eTrade 2007 Annual Report Download - page 115

The following tables show: 1) amounts recorded in accumulated other comprehensive loss related to
derivative instruments accounted for as cash flow hedges; 2) the notional amounts and fair values of derivatives
terminated for the periods presented; and 3) the amortization of terminated interest rate swaps included in
operating interest expense and operating interest income (dollars in thousands):
Year Ended December 31,
2007 2006 2005
Impact on accumulated other comprehensive loss (net of taxes):
Beginning balance $ (27,844) $ (70,831) $ (118,018)
Unrealized gains (losses), net (116,101) 36,409 7,032
Reclassifications into earnings, net 11,722 6,578 40,155
Ending balance $ (132,223) $ (27,844) $ (70,831)
Derivatives terminated during the period:
Notional $11,435,000 $10,675,000 $17,920,000
Fair value of net gains (losses) recognized in accumulated other
comprehensive loss $ (17,530) $ 80,198 $ 2,228
Amortization of terminated interest rate swaps and options included
in operating interest expense and operating interest income $ 1,090 $ 10,043 $ 65,110
The gains (losses) accumulated in other comprehensive loss on the derivative instruments terminated shown
in the preceding table will be included in operating interest expense and operating interest income over the
periods the variable rate liabilities and hedged forecasted issuance of liabilities will affect earnings, ranging from
16 days to more than 14 years.
The following table shows the balance in accumulated other comprehensive loss attributable to open cash
flow hedges and discontinued cash flow hedges (dollars in thousands):
Year Ended December 31,
2007 2006 2005
Accumulated other comprehensive loss balance (net of taxes) related to:
Open cash flow hedges $(144,337) $(50,158) $(36,736)
Discontinued cash flow hedges 12,114 22,314 (34,095)
Total cash flow hedges $(132,223) $(27,844) $(70,831)
Hedge Ineffectiveness
In accordance with SFAS No. 133, as amended, the Company recognizes hedge ineffectiveness on both fair
value and cash flow hedge relationships. The amount of ineffectiveness recorded in earnings for cash flow
hedges is equal to the excess of the cumulative change in the fair value of the actual derivative over the
cumulative change in the fair value of a hypothetical derivative which is created to match the exact terms of the
underlying instruments being hedged. These amounts are reflected in the other expense excluding interest line
item in the consolidated statement of income (loss). Cash flow and fair value ineffectiveness are re-measured on
a quarterly basis. The following table summarizes income (expense) recognized by the Company as fair value
and cash flow hedge ineffectiveness (dollars in thousands):
Year Ended December 31,
2007 2006 2005
Fair value hedges $(4,673) $(1,409) $(4,937)
Cash flow hedges (336) (93) 45
Total hedge ineffectiveness $(5,009) $(1,502) $(4,892)
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