Ford 2012 Annual Report Download - page 130

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128 Ford Motor Company | 2012 Annual Report
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 18. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)
Our Financial Services sector reports net interest settlements and accruals and changes in the fair value of interest
rate swaps not designated as hedging instruments in Financial Services other income/(loss) net. Foreign currency
revaluation on accrued interest along with gains and losses on foreign exchange contracts and cross currency interest
rate swaps are reported in Financial Services Operating and other expenses. Cash flows associated with non-designated
or de-designated derivatives are reported in Net cash provided by/(used in) investing activities in our statements of cash
flows.
Net Investment Hedges. We have used foreign currency exchange derivatives to hedge the net assets of certain
foreign entities to offset the translation and economic exposures related to our investment in these entities. The effective
portion of changes in the value of designated instruments (i.e., the spot-to-spot) is included in Accumulated other
comprehensive income/(loss) as a foreign currency translation adjustment until the hedged investment is sold or
liquidated. When the investment is sold or liquidated, the hedge gains and losses previously reported in Accumulated
other comprehensive income/(loss) are recognized in Automotive interest income and other income/(loss), net as part of
the gain or loss on sale. Presently, we have had no derivative instruments in an active net investment hedging
relationship.
Normal Purchases and Normal Sales Classification. We have elected to apply the normal purchases and normal
sales classification for physical supply contracts that are entered into for the purpose of procuring commodities to be used
in production over a reasonable period in the normal course of our business.