Derivative Instruments and Hedging Activities

12 Months Ended

Dec. 31, 2011

Derivative Instruments and Hedging Activities [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

Derivative Instruments and Hedging Activities

As a global service business, we operate in multiple foreign currencies and issue debt in the capital markets. In the normal course of business, we are exposed to foreign currency fluctuations and the impact of interest rate changes. We limit these risks through risk management policies and procedures, including the use of derivatives. For foreign currency exposure, derivatives are used to mitigate the cash flow volatility arising from foreign exchange rate fluctuations. For interest rate exposure, derivatives have been used to manage the related cost of debt.

As a result of using derivative instruments, we are exposed to the risk that counterparties to derivative contracts will fail to meet their contractual obligations. To mitigate counterparty credit risk, we have a policy of only entering into contracts with carefully selected major financial institutions based on credit ratings and other factors.

We evaluate the effects of changes in foreign currency exchange rates, interest rates and other relevant market risks on our derivative instruments. We periodically determine the potential loss from market risk on our derivative instruments by performing a value-at-risk analysis. Value-at-risk is a statistical model that utilizes historical currency exchange and interest rate data to measure the potential impact on future earnings of our derivative financial instruments. The value-at-risk analysis on our derivative financial instruments at December 31, 2011 indicated that the risk of loss was immaterial.

Foreign Exchange Risk

Our regional treasury centers centralize and manage the cash of our international operations. These centers use short-term forward foreign exchange contracts to hedge the foreign currency exchange risk of intercompany cash movements between businesses operating in different functional currencies from the regional treasury centers from which they borrow or invest funds. Additionally, the regional treasury centers use forward foreign exchange contracts to mitigate the foreign currency risk associated with activities when revenue and operating expenses are not denominated in the same currency. In these instances, amounts are promptly settled or hedged with forward foreign exchange contracts. At December 31, 2011 and 2010, the total value of the intercompany receivable and payables hedged by forward foreign exchange contracts was $192.4 million and $1,351.8 million, respectively. The notional value of forward foreign exchange contracts to purchase currencies, principally Korean Won, British Pounds and Euros at December 31, 2011 was $96.2 million and the notional value of forward foreign exchange contracts to purchase currencies, principally British Pounds, Euros, Japanese Yen and Korean Won at December 31, 2010, was $679.5 million. The notional value of forward foreign exchange contracts to sell currencies, principally U.S. Dollars, at December 31, 2011 and 2010, was $96.2 million and $672.3 million, respectively. See Note 20 for a discussion of the fair value of these instruments. The terms of our forward contracts are generally less than 90 days. The changes in the fair value of these contracts and of the underlying exposures generally offset and are included in our results of operations.

The foreign currency contracts that existed during 2011 and 2010 were entered into for the purpose of seeking to mitigate the risk of certain specific adverse currency risks. As a result of these financial instruments, we reduced financial risk in exchange for foregoing any gain (reward) that might have occurred if the markets moved favorably. In using these contracts, management exchanged the risks of the financial markets for counterparty credit risk.

Interest Rate Risk

From time to time, we issue debt in the capital markets. In 2011, to manage our overall interest cost, we used interest rate swaps to convert specific fixed-rate debt into variable-rate debt (fair value hedge). See Note 7 for a discussion of our interest rate swaps. At December 31, 2011, there were no interest rate swaps outstanding. The interest rate swaps reduced interest expense in 2011 and 2010 by $12.2 million and $5.0 million, respectively.