Notes to Consolidated Financial Statements

NOTE 18

COMPREHENSIVE INCOME

Comprehensive income (loss) consists of net income and other gains and losses affecting shareowners' investment that, under GAAP, are excluded from net income. Significant changes in the components of Other comprehensive income (loss), net of income tax expense (benefit), are described below.

Foreign Currency Translation

(dollars in millions)

Years Ended December 31,

2008

 

2007

 

2006

 

Foreign Currency Translation Adjustments:

Vodafone Omnitel

$

(119

)

$

397

 

$

330

 

CANTV

 

 

 

412

 

 

 

Verizon Dominicana

 

 

 

 

 

786

 

Other international operations

 

(112

)

 

29

 

 

80

 

 

$

(231

)

$

838

 

$

1,196

 

Net Unrealized Gains (Losses) on Cash Flow Hedges

The changes in Unrealized Gains (Losses) on Cash Flow Hedges were as follows:

(dollars in millions)

Years Ended December 31,

2008

 

2007

 

2006

 

Unrealized Gains (Losses) on Cash Flow Hedges

Unrealized gains (losses), net of taxes

$

(43

)

$

(2

)

$

11

 

Less reclassification adjustments for losses realized

in net income, net of taxes

 

(3

)

 

(3

)

 

(3

)

Net unrealized gains (losses) on cash flow hedges

$

(40

)

$

1

 

$

14

 

Unrealized Gains (Losses) on Marketable Securities

The changes in Unrealized Gains (Losses) on Marketable Securities were as follows:

(dollars in millions)

Years Ended December 31,

2008

 

2007

 

2006

 

Unrealized Gains (Losses) on Marketable Securities

Unrealized gains (losses), net of taxes

$

(142

)

$

13

 

$

79

 

Less reclassification adjustments for gains (losses) realized

in net income, net of taxes

 

(45

)

 

17

 

 

25

 

Net unrealized gains (losses) on marketable securities

$

(97

)

$

(4

)

$

54

 

Accumulated Other Comprehensive Loss

The components of Accumulated Other Comprehensive Loss are as follows:

(dollars in millions)

At December 31,

2008

 

2007

 

Foreign currency translation adjustments

$

936

 

$

1,167

 

Net unrealized losses on hedging

 

(50

)

 

(10

)

Unrealized gains (losses) on marketable securities

 

(37

)

 

60

 

Defined benefit pension and postretirement plans

 

(14,221

)

 

(5,723

)

Accumulated Other Comprehensive Loss

$

(13,372

)

$

(4,506

)

Foreign Currency Translation Adjustments

The change in foreign currency translation adjustments at December 31, 2008 was primarily driven by the settlement of the foreign currency forward contracts which hedged a portion of our net investment in Vodafone Omnitel (see Note 11) and the devaluation of the Euro. During 2007 we sold our interest in CANTV. During 2006 we sold our interest in Verizon Dominicana. See Note 3 for information on CANTV and Verizon Dominicana.

Defined Benefit Pension and Postretirement Plans

The change in defined benefit pension and postretirement plans of $8.5 billion, net of taxes of $5.4 billion, at December 31, 2008 was attributable to the change in the funded status of the plans in connection with the annual pension and postretirement valuation in accordance with SFAS No. 158. The funded status was impacted by changes in asset performance, actuarial assumptions, and plan experience. In addition to the pension and postretirement items, we recorded a reduction to the beginning balance of Accumulated other comprehensive loss of $79 million ($44 million after-tax) in connection with the spin-off of our local exchange and related business assets in Maine, New Hampshire and Vermont.