Page 323 - TSMC 2022 Annual Report

On the basis of economic relationships, the Company expects that the value of forward exchange contracts and the value of hedged transactions 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 during the hedging period. For the years ended December 31, 2021, 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 effect of hedging foreign currency risk for the years ended December 31, 2021 is detailed below:
Hedging Instruments/Hedged Items
Hedging Instruments
Forward exchange contracts
Hedged Items Forecasttransaction(capitalexpenditures)
10. NOTES AND ACCOUNTS RECEIVABLE, NET
At amortized cost
Notes and accounts receivable Less: Loss allowance
At FVTOCI
December 31, 2022
Change in Value Used for Calculating Hedge Ineffectiveness Years Ended December 31, 2021
$ (41,416) $ 41,416
December 31, 2021
$
34,316,916 (330,686)
$
42,046,293 (345,905)
33,986,230 7,325,606 $ 41,311,836
41,700,388 4,199,909 $ 45,900,297
The Company signed a contract with the bank to sell certain accounts receivable without recourse and transaction cost required. These accounts receivable are classified as at FVTOCI because they are held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets.
In principle, the payment term granted to customers is due 30 days from the invoice date or 30 days from the end of the month when the invoice is issued. Aside from recognizing impairment loss for credit-impaired accounts receivable, the Company recognizes loss allowance based on the expected credit loss ratio of customers by different risk levels with consideration of factors of historical loss ratios and customers’ financial conditions, competitiveness and business outlook. For accounts receivable past due over 90 days without collaterals or guarantees, the Company recognizes loss allowance at full amount.
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