest expense. As of
December 27, 2008 and December 29, 2007, we did not have any interest rate derivatives designated as fair value
hedges.
•
Interest rate derivatives without hedge accounting designation
that utilize interest rate swaps and currency interest rate
swaps in economic hedging transactions, including hedges of non-U.S.-dollar-denominated debt instruments classified
as trading assets. Floating interest rates on the swaps are reset on a monthly, quarterly, or semiannual basis. Changes in
fair value of the debt instruments classified as trading assets are generally offset by changes in fair value of the related
derivatives, both of which are recorded in interest and other, net.