The following is an excerpt from a disclosure note of Johnson & Johnson:
6. Fair Value Measurements (in part)
As of January 3, 2016, the balance of deferred net losses on derivatives included in accumulated other comprehensive income was $36 million after-tax. The Company expects that substantially all of the amounts related to forward foreign exchange contracts will be reclassified into earnings over the next 12 months as a result of transactions that are expected to occur over that period.
Required:
1. Johnson & Johnson indicates that it expects that substantially all of the balance of deferred net losses on derivatives will be reclassified into earnings over the next 12 months as a result of transactions that are expected to occur over that period. What is meant by "reclassified into earnings"?
2. What type(s) of hedging transaction might be accounted for in this way?