Yahoo 2014 Annual Report Download - page 128

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Yahoo Japan will be adversely affected by foreign currency exchange rate fluctuations. The total of
the after-tax net investment hedge was less than the Yahoo Japan investment balance as of both
December 31, 2013 and 2014. As such, the net investment hedge was considered to be effective.
Cash Flow Hedges. The Company entered into foreign currency forward contracts designated as
cash flow hedges of varying maturities through December 31, 2015. The cash flow hedges were
considered to be effective as of December 31, 2013 and 2014. All of the forward contracts designated
as cash flow hedges that were settled were reclassified to revenue within fiscal years 2013 and 2014,
and the Company recognized the hedge forecasted revenue related to these contacts as of
December 31, 2013 and 2014. All current outstanding cash flow hedges are expected to be reclassified
into revenue during 2015. The Company did not enter into any cash flow hedges in the year ended
December 31, 2012. For the years ended December 31, 2013 and 2014, the amounts recorded in Other
income (expense), net as a result of hedge ineffectiveness and the discontinuance of cash flow
hedges because the forecasted transactions were no longer probable of occurring was not material.
Not Designated as Hedging Instruments
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.
Notional amounts of the Company’s outstanding derivative contracts as of December 31, 2012, 2013
and 2014 (in millions) were as follows:
December 31,
2012 2013 2014
Derivatives designated as hedging instruments:
Net investment hedge forward and option contracts
$2,997 $1,341 $1,647
Cash flow hedge forwards
$ — $ 56 $ 222
Derivatives not designated as hedging instruments:
Balance sheet hedges
$ 356 $ 393 $ 243
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