Capital One 2012 Annual Report Download - page 231

CAPITAL ONE FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
certificates of deposits. These hedges have maturities through 2021 and have the effect of converting some
of our fixed rate debt, deposits and investments to variable rate.
•Cash Flow Hedges: We designate derivatives as cash flow hedges to manage our exposure to variability in
cash flows related to forecasted transactions. Changes in the fair value of derivatives designated as cash
flow hedges are recorded as a component of AOCI, to the extent that the hedge relationships are effective,
and amounts are reclassified from AOCI to earnings as the forecasted transactions occur. To the extent that
any ineffectiveness exists in the hedge relationships, the amounts are recorded in current period earnings.
Our cash flow hedges consist of interest rate swaps that are intended to hedge the variability in interest
payments on some of our variable rate debt issuances and assets through 2018. These hedges have the effect
of converting some of our variable rate debt and assets to a fixed rate. We also have entered into forward
foreign currency derivative contracts to hedge our exposure to variability in cash flows related to foreign
currency denominated debt.
•Free-Standing Derivatives: We use free-standing derivatives, to hedge the risk of changes in the fair value
of residential mortgage servicing rights (“MSRs”), mortgage loan origination and purchase commitments
and other interests held. We also categorize our customer-accommodation derivatives and the related
offsetting contracts as free-standing derivatives. Changes in the fair value of free-standing derivatives are
recorded in earnings as a component of other non-interest income.
Balance Sheet Presentation
The following table summarizes the fair value and related outstanding notional amounts of derivative instruments
reported in our consolidated balance sheets as of December 31, 2012 and 2011. The fair value amounts are
segregated by derivatives that are designated as accounting hedges and those that are not, and are further
segregated by type of contract within those two categories.
212