GE 2014 Annual Report Download - page 223

GE 2014 FORM 10-K 203
FINANCIAL STATEMENTS FINANCIAL INSTRUMENTS
The notional amounts of derivative contracts represent the basis upon which interest and other payments are calculated and
are reported gross, except for offsetting foreign currency forward contracts that are executed in order to manage our currency
risk of net investment in foreign subsidiaries. Of the outstanding notional amount of $297,000 million, approximately 87% or
$258,000 million, is associated with reducing or eliminating the interest rate, currency or market risk between financial assets
and liabilities in our financial services businesses. The remaining derivative activities primarily relate to hedging against
adverse changes in currency exchange rates and commodity prices related to anticipated sales and purchases and contracts
containing certain clauses that meet the accounting definition of a derivative. The instruments used in these activities are
designated as hedges when practicable. When we are not able to apply hedge accounting, or when the derivative and the
hedged item are both recorded in earnings concurrently, the derivatives are deemed economic hedges and hedge accounting
is not applied. This most frequently occurs when we hedge a recognized foreign currency transaction (e.g., a receivable or
payable) with a derivative. Since the effects of changes in exchange rates are reflected concurrently in earnings for both the
derivative and the transaction, the economic hedge does not require hedge accounting.
FAIR VALUE OF DERIVATIVES
2014 2013
December 31
(
In millions
)
Assets Liabilities Assets Liabilities
Derivatives accounted for as hedges
Interest rate contracts $ 5,859 $ 461 $ 3,837 $ 1,989
Currency exchange contracts 2,579 884 1,830 984
Other contracts - 2 1 -
8,438 1,347 5,668 2,973
Derivatives not accounted for as hedges
Interest rate contracts 276 137 270 169
Currency exchange contracts 1,212 3,450 2,257 2,245
Other contracts 256 55 284 42
1,744 3,642 2,811 2,456
Gross derivatives recognized in statement of
financial position
Gross derivatives 10,182 4,989 8,479 5,429
Gross accrued interest 1,401 (18) 1,227 241
11,583 4,971 9,706 5,670
Amounts offset in statement of financial position
Netting adjustments(a) (3,896) (3,905) (4,120) (4,113)
Cash collateral(b) (3,709) (502) (2,619) (242)
(7,605) (4,407) (6,739) (4,355)
Net derivatives recognized in statement of
financial position
Net derivatives 3,978 564 2,967 1,315
Amounts not offset in statement of
financial position
Securities held as collateral(c) (3,361) - (1,962) -
Net amount $ 617 $ 564 $ 1,005 $ 1,315
Derivatives are classified in the captions “All other assets” and “All other liabilities” and the related accrued interest is classified in “Other GECC receivables” and “All other
liabilities” in our financial statements.
(a) The netting of derivative receivables and payables is permitted when a legally enforceable master netting agreement exists. Amounts include fair value adjustments
related to our own and counterparty non-performance risk. At December 31, 2014 and 2013, the cumulative adjustment for non-performance risk was a gain (loss) of $9
million and $(7) million, respectively.
(b) Excluded excess cash collateral received and posted of $63 million and $211 million, and $160 million and $37 million at December 31, 2014 and 2013, respectively.
(c) Excluded excess securities collateral received of $224 million and $363 million at December 31, 2014 and 2013, respectively.