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75732me_10K.indd 67 6/25/13 6:39 PM
Table of Contents
Medtronic, Inc.
Notes to Consolidated Financial Statements (Continued)
Elements of the consolidated statements of earnings are translated at average currency exchange rates in effect during the period
and foreign currency transaction gains and losses are included in other expense, net in the consolidated statements of earnings.
Comprehensive Income and Accumulated Other Comprehensive Loss In addition to net earnings, comprehensive income
includes changes in currency exchange rate translation adjustments, unrealized gains and losses on currency exchange rate
derivative contracts and interest rate derivative instruments qualifying and designated as cash flow hedges, net changes in retirement
obligation funded status, and unrealized gains and losses on available-for-sale marketable securities. Taxes are not provided on
cumulative translation adjustments as substantially all translation adjustments relate to earnings that are intended to be indefinitely
reinvested outside the U.S.
Presented below is a summary of activity for each component of accumulated other comprehensive loss for fiscal years 2013,
2012, and 2011:
Unrealized Net Change Unrealized Accumulated
Gain (Loss) Cumulative in Gain (Loss) Other
on Translation Retirement on Comprehensive
(in millions) Investments Adjustments Obligations Derivatives Loss
Balance as of April 30, 2010 $ (30) $ 243 $ (612) $ 92 $ (307)
Other comprehensive (loss) income 226 200 5 (348) 83
Balance as of April 29, 2011 $ 196 $ 443 $ (607) $ (256) $ (224)
Other comprehensive (loss) income (66) (137) (227) 181 (249)
Balance as of April 27, 2012 $ 130 $ 306 $ (834) $ (75) $ (473)
Other comprehensive (loss) income (33) (21) (18) 53 (19)
Balance as of April 26, 2013 $ 97 $ 285 $ (852) $ (22) $ (492)
During fiscal year 2011, the Company received shares in the form of a dividend related to a previous cost method investment, and
in accordance with authoritative guidance, the Company recorded these shares as an investment and correspondingly recorded an
unrealized gain. Included in cumulative translation adjustments is translation on certain foreign exchange rate derivatives held by
non-U.S. functional currency entities.
Refer to the consolidated statements of comprehensive income for additional information.
Derivatives U.S. GAAP requires companies to recognize all derivatives as assets and liabilities on the balance sheet and to
measure the instruments at fair value through earnings unless the derivative qualifies as a hedge. If the derivative is a hedge,
depending on the nature of the hedge and hedge effectiveness, changes in the fair value of the derivative will either be recognized
currently through earnings or recorded in other comprehensive income (loss) until the hedged item is recognized in earnings upon
settlement/termination. The changes in the fair value of the derivative are intended to offset the change in fair value of the hedged
asset, liability, or probable commitment. The Company evaluates hedge effectiveness at inception and on an ongoing basis. If a
derivative is no longer expected to be highly effective, hedge accounting is discontinued. Hedge ineffectiveness, if any, is recorded
in earnings.
The Company uses operational and economic hedges, as well as currency exchange rate derivative contracts and interest rate
derivative instruments, to manage the impact of currency exchange and interest rate changes on earnings and cash flows. In order
to minimize earnings and cash flow volatility resulting from currency exchange rate changes, the Company enters into derivative
instruments, principally forward currency exchange rate contracts. These contracts are designed to hedge anticipated foreign
currency transactions and changes in the value of specific assets and liabilities. At inception of the forward contract, the derivative
is designated as either a freestanding derivative or cash flow hedge. The primary currencies of the derivative instruments are the
Euro and the Japanese Yen. The Company does not enter into currency exchange rate derivative contracts for speculative purposes.
All derivative instruments are recorded at fair value on the consolidated balance sheets, as a component of prepaid expenses and
other current assets, other assets, other accrued expenses, or other long-term liabilities depending upon the gain or loss position
of the contract and contract maturity date.
Forward currency exchange rate contracts designated as cash flow hedges are designed to hedge the variability of cash flows
associated with forecasted transactions denominated in a foreign currency that will take place in the future. Changes in value of
derivatives designated as cash flow hedges are recorded in accumulated other comprehensive loss on the consolidated balance
sheets until earnings are affected by the variability of the underlying cash flows. At that time, the applicable amount of gain or
loss from the derivative instrument that is deferred in shareholders’ equity is reclassified into earnings and is included in other
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