Go to Xerox Corporation’s Web site and access their 2010 annual report. Answer the following questions regarding Xerox’s derivative and foreign currency transactions.
1. Which categories of derivative transactions does Xerox engage in (cash flow hedges, fair value hedges, speculative hedges)? Describe the types of commodities that Xerox hedges. How do derivative transactions fit into Xerox’s overall business strategy?
2. What was the 2010 income statement effect of each category? Give the total dollar amount, as well as the effect as a percentage of revenues and income before tax. Have these transactions materially affected the profitability of Xerox? Explain your answer.
3. Where does Xerox disclose the financial statement impact of the cash flow hedges it enters into? Do you consider these to have a material impact on its financial position? Explain.