JP Morgan Chase 2012 Annual Report Download - page 212

Notes to consolidated financial statements
222 JPMorgan Chase & Co./2012 Annual Report
Impact of derivatives on the Consolidated Statements of Income
The following tables provide information related to gains and losses recorded on derivatives based on their hedge accounting
designation or purpose.
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, 2012,
2011 and 2010, respectively. 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 statement impact due to:
Year ended December 31, 2012 (in millions) Derivatives Hedged items
Total income
statement
impact
Hedge
ineffectiveness(e)
Excluded
components(f)
Contract type
Interest rate(a) $ (1,238) $ 1,879 $ 641 $ (28) $ 669
Foreign exchange(b) (3,027) (d) 2,925 (102) — (102)
Commodity(c) (2,530) 1,131 (1,399) 107 (1,506)
Total $ (6,795) $ 5,935 $ (860) $ 79 $ (939)
Gains/(losses) recorded in income Income statement impact due to:
Year ended December 31, 2011 (in millions) Derivatives Hedged items
Total income
statement
impact
Hedge
ineffectiveness(e)
Excluded
components(f)
Contract type
Interest rate(a) $ 532 $ 33 $ 565 $ 104 $ 461
Foreign exchange(b) 5,684 (d) (3,761) 1,923 — 1,923
Commodity(c) 1,784 (2,880) (1,096) (10) (1,086)
Total $ 8,000 $ (6,608) $ 1,392 $ 94 $ 1,298
Gains/(losses) recorded in income Income statement impact due to:
Year ended December 31, 2010 (in millions) Derivatives Hedged items
Total income
statement
impact
Hedge
ineffectiveness(e)
Excluded
components(f)
Contract type
Interest rate(a) $ 1,102 $ (376) $ 726 $ 175 $ 551
Foreign exchange(b) 1,357 (d) (1,812) (455) — (455)
Commodity(c) (1,354) 1,882 528 — 528
Total $ 1,105 $ (306) $ 799 $ 175 $ 624
(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. The current presentation excludes accrued interest. Prior period amounts have been
revised to conform with the current presentation.
(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 foreign currency rates, were recorded in principal transactions revenue and net interest
income.
(c) Consists of overall fair value hedges of physical commodities inventories that are generally carried at the lower of cost or market (market approximates
fair value). Gains and losses were recorded in principal transactions revenue.
(d) Included $(3.1) billion, $4.9 billion and $278 million for the years ended December 31, 2012, 2011 and 2010, respectively, of revenue related to certain
foreign exchange trading derivatives designated as fair value hedging instruments.
(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) The assessment of hedge effectiveness excludes certain components of the changes in fair values of the derivatives and hedged items such as forward
points on foreign exchange forward contracts and time values.