Yahoo 2013 Annual Report Download - page 108

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The notional amounts of the foreign currency forward contracts were $3 billion as of December 31, 2012 and
$1.3 billion as of December 31, 2013, respectively. The fair value of the foreign currency forward contract assets
were $3 million and $209 million as of December 31, 2012 and 2013, respectively, and were included in prepaid
expenses and other current assets on the Company’s consolidated balance sheets. Pre-tax gains of $3 million and
$510 million were recorded as of December 31, 2012 and December 31, 2013, respectively, and were included in
accumulated other comprehensive income on the Company’s consolidated balance sheets. The Company did not
enter into any net investment hedges in the year ended December 31, 2011. The Company received $304 million
in cash for settlement of certain foreign currency forward contracts during year ended December 31, 2013.
Cash Flow Hedges. The Company entered into foreign currency forward contracts designated as cash flow
hedges of varying maturities through July 31, 2014. For derivatives designated as cash flow hedges, the effective
portion of the unrealized gains or losses on these forward contracts is recorded in accumulated other
comprehensive income on the Company’s consolidated balance sheets and reclassified into revenue on the
consolidated statements of income when the underlying hedged revenue is recognized. If the cash flow hedges
were to become ineffective, the ineffective portion would be immediately recorded in other income, net on the
Company’s consolidated statements of income. The cash flow hedges were considered to be effective as of
December 31, 2013. The total notional amount of the foreign currency forward contracts was $56 million as of
December 31, 2013. The fair value of the foreign currency forward contract assets was $4 million as of
December 31, 2013 which was included in prepaid expenses and other current assets on the Company’s
consolidated balance sheets. A pre-tax net gain of $2 million was recorded as of December 31, 2013, which was
included in accumulated other comprehensive income on the Company’s consolidated balance sheets. For year
ended December 31, 2013, the Company recorded gains of $2 million, net of tax, for cash flow hedges, which
were recorded in revenue in the consolidated statements of income. The Company received $2 million in cash for
settlement of certain foreign currency forward contracts during the year ended December 31, 2013. The
Company did not enter into any cash flow hedges in the years ended December 31, 2011 and 2012.
Balance Sheet Hedges. The Company hedges certain of its net recognized foreign currency assets and liabilities
with foreign exchange forward contracts to reduce the risk that its earnings and cash flows will be adversely
affected by changes in foreign currency exchange rates. These derivative instruments hedge assets and liabilities,
including intercompany transactions, which are denominated in foreign currencies. The Company recognizes
balance sheet derivative instruments as either an asset or a liability on the Company’s consolidated balance
sheets at fair value. Changes in the fair value of these derivatives are recorded in other income, net on the
Company’s consolidated statements of income. The notional amounts of these foreign currency forward contracts
were $356 million and $393 million as of December 31, 2012 and 2013, respectively. As of December 31, 2012
and 2013, the fair value of the foreign currency forward contract liabilities were $5 million, and less than $1
million, respectively, and were included in accrued expenses and other current liabilities on the Company’s
consolidated balance sheets. A loss of $3 million, a gain of $4 million, and a loss of $12 million were recorded
for the years ended December 31, 2011, 2012, and 2013, respectively, and were included in other income, net on
the Company’s consolidated statements of income. The Company received $7 million and paid a net $17 million
in cash for settlement of certain foreign currency forward contracts during the years ended December 31, 2012
and 2013, respectively.
Forecasted Revenue Hedges. On October 2, 2013, the Company began hedging a portion of the forecasted
revenue of certain international subsidiaries whose functional currencies are not the U.S dollar. This program
attempts to reduce the risk that its revenue denominated in these currencies will be adversely affected by foreign
currency exchange rate fluctuations. These derivatives are economic hedges and as such do not qualify for hedge
accounting. The Company recognizes these derivative instruments as either assets or liabilities on the Company’s
consolidated balance sheets at fair value. Changes in the fair value of these derivatives are recorded as a
component of revenue in the Company’s consolidated statements of income. The Company did not have any
derivative contracts related to the forecasted revenue hedge outstanding as of December 31, 2013. The Company
did not enter into any forecasted revenue hedges in the years ended December 31, 2011 and 2012.
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