HSBC 2010 Annual Report Download - page 328

HSBC HOLDINGS PLC
Notes on the Financial Statements (continued)
20 – Derivatives / 21 – Financial investments
326
Fair value of derivatives designated as cash flow hedges
At 31 December 2010 At 31 December 2009
Assets Liabilities Assets Liabilities
US$m US$m US$m US$m
Foreign exchange .......................................................................... 1,151 340 1,353 300
Interest rate ................................................................................... 2,321 1,683 3,264 2,189
3,472 2,023 4,617 2,489
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 2010
Assets ............................................................................................ 163,006 97,174 58,975 1,358
Liabilities ...................................................................................... (89,112) (58,811) (42,259) (6,065)
Net cash inflows/(outflows) exposure .......................................... 73,894 38,363 16,716 (4,707)
At 31 December 2009
Assets ............................................................................................ 120,915 111,456 53,184 476
Liabilities ...................................................................................... (71,143) (78,841) (39,377) (6,559)
Net cash inflows/(outflows) exposure .......................................... 49,772 32,615 13,807 (6,083)
This table reflects the interest rate repricing profile of the underlying hedged items.
The gains and losses on ineffective portions of such derivatives are recognised immediately in ‘Net trading income’.
During the year to 31 December 2010 a loss of US$9m (2009: gain of US$90m; 2008: loss of US$40m) was
recognised due to hedge ineffectiveness.
Hedges of net investments in foreign operations
The Group applies hedge accounting in respect of certain consolidated net investments. Hedging is undertaken using
forward foreign exchange contracts or by financing with currency borrowings.
At 31 December 2010, the fair values of outstanding financial instruments designated as hedges of net investments
in foreign operations were liabilities of US$34m (2009: US$28m) and notional contract values of US$644m (2009:
US$566m).
The ineffectiveness recognised in ‘Net trading income’ in the year ended 31 December 2010 that arose from hedges
in foreign operations was nil (2009 and 2008: nil).
21 Financial investments
2010 2009
US$m US$m
Financial investments:
– not subject to repledge or resale by counterparties .......................................................................... 369,597 356,864
– which may be repledged or resold by counterparties ...................................................................... 31,158 12,294
400,755 369,158