Page 296 - TSMC 2020 Annual Report
P. 296

Outstanding forward exchange contracts consisted of the following:
December 31, 2020 Sell NT$ December 31, 2019 Sell NT$
Sell JPY
Maturity Date
January 2021 to March 2021
January 2020 to June 2020 January 2020 to February 2020
Contract Amount (In Thousands)
NT$108,428,027 JPY57,471,581
Financial assets- current
Cash flow hedges
Forward exchange contracts $
Financial liabilities- current
Cash flow hedges
Forward exchange contracts $
December 31, 2020
December 31, 2019
$ 3,504
$ 1,798
         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 19(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)
Sell NT$1,342,392
Balance in Other Equity (Continuing Hedges)
Forward exchange contracts
January 2020
$ (3,820)
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