eTrade 2010 Annual Report Download - page 138
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Related to derivative instruments accounted for as cash flow hedges, the following table shows: 1) amounts
recorded in accumulated other comprehensive loss; 2) amount of ineffectiveness recorded in earnings; 3) the
notional amount and fair value of terminated derivative instruments for the periods presented; and 4) the
amortization of terminated derivative instruments included in net operating interest income (dollars in
thousands):
For the Year Ended December 31,
2010 2009 2008
Impact on accumulated other comprehensive loss (net of tax):
Beginning balance $ (278,548) $ (417,489) $ (132,223)
Unrealized gains (losses), net (77,724) 101,886 (302,132)
Reclassifications into earnings, net 47,774 37,055 16,866
Ending balance $ (308,498) $ (278,548) $ (417,489)
Cash flow hedge ineffectiveness(1)(2) $ (265) $ 579 $ 180
Derivatives terminated during the period:
Notional $2,745,000 $1,140,000 $7,135,000
Fair value of net losses recognized in accumulated other
comprehensive loss $ (160,977) $ (128,869) $ (268,364)
Amortization of terminated interest rate swaps and options
included in net operating interest income $ (57,693) $ (39,629) $ 5,811
(1) 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.
(2) The cash flow hedge ineffectiveness is reflected in the gains (losses) on loans and securities, net line item on the statement of
consolidated loss.
During the upcoming twelve months, the Company expects to include a pre-tax amount of approximately
$18.5 million of net unrealized gains that are currently reflected in accumulated other comprehensive loss in net
operating interest income as a yield adjustment in the same periods in which the related items affect earnings.
The losses accumulated in other comprehensive loss on terminated derivative instruments will be included in net
operating interest income over the periods the related items will affect earnings, ranging from 6 days to
approximately 12 years.
The following table shows the balance in accumulated other comprehensive loss attributable to open and
discontinued cash flow hedges (dollars in thousands):
As of December 31,
2010 2009
Accumulated other comprehensive loss balance (net of tax) related to:
Discontinued cash flow hedges $(271,595) $(205,180)
Open cash flow hedges (36,903) (73,368)
Total cash flow hedges $(308,498) $(278,548)
135