ING Direct 2013 Annual Report Download - page 209

Notes to the consolidated annual accounts of ING Group continued
Gains and losses on the effective portions of derivatives designated under cash flow hedge accounting are recognised in Shareholders’
equity. Interest cash flows on these derivatives are recognised in the profit and loss account in interest result consistent with the manner in
which the forecast cash flows affect net result. The gains and losses on ineffective portions of such derivatives are recognised immediately
in the profit and loss account.
For the year ended 31 December 2013, ING Group recognised EUR –812 million (2012: EUR 716 million) after tax in equity as effective fair
value changes on derivatives under cash flow hedge accounting. As a consequence, the balance of the cash flow hedge reserve in equity
as at 31 December 2013 was EUR 2,448 million (2012: EUR 3,558 million) gross and EUR 1,879 million (2012: EUR 2,689 million) after
deferred tax. This cash flow hedge reserve will fluctuate with the fair value changes of the underlying derivatives and will be reflected in
the profit and loss account under Interest income/expense over the remaining term of the underlying hedged items. The cash flow hedge
reserve relates to a large number of derivatives and hedged items with varying maturities, up to 44 years for insurance operations and 40
years for banking operations, with the largest concentrations in the range of 1 to 8 years for insurance operations and 5 to 20 years for
banking operations. Accounting ineffectiveness on derivatives designated under cash flow hedge accounting resulted in a gain of EUR 54
million (2012: EUR 4 million gain) which was recognised in the profit and loss account.
As at 31 December 2013, the fair value of outstanding derivatives designated under cash flow hedge accounting was EUR 245 million
(2012: EUR 1,032 million), presented in the balance sheet as EUR 4,630 million (2012: EUR 7,471 million) positive fair values under assets
and EUR 4,385 million (2012: EUR 6,439 million) negative fair values under liabilities.
As at 31 December 2013, the fair value of outstanding non-derivatives designated as hedging instruments for cash flow hedge accounting
purposes was EUR –299 million (2012: EUR 267 million).
Included in Interest income and interest expense on non-trading derivatives is EUR 3,456 million (2012: EUR 2,598 million) and EUR 3,220
million (2012: EUR 2,620 million), respectively, relating to derivatives used in cash flow hedges.
Hedges of net investments in foreign operations
ING Group’s net investment hedges principally consist of derivatives (including currency forwards and swaps) and non-derivative financial
instruments such as foreign currency denominated funding that are used to protect against foreign currency exposures on foreign
subsidiaries.
Gains and losses on the effective portions of derivatives designated under net investment hedge accounting are recognised in
Shareholders’ equity. The balance in equity is recognised in the profit and loss account when the related foreign subsidiary is disposed.
The gains and losses on ineffective portions are recognised immediately in the profit and loss account.
As at 31 December 2013, the fair value of outstanding derivatives designated under net investment hedge accounting was EUR 86 million
(2012: EUR –22 million), presented in the balance sheet as EUR 138 million (2012: EUR 49 million) positive fair values under assets and
EUR 52 million (2012: EUR 71 million) negative fair values under liabilities.
As at 31 December 2013, the fair value of outstanding non-derivatives designated under net investment hedge accounting was EUR 491
million (2012: EUR –1,133 million).
Accounting ineffectiveness recognised in the profit and loss account for the year ended 31 December 2013 on derivatives and non-
derivatives designated under net investment hedge accounting was nil (2012: nil).
207ING Group Annual Report 2013
1 Who we are 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information