entire - Deutsche Bank Annual Report 2012

Deutsche Bank 02 – Consolidated Financial Statements 172
Financial Report 2010 Notes to the Consolidated Financial Statements
01 – Significant Accounting Policies
Hedging derivatives are reported as other assets and other liabilities. In the event that a derivative is subsequently
de-designated from a hedging relationship, it is transferred to financial assets/liabilities at fair value through
profit or loss. Subsequent changes in fair value are recognized in net gains (losses) on financial assets/liabilities
at fair value through profit or loss.
For hedges of changes in fair value, the changes in the fair value of the hedged asset, liability or unrecognized
firm commitment, or a portion thereof, attributable to the risk being hedged are recognized in the consolidated
statement of income along with changes in the entire fair value of the derivative. When hedging interest rate
risk, any interest accrued or paid on both the derivative and the hedged item is reported in interest income or
expense and the unrealized gains and losses from the hedge accounting fair value adjustments are reported in
other income. When hedging the foreign exchange risk of an AFS security, the fair value adjustments related to
the security’s foreign exchange exposures are also recorded in other income. Hedge ineffectiveness is reported
in other income and is measured as the net effect of changes in the fair value of the hedging instrument and
changes in the fair value of the hedged item arising from changes in the market rate or price related to the
risk(s) being hedged.
If a fair value hedge of a debt instrument is discontinued prior to the instrument’s maturity because the derivative
is terminated or the relationship is de-designated, any remaining interest rate-related fair value adjustments
made to the carrying amount of the debt instrument (basis adjustments) are amortized to interest income or
expense over the remaining term of the original hedging relationship. For other types of fair value adjustments
and whenever a fair value hedged asset or liability is sold or otherwise derecognized any basis adjustments
are included in the calculation of the gain or loss on derecognition.
For hedges of variability in future cash flows, there is no change to the accounting for the hedged item and the
derivative is carried at fair value, with changes in value reported initially in other comprehensive income to the
extent the hedge is effective. These amounts initially recorded in other comprehensive income are subsequently
reclassified into the consolidated statement of income in the same periods during which the forecast transaction
affects the consolidated statement of income. Thus, for hedges of interest rate risk, the amounts are amortized
into interest income or expense at the same time as the interest is accrued on the hedged transaction.
Hedge ineffectiveness is recorded in other income and is measured as changes in the excess (if any) in the
absolute cumulative change in fair value of the actual hedging derivative over the absolute cumulative change
in the fair value of the hypothetically perfect hedge.
When hedges of variability in cash flows attributable to interest rate risk are discontinued, amounts remaining
in accumulated other comprehensive income are amortized to interest income or expense over the remaining
life of the original hedge relationship, unless the hedged transaction is no longer expected to occur in which
case the amount will be reclassified into other income immediately. When hedges of variability in cash flows
attributable to other risks are discontinued, the related amounts in accumulated other comprehensive income
are reclassified into either the same consolidated statement of income caption and period as profit or loss from
the forecast transaction, or into other income when the forecast transaction is no longer expected to occur.