14.2.2.10 Calculation of Net Derivative Cash Inflows and Outflows

This section details the cash flow netting calculations at the derivative contract level and netting agreement level.

Cash Flow Netting at Derivative Contract Level

Cash flows from each derivative contract are netted as follows:

1. If the cash inflows and outflows are denominated in the same currency and occur in the same time bucket:
   1. The cash inflows and outflows are summed up and the net value is computed as follows:

      Figure 14-21 Formula to calculate net cash flow

      
      

      

      
      
   2. If the net cash flow is positive and there is no netting agreement associated with the derivative contract, the value is treated as net derivative cash outflow.
   3. If the net cash flow is negative and there is no netting agreement associated with the derivative contract, the value is treated as net derivative cash inflow.
2. If the cash inflows and outflows are denominated in different currencies but settle within the same day:
   1. The cash inflows and outflows are summed up after being converted to the reporting currency and the net value is computed.
   2. If the net cash flow is positive and there is no netting agreement associated with the derivative contract, the value is treated as net derivative cash outflow.
   3. If the net cash flow is negative and there is no netting agreement associated with the derivative contract, the value is treated as net derivative cash inflow.
3. If the cash inflows and outflows are denominated in different currencies and do not settle within the same day:
   1. The cash outflows from each derivative contract without an associated netting agreement are summed up and treated as net derivative cash outflow.
   2. The cash inflows from each derivative contract without an associated netting agreement are summed up and treated as net derivative cash inflow.
   3. If a derivative contract has a netting agreement associated with it, the cash flow is further netted across contracts at the netting agreement level.

Cash Flow Netting at Netting Agreement Level

For derivative contracts which have a netting agreement associated with them, the net cash flows computed at the derivative contract level are further netted across multiple contracts under the same netting agreement as follows:

1. For derivative contracts that belong to a single netting agreement, whose payment netting agreement flag is Yes:
   1. The cash inflows and outflows occurring in each time bucket, denominated in each currency, are summed up across all contracts whose payment netting agreement flag is Yes, and the net value is computed.
   2. If the net cash flow is positive, the value is treated as net derivative cashoutflow.
   3. If the net cash flow is negative, the value is treated as net derivative cashinflow.
2. For derivative contracts that belong to a single netting agreement, whose payment netting agreement flag is No:
   1. The cash outflows occurring in each time bucket, denominated in each currency, are summed up separately for each derivative contract whose payment netting agreement flag is No and treated as net derivative cash outflow.
   2. The cash inflows occurring in each time bucket, denominated in each currency, are summed up separately for each derivative contract whose payment netting agreement flag is No and treated as net derivative cash inflow.

      Note:

      Cash flow netting for netting agreements is done separately for each currency. Cash flows are not netted across currencies, instead, the inflows and outflows converted into the reporting currency are summed up separately to report the net derivatives cash inflow and net derivatives cash outflow at an entity level.