Page 192 - TSMC 2020 Annual Report

December 31, 2019
Contract Amount (US$ in Thousands)
US$122,200
Asset Carrying Amount
Financial assets at FVTOCI
The effect for the years ended December 31, 2020 and 2019 is detailed below:
Hedging Instruments
Interest rate futures contracts - US Treasury bonds
Hedged Items
Maturity
March 2020
Accumulated Amount of Fair Value Hedge Adjustments
$ (22,380)
Hedging Instruments/Hedged Items
Hedging Instruments
Interest rate futures contracts - US Treasury bonds
Hedged Items
Financial assets at FVTOCI
Cash flow hedge
Increase
(Decrease) in Value Used for Calculating Hedge Ineffectiveness Years Ended December 31
$ 7,364,727
2020
$ (353,611) 353,611 $ -
2019
$ (164,740) 177,831 $ 13,091
The Company entered into forward exchange contracts to partially hedge foreign exchange rate risks associated with certain highly probable forecast transactions (capital expenditures). The hedge ratio is adjusted in response to the changes in the financial market and capped at 100%. The forward exchange contracts have maturities of 12 months or less.
On the basis of economic relationships, the Company expects that the value of forward exchange contracts and the value of hedged transactions will change in opposite directions in response to movements in foreign exchange rates.
The main source of hedge ineffectiveness in these hedging relationships is driven by the effect of the
counterparty’s own credit risk on the fair value of forward exchange contracts. No other sources of
ineffectiveness emerged from these hedging relationships. For the years ended December 31, 2020 and 2019, refer to Note 22(d) for gain or loss arising from changes in the fair value of hedging instruments and the amount transferred to initial carrying amount of hedged items.
The following tables summarize the information relating to the hedges for foreign currency risk. December 31, 2019
Hedging Instruments
Contract Amount (In Thousands)
Maturity
Balance in Other Equity (Continuing Hedges)
Forward exchange contracts
Sell NT$ 1,342,392
January 2020
$ (3,820)
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