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WESTERN DIGITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Other Comprehensive Income (Loss)
Other comprehensive income (loss) refers to revenue, expenses, gains and losses that are recorded as an element of
shareholders' equity but are excluded from net income. The Company's other comprehensive income (loss) is com-
prised of unrealized gains and losses on foreign exchange contracts, actuarial gains and losses related to pensions and
gains and losses on foreign currency translation adjustments.
The following table illustrates the changes in the balances of each component of accumulated comprehensive
income for 2013, 2012 and 2011:
Actuarial
Pension
Gains
(Losses)
Foreign
Currency
Translation
Gains
(Losses)
Unrealized
Gains
(Losses) on
Foreign
Exchange
Contracts
Accumulated
Other
Comprehensive
Income (Loss)
Balance at July 2, 2010 . . . . . . . . . . . . . . . . . . . . .
$--
$--
$ 11
$ 11
Other comprehensive loss . . . . . . . . . . . . . . . . . .
--
--
(16)
(16)
Balance at July 1, 2011 . . . . . . . . . . . . . . . . . . . . .
$--
$--
$ (5)
$ (5)
Other comprehensive income (loss) . . . . . . . . . . .
(3)
4
(11)
(10)
Balance at June 29, 2012 . . . . . . . . . . . . . . . . . . . .
$ (3)
$ 4
$(16)
$(15)
Other comprehensive income (loss) . . . . . . . . . . .
14
(4)
(30)
(20)
Balance at June 28, 2013 . . . . . . . . . . . . . . . . . . . .
$11
$--
$(46)
$(35)
Foreign Exchange Contracts
Although the majority of the Company's transactions are in U.S. dollars, some transactions are based in various
foreign currencies. The Company purchases short-term, foreign exchange contracts to hedge the impact of foreign
currency exchange fluctuations on certain underlying assets, revenue, liabilities and commitments for operating
expenses and product costs denominated in foreign currencies. The purpose of entering into these hedging transactions
is to minimize the impact of foreign currency fluctuations on the Company's results of operations. These contract
maturity dates do not exceed 12 months. All foreign exchange contracts are for risk management purposes only. The
Company does not purchase foreign exchange contracts for trading purposes. The Company had outstanding foreign
exchange contracts with commercial banks for British Pound Sterling, Euro, Japanese Yen, Malaysian Ringgit,
Philippine Peso, Singapore Dollar and Thai Baht, which were designated as either cash flow or fair value hedges and
had an aggregate notional amount of $2.0 billion and $1.6 billion at June 28, 2013 and June 29, 2012, respectively.
If the derivative is designated as a cash flow hedge, the effective portion of the change in fair value of the
derivative is initially deferred in other comprehensive income (loss), net of tax and presented within cash flow from
operations. These amounts are subsequently recognized into earnings when the underlying cash flow being hedged is
recognized into earnings. Recognized gains and losses on foreign exchange contracts entered into for manufacturing-
related activities are reported in cost of revenue. Hedge effectiveness is measured by comparing the hedging
instrument's cumulative change in fair value from inception to maturity to the underlying exposure's terminal value.
The Company determined the ineffectiveness associated with its cash flow hedges to be immaterial.
A change in the fair value of fair value hedges is recognized in earnings in the period incurred and is reported as a
component of operating expenses. The fair value and the changes in fair value on these contracts were not material to
the consolidated financial statements for all years presented. See Notes 10 and 11 for additional disclosures related to
foreign exchange contracts.
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