1.23 Operating segments
Changes in the fair value of derivatives that are designated
A business segment is a distinguishable component
and qualify as fair value hedges are recorded in the income
engaged in providing products or services subject to
statement, together with any changes in the fair value of the
risks and returns that are different from those of other
hedged asset or liability that are attributable to the hedged
business segments. A geographical segment is engaged in
risk.
providing products or services within a specific economic environment subject to risks and returns that are different
b) Cash flow hedges
from those of segments operating in other economic
The effective portion of changes in the fair value of
environments.
derivatives that are designated and qualify as cash flow hedges is recognized in equity. The gain or loss relating to the ineffective portion of the hedge is recognized immediately in the income statement. Amounts accumulated in equity are reclassified to income in the periods when the hedged item affects profit or loss (e.g. when the forecast sale that is hedged takes place). When a hedging instrument expires or is sold, or when a hedge no longer qualifies for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is reclassified to the income statement when the forecast transaction is ultimately recognized in income. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement.
c) Derivatives that do not qualify for hedge accounting Certain derivative instruments do not qualify for hedge accounting. Such derivatives are recognized at fair value on the balance sheet, with changes in fair value recognized in the income statement. These instruments are designated as economic hedges inasmuch as they are not used to speculate on positions.
IBA annual report 2010 // 57
Consolidated financial statements
a) Fair value hedges