eTrade 2010 Annual Report Download - page 139
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The following table shows the balance in accumulated other comprehensive loss attributable to cash flow
hedges by type of hedged item (dollars in thousands):
As of December 31,
2010 2009
Repurchase agreements $(424,509) $(403,384)
FHLB advances (111,170) (102,572)
Home equity lines of credit 42,199 56,480
Other (628) (848)
Total balance of cash flow hedges before tax (494,108) (450,324)
Tax benefit 185,610 171,776
Total balance of cash flow hedges, net of tax $(308,498) $(278,548)
Fair Value Hedges
The Company uses interest rate swaps and options to offset its exposure to changes in value of certain fixed-
rate assets and liabilities. Changes in the fair value of the derivatives are recognized in the gains (losses) on loans
and securities, net line item.
Fair value hedges are accounted for by recording the fair value of the derivative instrument and the fair
value of the asset or liability being hedged on the consolidated balance sheet. To the extent that the hedge is
ineffective, the changes in the fair values will not offset and the difference, or hedge ineffectiveness, is reflected
in the gains (losses) on loans and securities, net line item in the consolidated statement of loss.
Hedge accounting is discontinued for fair value hedges if a derivative instrument ceases to be highly
effective as a hedge or if the derivative is sold, terminated or de-designated. If fair value hedge accounting is
discontinued, the net gain or loss on the asset or liability being hedged at the time of de-designation is amortized
to interest expense or interest income over the expected remaining life of the hedged item using the effective
interest method. Changes in the fair value of the derivative instruments after de-designation of fair value hedge
accounting are recorded in the gains (losses) on loans and securities, net line item in the consolidated statement
of loss. For a discontinued fair value hedge, the previously hedged item is no longer adjusted for changes in fair
value through the consolidated statement of loss.
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