Kodak 2005 Annual Report Download - page 98

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96
The Company does not apply hedge accounting to the foreign currency forward contracts used to offset currency-related changes in the fair value
of foreign currency denominated assets and liabilities. These contracts are marked to market through net (loss) earnings at the same time that the
exposed assets and liabilities are remeasured through net (loss) earnings (both in other income (charges), net). The majority of the contracts of this
type held by the Company are denominated in euros. At December 31, 2005, the fair value of these open contracts was an unrealized gain of
$1 million (pre-tax).
The Company has entered into silver forward contracts that are designated as cash fl ow hedges of price risk related to forecasted worldwide
silver purchases. Hedge gains and losses are reclassifi ed into cost of goods sold as silver-containing products are sold to third parties. At
December 31, 2005, the Company had open forward contracts with maturities through April 2006.
At December 31, 2005, the fair value of open silver forward contracts was an unrealized gain of $2 million (pre-tax), included in accumulated other
comprehensive (loss) income. If this amount were to be realized, all of it would be reclassifi ed into cost of goods sold during the next twelve months.
Additionally, realized gains of $1 million (pre-tax), related to closed silver contracts, have been deferred in accumulated other comprehensive (loss)
income. These gains will be reclassifi ed into cost of goods sold within the next twelve months. During 2005, gains of $5 million (pre-tax) were
reclassifi ed from accumulated other comprehensive (loss) income to cost of goods sold. Hedge ineffectiveness was insignifi cant.
The Company’s fi nancial instrument counterparties are high-quality investment or commercial banks with signifi cant experience with such
instruments. The Company manages exposure to counterparty credit risk by requiring specifi c minimum credit standards and diversifi cation of
counterparties. The Company has procedures to monitor the credit exposure amounts. The maximum credit exposure at December 31, 2005 was
not signifi cant to the Company.
NOTE 14: OTHER INCOME (CHARGES), NET
(in millions) 2005 2004 2003
Income (charges):
Investment income $ 25 $ 18 $ 19
Loss on foreign exchange transactions (31) (10) (10)
Equity in income (losses) of unconsolidated affi liates 12 30 (41)
Gain on sales of capital assets 74 15 13
Interest on past-due receivables and fi nance revenue on sales 4 4 5
Minority interest (4) (2) (24)
Non-strategic venture investment impairments — — (4)
Sun Microsystems settlement — 92 —
Legal settlement — 9 —
Asset impairment (25) — —
Lucky Film impairment (19) — —
Other 8 5 (9)
Total $ 44 $ 161 $ (51)