CSS » Topics » Derivative Financial Instruments

These excerpts taken from the CSS 10-K filed Jun 2, 2009.
Derivative Financial Instruments
 
The Company uses certain derivative financial instruments as part of its risk management strategy to reduce foreign currency risk. Derivatives are not used for trading or speculative activities.
 
The Company recognizes all derivatives on the consolidated balance sheet at fair value. On the date the derivative instrument is entered into, the Company generally designates the derivative as either (1) a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (“fair value hedge”), or (2) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow hedge”). Changes in the fair value of a derivative that is designated as, and meets all the required criteria for, a fair value hedge, along with the gain or loss on the hedged asset or liability that is attributable to the hedged risk, are recorded in current period earnings. Changes in the fair value of a derivative that is designated as, and meets all the required criteria for, a cash flow hedge are recorded in accumulated other comprehensive income and reclassified into earnings as the underlying hedged item affects earnings. The portion of the change in fair value of a derivative associated with hedge ineffectiveness or the component of a derivative instrument excluded from the assessment of hedge effectiveness is recorded currently in earnings. Also, changes in the entire fair value of a derivative that is not designated as a hedge are recorded immediately in earnings. The Company formally


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CSS INDUSTRIES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking various hedge transactions. This process includes relating all derivatives that are designated as fair value or cash flow hedges to specific assets and liabilities on the consolidated balance sheet or to specific firm commitments or forecasted transactions.
 
The Company also formally assesses, both at the inception of the hedge and on an ongoing basis, whether each derivative is highly effective in offsetting changes in fair values or cash flows of the hedged item. If it is determined that a derivative is not highly effective as a hedge or if a derivative ceases to be a highly effective hedge, the Company will discontinue hedge accounting prospectively.
 
The Company enters into foreign currency forward contracts in order to reduce the impact of certain foreign currency fluctuations. Firmly committed transactions and the related receivables and payables may be hedged with forward exchange contracts. Gains and losses arising from foreign currency forward contracts are recognized in income or expense as offsets of gains and losses resulting from the underlying hedged transactions. There were no open forward exchange contracts as of March 31, 2009 and 2008.
 
Derivative Financial Instruments
 
The Company uses certain derivative financial instruments as part of its risk management strategy to reduce foreign currency risk. Derivatives are not used for trading or speculative activities.
 
The Company recognizes all derivatives on the consolidated balance sheet at fair value. On the date the derivative instrument is entered into, the Company generally designates the derivative as either (1) a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (“fair value hedge”), or (2) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow hedge”). Changes in the fair value of a derivative that is designated as, and meets all the required criteria for, a fair value hedge, along with the gain or loss on the hedged asset or liability that is attributable to the hedged risk, are recorded in current period earnings. Changes in the fair value of a derivative that is designated as, and meets all the required criteria for, a cash flow hedge are recorded in accumulated other comprehensive income and reclassified into earnings as the underlying hedged item affects earnings. The portion of the change in fair value of a derivative associated with hedge ineffectiveness or the component of a derivative instrument excluded from the assessment of hedge effectiveness is recorded currently in earnings. Also, changes in the entire fair value of a derivative that is not designated as a hedge are recorded immediately in earnings. The Company formally


31


Table of Contents

 
CSS INDUSTRIES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking various hedge transactions. This process includes relating all derivatives that are designated as fair value or cash flow hedges to specific assets and liabilities on the consolidated balance sheet or to specific firm commitments or forecasted transactions.
 
The Company also formally assesses, both at the inception of the hedge and on an ongoing basis, whether each derivative is highly effective in offsetting changes in fair values or cash flows of the hedged item. If it is determined that a derivative is not highly effective as a hedge or if a derivative ceases to be a highly effective hedge, the Company will discontinue hedge accounting prospectively.
 
The Company enters into foreign currency forward contracts in order to reduce the impact of certain foreign currency fluctuations. Firmly committed transactions and the related receivables and payables may be hedged with forward exchange contracts. Gains and losses arising from foreign currency forward contracts are recognized in income or expense as offsets of gains and losses resulting from the underlying hedged transactions. There were no open forward exchange contracts as of March 31, 2009 and 2008.
 
Derivative
Financial Instruments



 



The Company uses certain derivative financial instruments as
part of its risk management strategy to reduce foreign currency
risk. Derivatives are not used for trading or speculative
activities.


 



The Company recognizes all derivatives on the consolidated
balance sheet at fair value. On the date the derivative
instrument is entered into, the Company generally designates the
derivative as either (1) a hedge of the fair value of a
recognized asset or liability or of an unrecognized firm
commitment (“fair value hedge”), or (2) a hedge
of a forecasted transaction or of the variability of cash flows
to be received or paid related to a recognized asset or
liability (“cash flow hedge”). Changes in the fair
value of a derivative that is designated as, and meets all the
required criteria for, a fair value hedge, along with the gain
or loss on the hedged asset or liability that is attributable to
the hedged risk, are recorded in current period earnings.
Changes in the fair value of a derivative that is designated as,
and meets all the required criteria for, a cash flow hedge are
recorded in accumulated other comprehensive income and
reclassified into earnings as the underlying hedged item affects
earnings. The portion of the change in fair value of a
derivative associated with hedge ineffectiveness or the
component of a derivative instrument excluded from the
assessment of hedge effectiveness is recorded currently in
earnings. Also, changes in the entire fair value of a derivative
that is not designated as a hedge are recorded immediately in
earnings. The Company formally





31





Table of Contents





 




CSS
INDUSTRIES, INC. AND SUBSIDIARIES




 




NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)


 



documents all relationships between hedging instruments and
hedged items, as well as its risk-management objective and
strategy for undertaking various hedge transactions. This
process includes relating all derivatives that are designated as
fair value or cash flow hedges to specific assets and
liabilities on the consolidated balance sheet or to specific
firm commitments or forecasted transactions.


 



The Company also formally assesses, both at the inception of the
hedge and on an ongoing basis, whether each derivative is highly
effective in offsetting changes in fair values or cash flows of
the hedged item. If it is determined that a derivative is not
highly effective as a hedge or if a derivative ceases to be a
highly effective hedge, the Company will discontinue hedge
accounting prospectively.


 



The Company enters into foreign currency forward contracts in
order to reduce the impact of certain foreign currency
fluctuations. Firmly committed transactions and the related
receivables and payables may be hedged with forward exchange
contracts. Gains and losses arising from foreign currency
forward contracts are recognized in income or expense as offsets
of gains and losses resulting from the underlying hedged
transactions. There were no open forward exchange contracts as
of March 31, 2009 and 2008.


 




Derivative
Financial Instruments



 



The Company uses certain derivative financial instruments as
part of its risk management strategy to reduce foreign currency
risk. Derivatives are not used for trading or speculative
activities.


 



The Company recognizes all derivatives on the consolidated
balance sheet at fair value. On the date the derivative
instrument is entered into, the Company generally designates the
derivative as either (1) a hedge of the fair value of a
recognized asset or liability or of an unrecognized firm
commitment (“fair value hedge”), or (2) a hedge
of a forecasted transaction or of the variability of cash flows
to be received or paid related to a recognized asset or
liability (“cash flow hedge”). Changes in the fair
value of a derivative that is designated as, and meets all the
required criteria for, a fair value hedge, along with the gain
or loss on the hedged asset or liability that is attributable to
the hedged risk, are recorded in current period earnings.
Changes in the fair value of a derivative that is designated as,
and meets all the required criteria for, a cash flow hedge are
recorded in accumulated other comprehensive income and
reclassified into earnings as the underlying hedged item affects
earnings. The portion of the change in fair value of a
derivative associated with hedge ineffectiveness or the
component of a derivative instrument excluded from the
assessment of hedge effectiveness is recorded currently in
earnings. Also, changes in the entire fair value of a derivative
that is not designated as a hedge are recorded immediately in
earnings. The Company formally





31





Table of Contents





 




CSS
INDUSTRIES, INC. AND SUBSIDIARIES




 




NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)


 



documents all relationships between hedging instruments and
hedged items, as well as its risk-management objective and
strategy for undertaking various hedge transactions. This
process includes relating all derivatives that are designated as
fair value or cash flow hedges to specific assets and
liabilities on the consolidated balance sheet or to specific
firm commitments or forecasted transactions.


 



The Company also formally assesses, both at the inception of the
hedge and on an ongoing basis, whether each derivative is highly
effective in offsetting changes in fair values or cash flows of
the hedged item. If it is determined that a derivative is not
highly effective as a hedge or if a derivative ceases to be a
highly effective hedge, the Company will discontinue hedge
accounting prospectively.


 



The Company enters into foreign currency forward contracts in
order to reduce the impact of certain foreign currency
fluctuations. Firmly committed transactions and the related
receivables and payables may be hedged with forward exchange
contracts. Gains and losses arising from foreign currency
forward contracts are recognized in income or expense as offsets
of gains and losses resulting from the underlying hedged
transactions. There were no open forward exchange contracts as
of March 31, 2009 and 2008.


 




These excerpts taken from the CSS 10-K filed Jun 2, 2008.
Derivative Financial Instruments
 
The Company uses certain derivative financial instruments as part of its risk management strategy to reduce foreign currency risk. Derivatives are not used for trading or speculative activities.
 
The Company recognizes all derivatives on the consolidated balance sheet at fair value. On the date the derivative instrument is entered into, the Company generally designates the derivative as either (1) a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (“fair value hedge”), or (2) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow hedge”). Changes in the fair value of a derivative that is designated as, and meets all the required criteria for, a fair value hedge, along with the gain or loss on the hedged asset or liability that is attributable to the hedged risk, are recorded in current period earnings. Changes in the fair value of a derivative that is designated as, and meets all the required criteria for, a cash flow hedge are recorded in accumulated other comprehensive loss and reclassified into earnings as the underlying hedged item affects earnings. The portion of the change in fair value of a derivative associated with hedge ineffectiveness or the component of a derivative instrument excluded from the assessment of hedge effectiveness is recorded currently in earnings. Also, changes in the entire fair value of a


27


 

 
CSS INDUSTRIES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
derivative that is not designated as a hedge are recorded immediately in earnings. The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking various hedge transactions. This process includes relating all derivatives that are designated as fair value or cash flow hedges to specific assets and liabilities on the consolidated balance sheet or to specific firm commitments or forecasted transactions.
 
The Company also formally assesses, both at the inception of the hedge and on an ongoing basis, whether each derivative is highly effective in offsetting changes in fair values or cash flows of the hedged item. If it is determined that a derivative is not highly effective as a hedge or if a derivative ceases to be a highly effective hedge, the Company will discontinue hedge accounting prospectively.
 
The Company enters into foreign currency forward contracts in order to reduce the impact of certain foreign currency fluctuations. Firmly committed transactions and the related receivables and payables may be hedged with forward exchange contracts. Gains and losses arising from foreign currency forward contracts are recognized in income or expense as offsets of gains and losses resulting from the underlying hedged transactions. There were no open forward exchange contracts as of March 31, 2008. The notional amount of open forward exchange contracts as of March 31, 2007 was $294,000 and the related gain was not material.
 
Derivative
Financial Instruments



 



The Company uses certain derivative financial instruments as
part of its risk management strategy to reduce foreign currency
risk. Derivatives are not used for trading or speculative
activities.


 



The Company recognizes all derivatives on the consolidated
balance sheet at fair value. On the date the derivative
instrument is entered into, the Company generally designates the
derivative as either (1) a hedge of the fair value of a
recognized asset or liability or of an unrecognized firm
commitment (“fair value hedge”), or (2) a hedge
of a forecasted transaction or of the variability of cash flows
to be received or paid related to a recognized asset or
liability (“cash flow hedge”). Changes in the fair
value of a derivative that is designated as, and meets all the
required criteria for, a fair value hedge, along with the gain
or loss on the hedged asset or liability that is attributable to
the hedged risk, are recorded in current period earnings.
Changes in the fair value of a derivative that is designated as,
and meets all the required criteria for, a cash flow hedge are
recorded in accumulated other comprehensive loss and
reclassified into earnings as the underlying hedged item affects
earnings. The portion of the change in fair value of a
derivative associated with hedge ineffectiveness or the
component of a derivative instrument excluded from the
assessment of hedge effectiveness is recorded currently in
earnings. Also, changes in the entire fair value of a





27





 





 




CSS
INDUSTRIES, INC. AND SUBSIDIARIES




 




NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)


 



derivative that is not designated as a hedge are recorded
immediately in earnings. The Company formally documents all
relationships between hedging instruments and hedged items, as
well as its risk-management objective and strategy for
undertaking various hedge transactions. This process includes
relating all derivatives that are designated as fair value or
cash flow hedges to specific assets and liabilities on the
consolidated balance sheet or to specific firm commitments or
forecasted transactions.


 



The Company also formally assesses, both at the inception of the
hedge and on an ongoing basis, whether each derivative is highly
effective in offsetting changes in fair values or cash flows of
the hedged item. If it is determined that a derivative is not
highly effective as a hedge or if a derivative ceases to be a
highly effective hedge, the Company will discontinue hedge
accounting prospectively.


 



The Company enters into foreign currency forward contracts in
order to reduce the impact of certain foreign currency
fluctuations. Firmly committed transactions and the related
receivables and payables may be hedged with forward exchange
contracts. Gains and losses arising from foreign currency
forward contracts are recognized in income or expense as offsets
of gains and losses resulting from the underlying hedged
transactions. There were no open forward exchange contracts as
of March 31, 2008. The notional amount of open forward
exchange contracts as of March 31, 2007 was $294,000 and
the related gain was not material.


 




This excerpt taken from the CSS 10-K filed Jun 5, 2007.
Derivative Financial Instruments
 
The Company uses certain derivative financial instruments as part of its risk management strategy to reduce interest rate and foreign currency risk. Derivatives are not used for trading or speculative activities.
 
The Company recognizes all derivatives on the consolidated balance sheet at fair value. On the date the derivative instrument is entered into, the Company generally designates the derivative as either (1) a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (“fair value hedge”), or (2) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow hedge”). Changes in the fair value of a derivative that is designated as, and meets all the required criteria for, a fair value hedge, along with the gain or loss on the hedged asset or liability that is attributable to the hedged risk, are recorded in current period earnings. Changes in the fair value of a derivative that is designated as, and meets all the required criteria for, a cash flow hedge are recorded in accumulated other comprehensive loss and reclassified into earnings as the underlying hedged item affects earnings. The portion of the change in fair value of a derivative associated with hedge ineffectiveness or the component of a derivative instrument excluded from the assessment of hedge effectiveness is recorded currently in earnings. Also, changes in the entire fair value of a derivative that is not designated as a hedge are recorded immediately in earnings. The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking various hedge transactions. This process includes relating all derivatives that are designated as fair value or cash flow hedges to specific assets and liabilities on the consolidated balance sheet or to specific firm commitments or forecasted transactions.
 
The Company also formally assesses, both at the inception of the hedge and on an ongoing basis, whether each derivative is highly effective in offsetting changes in fair values or cash flows of the hedged item. If it is determined that a derivative is not highly effective as a hedge or if a derivative ceases to be a highly effective hedge, the Company will discontinue hedge accounting prospectively.
 
The Company enters into foreign currency forward contracts in order to reduce the impact of certain foreign currency fluctuations. Firmly committed transactions and the related receivables and payables may be hedged with forward exchange contracts. Gains and losses arising from foreign currency forward contracts are recognized in income or expense as offsets of gains and losses resulting from the underlying hedged transactions. The notional amount of open forward exchange contracts as of March 31, 2007 was $294,000 and the related gain was not material. The notional amount of open forward exchange contracts as of March 31, 2006 was $494,000 and the related loss was not material.
 
This excerpt taken from the CSS 10-K filed Jun 9, 2006.

Derivative Financial Instruments

The Company uses certain derivative financial instruments as part of its risk management strategy to reduce interest rate and currency risk. Derivatives are not used for trading or speculative activities.

The Company recognizes all derivatives on the consolidated balance sheet at fair value. On the date the derivative instrument is entered into, the Company generally designates the derivative as either (1) a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (“fair value hedge”), or (2) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow hedge”). Changes in the fair value of a derivative that is designated as, and meets all the required criteria for, a fair value hedge, along with the gain or loss on the hedged asset or liability that is attributable to the hedged risk, are recorded in current period earnings. Changes in the fair value of a derivative that is designated as, and meets all the required criteria for, a cash flow hedge are recorded in accumulated other comprehensive loss and reclassified into earnings as the underlying hedged item affects earnings. The portion of the change in fair value of a derivative associated with hedge ineffectiveness or the component of a derivative instrument excluded from the assessment of hedge effectiveness is recorded currently in earnings. Also, changes in the entire fair value of a derivative that is not designated as a hedge are recorded immediately in earnings. The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking various hedge transactions. This process includes relating all derivatives that are designated as fair value or cash flow hedges to specific assets and liabilities on the consolidated balance sheet or to specific firm commitments or forecasted transactions.

The Company also formally assesses, both at the inception of the hedge and on an ongoing basis, whether each derivative is highly effective in offsetting changes in fair values or cash flows of the hedged item. If it is determined that a derivative is not highly effective as a hedge or if a derivative ceases to be a highly effective hedge, the Company will discontinue hedge accounting prospectively.

The Company enters into foreign currency forward contracts in order to reduce the impact of certain foreign currency fluctuations. Firmly committed transactions and the related receivables and payables may be hedged with forward exchange contracts. Gains and losses arising from foreign currency forward contracts are recognized in income or expense as offsets of gains and losses resulting from the underlying hedged transactions. The notional amount of open forward exchange contracts as of March 31, 2006 was $494,000 and the related loss was not material. There were no open forward exchange contracts as of March 31, 2005.

This excerpt taken from the CSS 10-K filed Jun 1, 2005.

Derivative Financial Instruments

The Company uses certain derivative financial instruments as part of its risk management strategy to reduce interest rate and currency risk. Derivatives are not used for trading or speculative activities.

The Company recognizes all derivatives on the consolidated balance sheet at fair value. On the date the derivative instrument is entered into, the Company generally designates the derivative as either (1) a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (“fair value hedge”), or (2) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow hedge”). Changes in the fair value of a derivative that is designated as, and meets all the required criteria for, a fair value hedge, along with the gain or loss on the hedged asset or liability that is attributable to the hedged risk, are recorded in current period earnings. Changes in the fair value of a derivative that is designated as, and meets all the required criteria for, a cash flow hedge are recorded in accumulated other comprehensive loss and reclassified into earnings as the underlying hedged item affects earnings. The portion of the change in fair value of a derivative associated with hedge ineffectiveness or the component of a derivative instrument excluded from the assessment of hedge effectiveness is recorded currently in earnings. Also, changes in the entire fair value of a derivative that is not designated as a hedge are recorded immediately in earnings. The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking various hedge transactions. This process includes relating all derivatives that are designated as fair value or cash flow hedges to specific assets and liabilities on the consolidated balance sheet or to specific firm commitments or forecasted transactions.

The Company also formally assesses, both at the inception of the hedge and on an ongoing basis, whether each derivative is highly effective in offsetting changes in fair values or cash flows of the hedged item. If it is determined that a derivative is not highly effective as a hedge or if a derivative ceases to be a highly effective hedge, the Company will discontinue hedge accounting prospectively.

The Company enters into foreign currency forward contracts in order to reduce the impact of certain foreign currency fluctuations. Firmly committed transactions and the related receivables and payables may be hedged with forward exchange contracts. Gains and losses arising from foreign currency forward contracts are recognized in income or expense as offsets of gains and losses resulting from the underlying hedged transactions. There were no open forward exchange contracts as of March 31, 2005. The notional amount of open forward exchange contracts as of March 31, 2004 was $357,000 and the related loss was not material.

During 2001, the Company entered into interest rate swap agreements, with maturities through January 2004, to manage its exposure to interest rate movements by effectively converting a portion of its anticipated working capital debt from variable to fixed rates. There were no outstanding interest rate swap contracts as of March 31, 2005 and 2004. The average annual notional amounts of interest rate swap contracts subject to fixed rates were $10,946,000 for fiscal year 2004. These agreements involved the exchange of variable rate payments for fixed rate payments without the effect of leverage and without the exchange of the underlying face amount. Fixed interest

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rate payments were at a weighted average rate of 5.09% in fiscal 2004. Interest rate differentials paid under these agreements were recognized as adjustments to interest expense and amounted to $443,000 for the year ended March 31, 2004.

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