Contents Management report Corporate governance Consolidated financial statements Financial statements Pillar 3
reclassified to the profit and loss account. On 31 December
2015, the cash flow hedge reserves as part of equity totalled
-39 (2014:11) after taxation. This amount fluctuates along
with the fair value of the derivatives in the cash flow hedges
and is accounted for in profit over the term of the hedged
positions as trading profit. The cash flow hedge reserve relates
to a large number of derivatives and hedged positions with
different terms.The maximum term is 26 years, with the largest
concentrations exceeding five years.The IFRS ineffectiveness for
theyearended 31 December 2015 was 181 (2014:185).
Net investment hedges
Rabobank uses foreign forward-exchange contracts to hedge
a portion of the currency translation risk of net investments
in foreign entities.The net fair value of these foreign forward-
exchange contracts on 31 December 2015 was 4 (2014:8).
On 31 December 2015, futures contracts with a nominal
amount of 657 (2014:1,797) were designated as net investment
hedges.These resulted in exchange gains and losses of-6 for
the year (2014: -87), which are deferred in equity. A total of 22
was made in withdrawals from equity during the reporting
year (2014:106). For the year ended 31 December 2015,
Rabobank reported no ineffectiveness resulting from the net
investment hedges.
10.4 Notional amount and fair value
Although the notional amount of certain types of financial
instruments provides a basis for comparing instruments that
are included in the statement of financial position, it does
not necessarily represent the related future cash flows or the
fair values of the instruments and therefore the exposure of
Rabobank to credit or exchange risks. The nominal value is
the amount of the asset, reference rate or index underlying
a derivative financial instrument, which represents the basis
on which changes in a derivative financial instrument's value
are measured. It provides an indication of the volume of
transactions executed by Rabobank, but is not a measure
of risk exposure. Some derivatives are standardised in terms
of notional amount or settlement date and are specifically
designed for trading on active markets (stock exchanges).
Other derivatives are specifically constructed for individual
clients and not for trading on an exchange, even though they
can be traded at prices negotiated between buyers and sellers
(OTC instruments).
The positive fair value represents the cost for Rabobank to
replace all contracts on which it will be entitled to receive
payment if all counterparties were to default. This is the
standard method in the industry for calculating the current
credit risk exposure.The negative fair value represents the
cost of all Rabobank contracts on which it will have to make
payment if Rabobank defaults. The totals of the positive and
negative fair values are disclosed separately in the statement of
financial position. Derivatives are positive (assets) or negative
(liabilities) as a result of fluctuations in market or exchange rates
in relation to their contract values.The total contract amount
or notional amount of derivatives held, the degree to which
these instruments are positive or negative, and hence the total
fair value of the derivative financial assets and liabilities can
sometimes fluctuate significantly.
The following table shows the notional amounts and the
positive and negative fair values of derivative contracts held
by Rabobank.
219 Notes to the consolidated financial statements
