Current Financial Reporting Trends

• Describe the accounting for interest rate swaps that were terminated prior to the
expiration date, in accordance with paragraphs 32 and 33 of SFAS 133.
• Tell us and revise the footnote or MD&A, as appropriate to discuss how the derivative
instruments qualified for hedge accounting under SFAS 133 and how your accounting
policies comply with that standard, including the following:
o The specific nature of the hedged assets and liabilities and if the hedge is a fair
value or cash flow hedge.
o Describe your formal documentation of the hedging relationships.
o How you identify the hedge item or transaction and the hedge instrument.
o Describe the quantitative measures of correlation you use to assess
effectiveness of each hedge both at inception and on an ongoing basis.
o Describe how you assess the ineffectiveness of the hedge.
o
o
o
o
o
Disclose when you perform these assessments.
Disclose where you present the gains and losses relating to hedge
ineffectiveness in the statements of income and explain why that presentation
is appropriate.
Describe the quantitative measures you use to assess effectiveness of each
hedge both at inception and on an ongoing basis.
Explain how often you assess and how often you back test and how these
determinations have resulted in no hedge ineffectiveness for the periods
presented.
Describe and quantify the impact of your use of derivatives on interest income
and expense.
Comment #682 – Form 10-K; SIC: 2020 Dairy Products
We note, on page 75, that you have recorded changes in the fair value of securities to accumulated
other comprehensive income. We further note the following in your derivative commodity
instruments policy on page 76, which appears to be inconsistent with your recording of changes in
fair value of securities to accumulated other comprehensive income:
* Changes in the fair values of futures contracts are recognized in earnings; and
* Changes in the fair values of interest rate swaps designated and effective as fair value hedges
are recorded in net earnings and are offset by corresponding changes in the fair value of the
hedged debt.
Please clarify how you account for your derivative financial instruments, provide the disclosures
required by paragraphs 44 to 47 of SFAS 133, and describe the financial statement line items
where derivative activities are recorded, to the extent applicable and material.
Comment #570 – Form 10-K; SIC: 5047 Wholesale-Medical, Dental & Hospital Equipment &
Supplies
Please tell us how you are accounting for the embedded conversion feature present in your
convertible debt. In particular, tell us whether you have bifurcated the embedded conversion
feature from the host contract and accounted for it as a mark-to-market derivative liability under
SFAS 133 and why or why not.
In this regard, based on our understanding of the terms of the convertible debt, it would appear
that the embedded conversion feature meets the three criteria in paragraph 12 of SFAS 133 for
bifurcation from the host contract. If you disagree, please advise us in detail as to how you arrived
at your conclusion.
Moreover, once bifurcated from the host contract, it would appear that the embedded conversion
option should be treated as a mark- to- market derivative liability pursuant to the guidance in SFAS
133 regarding accounting for derivative instruments, unless the embedded conversion option
qualifies for the paragraph 11(a) scope exception. If you believe the conversion option qualifies for
the paragraph 11(a) scope exception, please tell us in detail how you arrived at this conclusion. In
crafting your response, please note that this scope exception is a two step test, and both steps
must be met to qualify.
The first step is to determine whether the instrument is indexed to a company’s own stock. Since
exercise of the conversion option in this case is contingent on certain events, please tell us
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