1.0.0.3 false 12. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES false 1 $ false false USD Standard http://www.xbrl.org/2003/iso4217 USD iso4217 0 USDperShareItemType Divide http://www.xbrl.org/2003/iso4217 USD iso4217 http://www.xbrl.org/2003/instance shares 0 2 Notes to Financial Statements [Abstract] 0 avp_NotesToFinancialStatementsAbstract avp false na duration string Notes to Financial Statements [Abstract] false false false false false true false false false 1 false false 0 0 false false Notes to Financial Statements [Abstract] false 3 12. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES 1 us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock us-gaap true na duration string No definition available. false false false false false false false false false 1 false false 0 0 <div> 12. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES Derivatives are recognized on the balance sheet at their fair values. The following table presents the fair value of derivative instruments outstanding at September 30, 2009:   <table cellspacing="0" cellpadding="0" width="100%" align="center" border="0"> <tr> <td width="52%"></td> <td valign="bottom" width="2%"></td> <td></td> <td valign="bottom" width="2%"></td> <td></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> <td valign="bottom" width="2%"></td> <td></td> <td></td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center" colspan="4">Asset</td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center" colspan="4">Liability</td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center">Balance Sheet Classification</td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center" colspan="2">Fair Value</td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center">Balance Sheet Classification</td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center" colspan="2">Fair Value</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Derivatives designated as hedges: </td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr> <td valign="top"> Interest-rate swap agreements </td> <td valign="bottom">  </td> <td valign="bottom" align="center">Other assets</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">58.0</td> <td valign="bottom">  </td> <td valign="bottom" align="center">Other Liabilities</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">—  </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Foreign exchange forward contracts </td> <td valign="bottom">  </td> <td valign="bottom" align="center">Prepaid expenses and other</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td valign="bottom">  </td> <td valign="bottom" align="center">Accounts Payable</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1.3</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> </tr> <tr> <td valign="top"> Total derivatives designated as hedges </td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">58.0</td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">1.3</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Derivatives not designated as hedges: </td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr> <td valign="top"> Interest-rate swap agreements </td> <td valign="bottom">  </td> <td valign="bottom" align="center">Other assets</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">15.1</td> <td valign="bottom">  </td> <td valign="bottom" align="center">Other Liabilities</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">12.6</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Foreign exchange forward contracts </td> <td valign="bottom">  </td> <td valign="bottom" align="center">Prepaid expenses and other</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">16.5</td> <td valign="bottom">  </td> <td valign="bottom" align="center">Accounts Payable</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">8.1</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> </tr> <tr> <td valign="top"> Total derivatives not designated as hedges </td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">31.6</td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">20.7</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Total derivatives </td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">89.6</td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">22.0</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> </tr> </table> When we become a party to a derivative instrument, we designate, for financial reporting purposes, the instrument as a fair value hedge, a cash flow hedge, a net investment hedge, or a non-hedge. We assess, both at the hedge’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. The ineffective portion of a derivative’s gain or loss, if any, is recorded in earnings in other expense, net on the Consolidated Statements of Income. When we determine that a derivative is not highly effective as a hedge, hedge accounting is discontinued. When it is probable that a hedged forecasted transaction will not occur, we discontinue hedge accounting for the affected portion of the forecasted transaction, and reclassify gains or losses that were accumulated in accumulated other comprehensive income (“AOCI”) to earnings. Interest Rate Risk We use interest-rate swap agreements, which effectively convert the fixed rate on long-term debt to a floating interest rate, to manage our interest rate exposure. These agreements are designated as fair value hedges. At September 30, 2009, we held interest-rate swap agreements that effectively converted approximately 82% of our outstanding long-term, fixed-rate borrowings to a variable interest rate based on LIBOR. Our total exposure to floating interest rates at September 30, 2009, was approximately 78%. At September 30, 2009, we had interest-rate swap agreements designated as fair value hedges of fixed-rate debt, with notional amounts totaling $1,975. During the three and nine months ended September 30, 2009, we recorded a net gain of $24.6 and a net loss of $30.2, respectively, in interest expense for these interest-rate swap agreements designated as fair value hedges. The impact on interest expense of these interest-rate swap agreements was offset by an equal and offsetting impact in interest expense on our fixed-rate debt. At times, we may de-designate the hedging relationship of a receive-fixed/pay-variable interest-rate swap agreement. In these cases, we enter into receive-variable/pay-fixed interest-rate swap agreements that are designed to offset the gain or loss on the de-designated contract. At September 30, 2009, we had interest-rate swap agreements that are not designated as hedges with notional amounts totaling $650. During the three and nine months ended September 30, 2009, we recorded a net loss of $1.2 and $2.6 in other expense, net associated with these undesignated interest-rate swap agreements. Foreign Currency Risk The primary currencies for which we have net underlying foreign currency exchange rate exposures are the Argentine peso, Brazilian real, British pound, Canadian dollar, Chinese renminbi, Colombian peso, the euro, Japanese yen, Mexican peso, Philippine peso, Polish zloty, Russian ruble, Turkish lira, Ukrainian hryvnia and Venezuelan bolivar. We use foreign exchange forward contracts to manage a portion of our foreign currency exchange rate exposures. At September 30, 2009, we had outstanding foreign exchange forward contracts with notional amounts totaling approximately $274 for the euro, the Hungary forint, the Peru new sol, the Czech Republic koruna, the Romania leu, the Canadian dollar, the Australian dollar, the New Zealand dollar, the Polish zloty and the British pound. We use foreign exchange forward contracts to hedge portions of our forecasted foreign currency cash flows resulting from intercompany royalties, and other third-party and intercompany foreign currency transactions where there is a high probability that anticipated exposures will materialize. These contracts are designated as cash flow hedges. The effective portion of the gain or loss on the derivative is recorded in AOCI to the extent effective and reclassified into earnings in the same period or periods during which the transaction hedged by that derivative also affects earnings. The ineffective portion of the gain or loss on the derivative is recorded in other expense, net. For the three and nine months ended September 30, 2009, there was no ineffectiveness reported. The effective portion of these hedges resulted in a gain of $0.7 and loss of $2.9 being recognized in AOCI for the three and nine months ended September 30, 2009, respectively. $1.4 and $8.6 of losses were reclassified from AOCI to cost of sales to offset a gain on the item being hedged during the three and nine months ended September 30, 2009, respectively. We also use foreign exchange forward contracts to manage foreign currency exposure of intercompany loans. These contracts are not designated as hedges for financial reporting purposes. The change in fair value of these contracts is immediately recognized in earnings and substantially offsets the foreign currency impact recognized in earnings relating to the intercompany loans. During the three and nine months ended September 30, 2009, we recorded a gain of $5.7 and $7.7 in other expense, net related to these undesignated foreign exchange forward contracts. During the three and nine months ended September 30, 2009, we recorded a loss of $4.3 and $3.9, respectively, related to the intercompany loans, caused by changes in foreign currency exchange rates. We have used foreign currency-denominated debt to hedge the foreign currency exposure related to the net assets of a foreign subsidiary. A loss of $1.6 on the foreign currency-denominated debt was effective as a hedge of the net assets of the foreign subsidiary and was recorded in AOCI. During the three and nine months ended September 30, 2009, the ineffective portion of the loss was nil and $.3 on the foreign currency-denominated debt and was recorded in other expense, net.   Credit and Market Risk We attempt to minimize our credit exposure to counterparties by entering into interest rate swap and foreign currency forward rate and option agreements only with major international financial institutions with “A” or higher credit ratings as issued by Standard & Poor’s Corporation. Our foreign currency and interest rate derivatives are comprised of over-the-counter forward contracts, swaps or options with major international financial institutions. Although our theoretical credit risk is the replacement cost at the then estimated fair value of these instruments, we believe that the risk of incurring credit risk losses is remote and that such losses, if any, would not be material. </div> 12. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES Derivatives are recognized on the balance sheet at their fair values. The following table presents the fair false false No definition available. No authoritative reference available. false false 1 2 false UnKnown UnKnown UnKnown false true