38 Eme r s on 2013 Ann u al R e por t d erivatives and h edging In the normal course of business the Company is exposed to changes in interest rates foreign currency exchange rates and commodity prices due to its worldwide presence and diverse business profle Emersons foreign currency exposures primarily relate to transactions denominated in euros Mexican pesos Canadian dollars and Chinese renminbi Primary commodity exposures are price fuctuations on forecasted purchases of copper and aluminum and related products As part of the Companys risk management strategy derivative instruments are selectively used in an effort to minimize the impact of these exposures Foreign exchange forwards and options are utilized to hedge foreign currency exposures impacting sales or cost of sales transactions frm commitments and the fair value of assets and liabilities while swap and option contracts may be used to minimize the effect of commodity price fuctuations on the cost of sales All derivatives are associated with specifc underlying exposures and the Company does not hold derivatives for trading or speculative purposes The duration of hedge positions is generally two years or less and amounts currently hedged beyond 18 months are not signifcant All derivatives are accounted for under ASC 815 Derivatives and Hedging and recognized at fair value For derivatives hedging variability in future cash fows the effective portion of any gain or loss is deferred in stockholders equity and recognized when the underlying hedged transaction impacts earnings The majority of the Companys derivatives that are designated as hedges and qualify for deferral accounting are cash fow hedges For derivatives hedging the fair value of existing assets or liabilities both the gain or loss on the derivative and the offsetting loss or gain on the hedged item are recognized in earnings each period Currency fuctuations on nonUS dollar obligations that have been designated as hedges of nonUS dollar net asset exposures are reported in equity To the extent that any hedge is not fully effective at offsetting changes in the underlying hedged item there could be a net earnings impact The Company also uses derivatives to hedge economic exposures that do not receive deferral accounting under ASC 815 The underlying exposures for these hedges relate primarily to purchases of commoditybased components used in the Companys manufacturing processes and the revaluation of certain foreigncurrencydenominated assets and liabilities Gains or losses from the ineffective portion of any hedge as well as any gains or losses on derivative instruments not designated as hedges are recognized in the income statement immediately Counterparties to derivative arrangements are companies with high credit ratings and the Company has bilateral collateral arrangements with them for which credit ratingbased posting thresholds vary depending on the arrangement If credit ratings on the Companys debt fall below preestablished levels counterparties can require immediate full collateralization on all instruments in net liability positions Similarly Emerson can demand full collateralization of instruments in net asset positions should any of the Companys counterparties credit ratings fall below certain thresholds Risk from credit loss when derivatives are in asset positions is not considered material The Company has master netting arrangements in place with its counterparties that allow the offsetting of certain derivativerelated amounts receivable and payable when settlement occurs in the same period Accordingly counterparty balances are netted in the consolidated balance sheet Net values of contracts are reported in other current assets or accrued expenses as appropriate depending on positions with counterparties as of the balance sheet date See Note 7 i ncome t axes The provision for income taxes is based on pretax income reported in the consolidated statements of earnings and tax rates currently enacted in each jurisdiction Certain income and expense items are recognized in different time periods for fnancial reporting and income tax fling purposes and deferred income taxes are provided for the effect of temporary differences The Company also provides for US federal income taxes net of available foreign tax credits on earnings intended to be repatriated from nonUS locations No provision has been made for US income taxes on approximately 71 billion of undistributed earnings of nonUS subsidiaries as of September 30 2013 as these earnings are considered permanently invested or otherwise indefnitely retained for continuing international operations Recognition of US taxes on undistributed nonUS earnings would be triggered by a management decision to repatriate those earnings although there is no current intention to do so Determination of the amount of taxes that might be paid on these undistributed earnings if eventually remitted is not practicable See Note 13 c om P rehensive i ncome Comprehensive income is primarily composed of net earnings plus changes in foreign currency translation pension and postretirement adjustments and the effective portion of changes in the fair value of cash fow hedges Accumulated other comprehensive income net of tax a component of equity consists of foreign currency translation credits of 504 and 466 deferred pension and postretirement charges of 692 and 1213 and cash fow hedges and other charges of 1 and credits of 16 respectively at September 30 2013 and 2012 Accumulated other comprehensive income attributable to noncontrolling interests in subsidiaries consists primarily of earnings and changes in foreign currency translation