Medtronic 2014 Annual Report Download - page 81

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Medtronic, Inc.
Notes to Consolidated Financial Statements (Continued)
is available. BESP is determined in a manner consistent with that used to establish the price to sell the deliverable on a
standalone basis.
Shipping and Handling Shipping and handling costs incurred were $194 million, $182 million, and $167 million in fiscal
years 2014, 2013, and 2012, respectively, and are included in selling, general, and administrative expense in the consolidated
statements of earnings.
Research and Development Research and development costs are expensed when incurred. Research and development costs
include costs of all basic research activities as well as other research, engineering, and technical effort required to develop a new
product or service or make significant improvement to an existing product or manufacturing process. Research and development
costs also include pre-approval regulatory and clinical trial expenses.
Other Expense, Net Other expense, net includes royalty income and expense, realized equity security gains and losses,
realized foreign currency transaction and derivative gains and losses, impairment charges on equity securities, the Puerto Rico
excise tax, and the U.S. medical device excise tax.
Stock-Based Compensation The Company’s compensation programs include share-based payments. All awards under share-
based payment programs are accounted for at fair value and these fair values are generally amortized on a straight-line basis
over the vesting terms into cost of products sold, research and development expense, and selling, general, and administrative
expense in the consolidated statements of earnings, as appropriate. Refer to Note 12 for additional information.
Foreign Currency Translation Assets and liabilities of non-U.S. dollar functional currency entities are translated to U.S.
dollars at period-end exchange rates, and the resulting gains and losses arising from the translation of those net assets are
recorded as a cumulative translation adjustment, a component of accumulated other comprehensive loss on the consolidated
balance sheets. 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
and 2012:
(in millions)
Unrealized
Gain (Loss)
on
Available-for-
Sale Securities
Cumulative
Translation
Adjustments
Net Change
in
Retirement
Obligations
Unrealized
Gain (Loss)
on
Derivatives
Accumulated
Other
Comprehensive
Loss
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)
Correction of classification — (80) — 80 —
Balance as of April 26, 2013 $ 97 $ 205 $ (852) $ 58 $ (492)
Included in cumulative translation adjustments is translation on certain foreign exchange rate derivatives held by non-U.S.
dollar functional currency entities. In fiscal year 2014, the Company corrected the classification of cumulative translation of the
unrealized gains (losses) on certain foreign exchange rate derivatives held by non-U.S. dollar functional currency entities from
73