Hong Kong Regulations

BANKING (DISCLOSURE) RULES - SECT 40

Hedge accounting

(1) An authorized institution shall separately disclose, in respect of its
hedges which are fair value hedges, cash flow hedges or hedges of 
net investments in foreign operations—

   (a)  a description of each type of hedge;

   (b)  a description of the financial instruments designated as hedging
        instruments and their fair values; and

   (c)  the nature of the risks being hedged.

(2) An authorized institution shall disclose in respect of its cash 
flow hedges—

   (a)  the periods when the cash flows are expected to occur and when they
        are expected to affect the institution's profit or loss;

   (b)  a description of any forecast transaction for which hedge accounting
        had previously been used but which is no longer expected to occur;

   (c)  any amount which was recognized in equity for the annual 
        reporting period;

   (d)  any amount which was removed from equity and included in profit or
        loss for the annual reporting period, showing the amount included in
        each line item in the income statement; and

   (e)  any amount which was removed from equity for the annual 
        reporting period and included in the initial cost or other carrying
        amount of a non-financial asset or non-financial liability the
        acquisition or incurrence of which was a hedged
        highly probable forecast transaction.

(3) An authorized institution shall separately disclose—

   (a)  in respect of its fair value hedges, gains or losses—

        (i)    on the hedging instrument; and

        (ii)   on the hedged item attributable to the hedged risk;

   (b)  any ineffectiveness recognized in the institution's profit or loss
        which arises from cash flow hedges; and

   (c)  any ineffectiveness recognized in the institution's profit or loss
        which arises from hedges of net investments in foreign operations.

(4) In this section—

"ineffectiveness" (無效部分), in relation to a hedge, means the degree to
which changes in the fair value or cash flows of the hedged item concerned
which are attributable to a hedged risk are not offset by changes in the fair
value or cash flows of the hedging instrument.

"ineffectiveness" (無效部分)