HSBC 2012 Annual Report Download - page 457

455
Overview
Operating & Financial Review
Corporate Governance
Financial Statements
Shareholder Information
Fair value of derivatives designated as fair value hedges
At 31 December 2012 At 31 December 2011
Assets Liabilities Assets Liabilities
US$m US$m US$m US$m
Foreign exchange .......................................................................... – – 77 1
Interest rate ................................................................................... 199 4,450 369 4,331
199 4,450 446 4,332
Gains or losses arising from fair value hedges
2012 2011 2010
US$m US$m US$m
Gains/(losses):
– on hedging instruments .......................................................................................... (898) (4,082) (830)
– on the hedged items attributable to the hedged risk ............................................... 871 3,858 868
(27) (224) 38
The gains and losses on ineffective portions of fair value hedges are recognised immediately in ‘Net trading income’.
Cash flow hedges
HSBC’s cash flow hedges consist principally of interest rate swaps, futures and cross-currency swaps that are used to
protect against exposures to variability in future interest cash flows on non-trading assets and liabilities which bear
interest at variable rates or which are expected to be re-funded or reinvested in the future. The amounts and timing of
future cash flows, representing both principal and interest flows, are projected for each portfolio of financial assets
and liabilities on the basis of their contractual terms and other relevant factors, including estimates of prepayments
and defaults. The aggregate principal balances and interest cash flows across all portfolios over time form the basis
for identifying gains and losses on the effective portions of derivatives designated as cash flow hedges of forecast
transactions. Gains and losses are initially recognised in other comprehensive income, and accumulated in the cash
flow hedging reserve, and are transferred to the income statement when the forecast cash flows affect the income
statement.
Fair value of derivatives designated as cash flow hedges
At 31 December 2012 At 31 December 2011
Assets Liabilities Assets Liabilities
US$m US$m US$m US$m
Foreign exchange .......................................................................... 1,230 200 949 370
Interest rate ................................................................................... 2,218 2,041 2,070 1,890
3,448 2,241 3,019 2,260
Forecast principal balances on which interest cash flows are expected to arise
3 months
or less
More than 3
months but less
than 1 year
5 years or less
but more than
1 year
More than
5 years
US$m US$m US$m US$m
At 31 December 2012
Assets ............................................................................................ 112,846 93,072 72,557 5,055
Liabilities ...................................................................................... (68,534) (43,800) (29,401) (4,777)
Net cash inflows exposure ............................................................ 44,312 49,272 43,156 278
At 31 December 2011
Assets ............................................................................................ 139,701 110,960 66,383 4,460
Liabilities ...................................................................................... (77,898) (50,480) (36,296) (4,693)
Net cash inflows/(outflows) exposure .......................................... 61,803 60,480 30,087 (233)
This table reflects the interest rate repricing profile of the underlying hedged items.