RBS 2004 Annual Report Download - page 180

178
Notes on the accounts
Notes on the accounts continued
40 Financial instruments (continued)
Hedges
Derivatives and debt securities held for hedging purposes are accounted for in accordance with the treatment of the hedged
transaction. As a result, any gains or losses on the hedging instrument arising from changes in fair values are not recognised
in the profit and loss account immediately but are accounted for in the same manner as the hedged item.
2004 2004 2003 2003
Unrecognised Deferred Unrecognised Deferred
gains and gains and gains and gains and
losses losses losses losses
£m £m £m £m
At 1 January – gains 2,236 213 2,535 285
At 1 January – losses (2,205) (34) (2,275) (44)
31 179 260 241
Recognised gains that arose in previous periods (781) (65) (659) (72)
Recognised losses that arose in previous periods 537 4 636 12
Unrecognised gains and losses arising in the year 224 — (208) —
Unrecognised gains and losses deferred in the year 61 (61) 2 (2)
Unrecognised gains and losses deferred and taken to profit and loss in the year — (30) ——
At 31 December 72 27 31 179
Of which – gains 1,571 483 2,236 213
Of which – losses (1,499) (456) (2,205) (34)
72 27 31 179
Gains expected to be recognised in the year to 31 December 2005
(year to 31 December 2004) 318 171 532 66
Gains expected to be recognised in the year to 31 December 2006 or later
(year to 31 December 2005 or later) 1,253 312 1,704 147
1,571 483 2,236 213
Losses expected to be recognised in the year to 31 December 2005
(year to 31 December 2004) (221) (91) (371) (5)
Losses expected to be recognised in the year to 31 December 2006 or later
(year to 31 December 2005 or later) (1,278) (365) (1,834) (29)
(1,499) (456) (2,205) (34)
During the year to 31 December 2004, gains of £249 million (2003 – £58 million) and losses of £166 million (2003 – £95 million) arising
in previous periods were taken directly to the profit and loss account on financial instruments no longer accounted for as hedges.
41 Memorandum items
Contingent liabilities and commitments
The amounts shown in the table below are intended only to provide an indication of the volume of business outstanding at
31 December. Although the Group is exposed to credit risk in the event of non-performance of the obligations undertaken by
customers, the amounts shown do not, and are not intended to, provide any indication of the Group’s expectation of future losses.
2004 2003
£m £m
Contingent liabilities:
Acceptances and endorsements 362 595
Guarantees and assets pledged as collateral security 10,438 8,787
Other contingent liabilities 5,293 5,482
16,093 14,864
Commitments:
Documentary credits and other short-term trade related transactions 182 605
Undrawn formal standby facilities, credit lines and other commitments to lend
– less than one year 109,653 85,424
– one year and over 69,577 51,827
Other commitments 1,365 1,837
180,777 139,693