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This excerpt taken from the GPS 10-Q filed Jun 9, 2009. Not Designated as Hedging Instruments We also use foreign exchange forward contracts to hedge our market risk exposure associated with foreign currency exchange rate fluctuations for certain intercompany balances denominated in currencies other than the functional currency of the entity with the intercompany balance. For derivative instruments that are not designated as hedging instruments under SFAS 133, the gain or loss on the derivative instruments as well as the remeasurement of the underlying intercompany balances are recognized in operating expenses in the same period and they generally offset. We generate intercompany activity each month and as such, we generally enter into foreign exchange forward contracts on a monthly basis to hedge intercompany balances that bear foreign exchange risk. These foreign exchange forward contracts generally settle in fewer than six months. As of May 2, 2009 we had foreign exchange forward contracts outstanding to buy $9 million, 3 billion Japanese yen, and 151 million Euro related to our intercompany balances that bear foreign exchange risk. |
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