JP Morgan Chase 2010 Annual Report Download - page 194

Notes to consolidated financial statements
194 JPMorgan Chase & Co./2010 Annual Report
The tables that follow reflect the derivative-related income statement impact by accounting designation for the years ended December 31,
2010 and 2009, respectively.
Fair value hedge gains and losses
The following tables present derivative instruments, by contract type, used in fair value hedge accounting relationships, as well as pretax
gains/(losses) recorded on such derivatives and the related hedged items for the years ended December 31, 2010 and 2009. The Firm includes
gains/(losses) on the hedging derivative and the related hedged item in the same line item in the Consolidated Statements of Income.
Gains/(losses) recorded in income
Income stat
e
ment impact due to:
Year ended
December 31, 2010
(in millions) Derivatives Hedged items
Total income
statement impact(d)
Hedge
ineffectiveness(e)
Excluded
components(f)
Contract type
Interest rate
(a)
$ 1,066 $ (454) $ 612 $ 172 $ 440
Foreign exchange
(b)
1,357
(g)
(1,812) (455) — (455)
Commodity
(c)
(1,354) 1,882 528 — 528
Total
$ 1,069
$ (384)
$ 685
$
172
$
513
Gains/(losses) recorded in income
Income stat
e
ment impact due to:
Year ended
December 31, 2009
(in millions) Derivatives Hedged items
Total income
statement impact(d)
Hedge
ineffectiveness(e)
Excluded
components(f)
Contract type
Interest rate
(a)
$ (3,830) $ 4,638 $ 808 $ (466) $ 1,274
Foreign exchange
(b)
(1,421)
(g)
1,445 24 — 24
Commodity
(c)
(430) 399 (31) — (31)
Total
$ (5,681) $ 6,482 $ 801 $ (466) $ 1,267
(a) Primarily consists of hedges of the benchmark (e.g., London Interbank Offered Rate (“LIBOR”)) interest rate risk of fixed-rate long-term debt and AFS securities. Gains
and losses were recorded in net interest income.
(b) Primarily consists of hedges of the foreign currency risk of long-term debt and AFS securities for changes in spot foreign currency rates. Gains and losses related to the
derivatives and the hedged items, due to changes in spot foreign currency rates, were recorded in principal transactions revenue.
(c) Consists of overall fair value hedges of gold and base metal inventory. Gains and losses were recorded in principal transactions revenue.
(d) Total income statement impact for fair value hedges consists of hedge ineffectiveness and any components excluded from the assessment of hedge effectiveness. The
related amount for the year ended December 31, 2008 was a net gain of $434 million.
(e) Hedge ineffectiveness is the amount by which the gain or loss on the designated derivative instrument does not exactly offset the gain or loss on the hedged item
attributable to the hedged risk.
(f) Certain components of hedging derivatives are permitted to be excluded from the assessment of hedge effectiveness, such as forward points on a futures or forward
contract. Amounts related to excluded components are recorded in current-period income.
(g) For the years ended December 31, 2010 and 2009, includes $278 million and $(1.6) billion of revenue related to certain foreign exchange trading derivatives desig-
nated as fair value hedging instruments, respectively.