Medtronic 2011 Annual Report Download - page 59

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55
Medtronic, Inc.
(in millions)
Unrealized
Gain/(Loss) on
Investments
Cumulative
Translation
Adjustments
Net Change
in Retirement
Obligations
Unrealized
Gain/(Loss) on
Foreign Currency
Exchange Rate
Derivatives
Accumulated
Other
Comprehensive
Loss
Balance as of April 25, 2008 $ (41) $ 209 $ (189) $ (266) $ (286)
Other comprehensive (loss)/income (54) (147) (210) 494 83
Adjustment for change in plan measurement date pursuant
to the new authoritative guidance for accounting for
defined benefit pension and other post-retirement plans — — 1 — 1
Balance as of April 24, 2009 $ (95) $ 62 $ (398) $ 228 $ (202)
Other comprehensive (loss)/income 68 181 (214) (137) (102)
Reclassification of other-than-temporary losses on
marketable securities included in net earnings (3) — — — (3)
Balance as of April 30, 2010 $ (30) $ 243 $ (612) $ 91 $ (307)
Other comprehensive (loss)/income 226 200 5 (348) 83
Balance as of April 29, 2011 $196 $443 $(607) $(257) $(224)
Translation adjustments are not adjusted for income taxes
as substantially all translation adjustments relate to permanent
investments in non-U.S. subsidiaries. The tax expense/(benefit) on
the unrealized gain/(loss) on foreign exchange derivatives in fiscal
years 2011, 2010, and 2009 was $(183) million, $(75) million, and
$320 million, respectively. The tax expense/(benefit) related to the
net change in retirement obligations was $3 million, $(112) million,
and $(109) million in fiscal years 2011, 2010, and 2009, respectively.
The Company adopted measurement date authoritative guidance
for defined benefit plans in the fourth quarter of fiscal year 2009,
which resulted in a one-time adjustment to retained earnings and
accumulated other comprehensive loss in that period. The tax
expense on the adjustment to other comprehensive loss for the
change in measurement date was less than $1 million. The tax
expense/(benefit) on the unrealized gain/(loss) on investments in
fiscal years 2011, 2010, and 2009 was $130 million, $35 million, and
$(33) million, respectively. During fiscal year 2011, the Company
received shares in the form of a dividend related to a previous
cost method investment, and in accordance with authoritative
guidance, the Company recorded these shares as an investment
and correspondingly recorded an unrealized gain.
Derivatives U.S. GAAP requires companies to recognize all
derivatives as assets and liabilities on the balance sheet and to
measure the instruments at fair value through earnings unless
the derivative qualifies as a hedge. If the derivative is a hedge,
depending on the nature of the hedge and hedge effectiveness,
changes in the fair value of the derivative will either be recorded
currently through earnings or recognized in accumulated other
comprehensive loss on the consolidated balance sheets until
the hedged item is recognized in earnings upon settlement/
termination. The changes in the fair value of the derivative are
intended to offset the change in fair value of the hedged asset,
liability, or probable commitment. The Company evaluates hedge
effectiveness at inception and on an ongoing basis. If a derivative
is no longer expected to be highly effective, hedge accounting
is discontinued. Hedge ineffectiveness, if any, is recorded in
earnings.
as currency exchange rate derivative instruments, to manage the
impact of currency exchange rate changes on earnings and cash
flows. In order to minimize earnings and cash flow volatility
resulting from currency exchange rate changes, the Company
enters into derivative instruments, principally forward currency
exchange rate contracts. These contracts are designed to hedge
anticipated foreign currency transactions and changes in the
value of specific assets, liabilities, and probable commitments. At
inception of the contract, the derivative is designated as either
a freestanding derivative or a cash flow hedge. The primary
currencies of the derivative instruments are the Euro and the
Japanese Yen. The Company does not enter into currency
exchange rate derivative instruments for speculative purposes.
All derivative instruments are recorded at fair value on the
consolidated balance sheets, as a component of prepaid expenses
and other current assets, other assets, other accrued expenses, or
other long-term liabilities depending upon the gain or loss position
of the contract and contract maturity date.
The Company uses operational and economic hedges, as well
Presented below is a summary of activity for each component of accumulated other comprehensive loss for fiscal years 2011, 2010,
and 2009: