BB&T 2015 Annual Report Download - page 153

TableofContents
The following table provides a summary of derivative strategies and the related accounting treatment:
  
Risk exposure Variability in cash flows of
interest payments on floating rate
business loans, overnight funding
and various LIBOR funding
instruments.
Losses in value on fixed rate
long-term debt, CDs, FHLB
advances, loans and state and
political subdivision securities
due to changes in interest rates.
Risk associated with an asset or liability,
including mortgage banking operations and
MSRs, or for client needs. Includes exposure
to changes in market rates and conditions
subsequent to the interest rate lock and
funding date for mortgage loans originated
for sale.
Risk management objective Hedge the variability in the
interest payments and receipts on
future cash flows for forecasted
transactions related to the first
unhedged payments and receipts
of variable interest.
Convert the fixed rate paid or
received to a floating rate,
primarily through the use of
swaps.
For interest rate lock commitment
derivatives and LHFS, use mortgage-based
derivatives such as forward commitments
and options to mitigate market risk. For
MSRs, mitigate the income statement effect
of changes in the fair value of the MSRs.
Treatment for portion that is highly
effective Recognized in AOCI until the
related cash flows from the
hedged item are recognized in
earnings.
Recognized in current period
income along with the
corresponding changes in the fair
value of the designated hedged
item attributable to the risk being
hedged.
Entire change in fair value recognized in
current period income.
Treatment for portion that is ineffective Recognized in current period
income. Recognized in current period
income. Not applicable
Treatment if hedge ceases to be highly
effective or is terminated Hedge is dedesignated. Effective
changes in value that are recorded
in AOCI before dedesignation are
amortized to yield over the period
the forecasted hedged
transactions impact earnings.
If hedged item remains
outstanding, termination proceeds
are included in cash flows from
financing activities and effective
changes in value are reflected as
part of the carrying value of the
financial instrument and
amortized to earnings over its
estimated remaining life.
Not applicable
Treatment if transaction is no longer
probable of occurring during forecast
period or within a short period
thereafter
Hedge accounting is ceased and
any gain or loss in AOCI is
reported in earnings immediately.
Not applicable Not applicable
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Source: BB&T CORP, 10-K, February 25, 2016 Powered by Morningstar® Document Research℠
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