Apply your critical-thinking ability to the knowledge you've gained. These cases will provide you an opportunity to develop your research, analysis, judgment, and communication skills. You also will work with other students, integrate what you've learned, apply it in real-world situations, and consider its global and ethical ramifications. This practice will broaden your knowledge and further develop your decision-making abilities.
The following is an excerpt from a disclosure note of Johnson & Johnson:
6. Fair Value Measurements (in part)
As of January 2, 2011, the balance of deferred net gains on derivatives included in accumulated other comprehensive income was $100 million after-tax The Company expects that substantially all the amount related to 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 gains 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?