GE 2015 Annual Report Download - page 222

FINANCIAL STATEMENTS FINANCIAL INSTRUMENTS
194 GE 2015 FORM 10-K
NOTIONAL AMOUNT OF DERIVATIVES
The notional amount of a derivative is the number of units of the underlying (for example, the notional principal amount of the debt in an
interest rate swap). The notional amount is used to compute interest or other payment streams to be made under the contract and is a
measure of our level of activity. We generally disclose derivative notional amounts on a gross basis. A substantial majority of the
outstanding notional amount of $245 billion at December 31, 2015 is related to managing interest rate and currency risk between
financial assets and liabilities in our financial services business. The remaining derivative notional primarily relates to hedges of
anticipated sales and purchases in foreign currency, commodity purchases and contractual terms in contracts that are considered
embedded derivatives.
The table below provides additional information about how derivatives are reflected in our financial statements. Derivative assets and
liabilities are recorded at fair value exclusive of interest earned or owed on interest rate derivatives, which is presented separately on
our balance sheet. Cash collateral and securities held as collateral represent assets that have been provided by our derivative
counterparties as security for amounts they owe us (derivatives that are in an asset position).
CARRYING AMOUNTS RELATED TO DERIVATIVES

December 31 (in millions) 2015 2014
Derivative assets $ 7,391 $ 9,911
Derivative liabilities (5,681) (4,851)
A
ccrued interest 1,014 1,419
Cash collateral & credit valuation adjustment (1,141) (3,233)
Net Derivatives 1,583 3,246
Securities held as collateral (1,277) (3,114)
Net carrying amount $ 306 $ 132
EFFECTS OF DERIVATIVES ON EARNINGS
All derivatives are marked to fair value on our balance sheet, whether they are designated in a hedging relationship for accounting
purposes or are used as economic hedges. As discussed in the previous sections, each type of hedge affects the financial statements
differently. In fair value and economic hedges, both the hedged item and the hedging derivative largely offset in earnings each period.
In cash flow and net investment hedges, the effective portion of the hedging derivative is offset in separate components of
shareowners¶ equity and ineffectiveness is recognized in earnings. The table below summarizes these offsets and the net effect on
earnings.
(In millions) Effect on hedging instrumen
t
Effect on underlying Effect on earnings
2015   
Cash flow hedges $ (911) $ 913 $ 2
Fair value hedges (151) 75 (75)
Net investment hedges(a) 4,022 (4,131) (109)
Economic hedges(b) (2,720) 2,543 (177)
Total $ (359)
2014   
Cash flow hedges $ (546) $ 546 $ 1
Fair value hedges 3,863 (3,939) (76)
Net investment hedges(a) 5,192 (5,741) (549)
Economic hedges(b) (2,198) 2,083 (116)
Total $ (740)
The amounts in the table above generally do not include associated derivative accruals in income or expense.
(a) Both derivatives and non-derivatives hedging instruments are included.
(b) Net effect is substantially offset by the change in fair value of the hedged item that will affect earnings in future periods.
Note 15 provides additional information about changes in VKDUHRZQHUV¶ equity related to hedging and amounts released to earnings.
Other supplemental information about derivatives and hedging can be found in Note 27.
194 GE 2015 FORM 10-K