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BP Annual Report and Accounts 2005 73
35 Derivative financial instruments continued
Derivative assets related to foreign exchange risks of cash flow hedges are denominated in the following currencies: $ million
2005
Currencies purchased forward
Other
US dollar Sterling Euro currencies Total
Currencies sold forward
US dollar 57 15 15 1 88
Sterling – –3 –3
57 15 18 1 91
Derivative liabilities related to foreign exchange risks of cash flow hedges are denominated in the following currencies: $ million
2005
Currencies purchased forward
Other
US dollar Sterling Euro currencies Total
Currencies sold forward
US dollar – (70) (40) (19) (129)
FAIR VALUE HEDGES
At 31 December 2005, the group held interest rate and currency swap contracts as fair value hedges of the interest rate risk on fixed rate debt
issued by the group. These hedges were assessed to be highly effective. At 31 December 2005, the loss on fair value hedges included in the
carrying value of fixed rate debt was $100 million.
Fair value hedges have the following maturities: $ million
2005
Fair value Fair value
asset liability
Within one year 185 (51)
1 to 2 years – (110)
2 to 3 years 15 (66)
3 to 4 years 23 (68)
4 to 5 years – (9)
Over 5 years 18 (37)
241 (341)
Derivative assets related to foreign exchange risks of fair value hedges are denominated in the following currencies: $ million
2005
Currencies purchased forward
Other
US dollar Sterling Euro currencies Total
Currencies sold forward
US dollar 19 53 96 50 218
Sterling – – 17 – 17
Euro ––6 –6
19 53 119 50 241
Derivative liabilities related to foreign exchange risks of fair value hedges are denominated in the following currencies: $ million
2005
Currencies purchased forward
Other
US dollar Sterling Euro currencies Total
Currencies sold forward
US dollar (217) (92) – (32) (341)
The following table shows the fair value of contracts deferred on the balance sheet. This is where, at contract inception, derivatives are required to
be recognized on the balance sheet at fair value, but any gain or loss is not recognized immediately but deferred on the balance sheet. The gain or
loss is recognized in the income statement only when the full remaining term of the derivative can be valued against market inputs.
$ million
Fair value Fair value
interest exchange
rate rate
contracts contracts
Fair value of contracts not recognized through the income statement at 1 January 2005 (73) 247
Fair value of new contracts at inception not recognized in the income statement ––
Fair value recycled from equity into the income statement (3) (109)
Other changes in fair values (122) (202)
Fair value of contracts not recognized through profit at 31 December 2005 (198) (64)