Note 7 - Derivative Instruments

3 Months Ended

Mar. 31, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

Derivative Instruments

The notional amounts associated with our foreign currency contracts at March 31, 2013 and 2012 were $5.7 billion and $4.4 billion, respectively, of which $2.0 billion and $1.5 billion, respectively, were designated as cash flow hedges. Derivative transactions are measured in terms of the notional amount, but this amount is not recorded on the balance sheet and is not, when viewed in isolation, a meaningful measure of the risk profile of the instruments. The notional amount is generally not exchanged, but is used only as the basis on which the value of foreign exchange payments under these contracts are determined.

For our derivative instruments designated as cash flow hedges, the amounts recognized in earnings related to the ineffective portion were not material in each of the periods presented, and we did not exclude any component of the changes in fair value of the derivative instruments from the assessment of hedge effectiveness. As of March 31, 2013, we estimate that approximately $28 million of net derivative gains related to our cash flow hedges included in accumulated other comprehensive income will be reclassified into earnings within the next 12 months.

Fair Value of Derivative Contracts

The fair value of our outstanding derivative instruments as of March 31, 2013 and December 31, 2012 was as follows:

	Derivative Assets Reported in Other Current Assets				Derivative Liabilities Reported in Other Current Liabilities
	March 31, 2013		December 31, 2012		March 31, 2013		December 31, 2012
	(In millions)
Foreign exchange contracts designated as cash flow hedges	$	46	$	1	$	15	$	56
Foreign exchange contracts not designated as hedging instruments	43		43		52		30
Other contracts not designated as hedging instruments	11		11		—		—
Total fair value of derivative instruments	$	100	$	55	$	67	$	86

Under the master netting agreements with the respective counterparties of the foreign exchange contracts, subject to applicable requirements, we are allowed to net settle transactions of the same currency with a single net amount payable by one party to the other.  However, we elected to present the derivative assets and derivative liabilities on a gross basis in our balance sheet.  As of March 31, 2013, the potential effect of rights of set off associated with the above foreign exchange contracts would be an offset to both assets and liabilities by $62 million, resulting in net derivative assets and derivative liabilities of $27 million and $5 million, respectively. We are not required to pledge nor are we entitled to receive cash collateral related to these derivative transactions.

Effect of Derivative Contracts on Accumulated Other Comprehensive Income

The following table summarizes the activity of derivative contracts that qualify for hedge accounting as of March 31, 2013 and December 31, 2012, and the impact of designated derivative contracts on accumulated other comprehensive income for the three months ended March 31, 2013:

	December 31, 2012			Amount of gain (loss) recognized in other comprehensive income (effective portion)		Amount of gain (loss) reclassified from accumulated other comprehensive income to net revenue and operating expense (effective portion)			March 31, 2013
	(In millions)
Foreign exchange contracts designated as cash flow hedges	$	(55	)	$	82	$	(4	)	$	31

The following table summarizes the activity of derivative contracts that qualify for hedge accounting as of March 31, 2012 and December 31, 2011, and the impact of designated derivative contracts on accumulated other comprehensive income for the three months ended March 31, 2012:

	December 31, 2011		Amount of gain (loss) recognized in other comprehensive income (effective portion)			Amount of gain (loss) reclassified from accumulated other comprehensive income to net revenue and operating expense (effective portion)		March 31, 2012
	(In millions)
Foreign exchange contracts designated as cash flow hedges	$	72	$	(36	)	$	23	$	13

Effect of Derivative Contracts on Condensed Consolidated Statement of Income

The following table provides the location in our financial statements of the recognized gains or losses related to our derivative instruments: 

	Three Months Ended March 31,
	2013			2012
	(In millions)
Foreign exchange contracts designated as cash flow hedges recognized in net revenues	$	—		$	12
Foreign exchange contracts designated as cash flow hedges recognized in operating expenses	(4		)	5
Foreign exchange contracts not designated as hedging instruments recognized in interest and other, net	4			3
Other contracts not designated as hedging instruments recognized in interest and other, net	—			4
Total gain (loss) recognized from derivative contracts in the condensed consolidated statement of income	$	—		$	24