Microsoft 2009 Annual Report Download - page 54

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PAGE 54
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
GROSS FAIR VALUES OF DERIVATIVE INSTRUMENTS (EXCLUDING FIN NO. 39(A) NETTING)
June 30, 2009
(In millions)
Foreign
Exchange
Contracts
Equity
Contracts
Interest
Rate
Contracts
Credit
Contracts
Commodity
Contracts
Total
Derivatives
Assets
Derivatives not designated as
hedging instruments
Short-term investments $ 9 $78 $ 44 $ 21
$ 2 $ 154
Other current assets 48 – – –
– 48
Total $ 57 $78 $ 44 $ 21
$ 2 $ 202
Derivatives designated as hedging
instruments
Short-term investments $ 12 $ – $ – $ –
$ – $ 12
Other current assets 417 – – –
– 417
Equity and other investments – 2 – –
– 2
Total $ 429 $ 2 $ – $ –
$ – $ 431
Total assets(b) $ 486 $80 $ 44 $ 21
$ 2 $ 633
Liabilities
Derivatives not designated as
hedging instruments
Other current liabilities $(183 ) $ (3) $(20) $(62 )
$(6) $(274 )
Derivatives designated as hedging
instruments
Other current liabilities $ (75 ) $ – $ – $ –
$ – $ (75 )
Total liabilities(b) $(258 ) $ (3) $(20) $(62 )
$(6) $(349 )
(a) FIN No. 39, Offsetting of Amounts Related to Certain Contracts – an interpretation of APB No. 10 and FASB
Statement No. 105, permits the netting of derivative assets and derivative liabilities when a legally enforceable
master netting agreement exists. These amounts include fair value adjustments related to our own credit risk
and counterparty credit risk.
(b) See Note 6 – Fair Value Measurements.
FAIR-VALUE HEDGES
For a derivative instrument designated as a fair-value hedge, the gain (loss) is recognized in earnings in the period
of change together with the offsetting loss or gain on the hedged item attributed to the risk being hedged. For options
designated as fair-value hedges, changes in the time value are excluded from the assessment of hedge
effectiveness and are recognized in earnings.
During fiscal year 2009, we recognized in other income (expense) the following gains (losses) on fair value
hedged derivatives and their related hedged items:
(In millions)
Foreign
Exchange
Contracts
Equity
Contracts
Derivatives $121 $191
Hedged items (120 )(211)
Total $ 1 $ (20)