Company: TVC
Filing Date: 2025-02-05
Form Type: 10-Q
Source: 0001376986-25-000011
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Company: Tennessee Valley Authority
Filing Date: 2025-02-05
Form: 10-Q
Item: Part II, Item 13
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13.  Risk Management Activities and Derivative Transactions 

TVA is exposed to various risks related to commodity prices, investment prices, interest rates, currency exchange rates, and inflation as well as counterparty credit and performance risks.  To help manage certain of these risks, TVA has historically entered into various derivative transactions, principally commodity option contracts, forward contracts, swaps, swaptions, futures, and options on futures.  Overview of Accounting TreatmentTVA recognizes certain of its derivative instruments as either assets or liabilities on its Consolidated Balance Sheets at fair value.  The accounting for changes in the fair value of these instruments depends on (1) whether TVA uses regulatory accounting to defer the derivative gains and losses, (2) whether the derivative instrument has been designated and qualifies for hedge accounting treatment, and (3) if so, the type of hedge relationship (for example, cash flow hedge).The following tables summarize the accounting treatment that certain of TVA's financial derivative transactions receive:Summary of Derivative Instruments That Receive Hedge Accounting Treatment (part 1) Amount of Mark-to-Market Gain (Loss) Recognized in Accumulated Other Comprehensive Income (Loss)(in millions)Three Months Ended December 31Derivatives in Cash Flow Hedging RelationshipObjective of Hedge TransactionAccounting for DerivativeHedging Instrument20242023Currency swapsTo protect against changes in cash flows caused by changes in foreign currency exchange rates (exchange rate risk)Unrealized gains and losses are recorded in AOCI and reclassified to Interest expense to the extent they are offset by gains and losses on the hedged transaction$(19)$20 Summary of Derivative Instruments That Receive Hedge Accounting Treatment (part 2)(1)Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss) to Interest Expense(in millions)Three Months Ended December 31Derivatives in Cash Flow Hedging Relationship20242023Currency swaps$(37)$19 Note(1)  There were no amounts excluded from effectiveness testing for any of the periods presented.  Based on forecasted foreign currency exchange rates, TVA expects to reclassify approximately $11 million of gains from Accumulated other comprehensive income (loss) ("AOCI") to Interest expense within the next 12 months to 

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offset amounts anticipated to be recorded in Interest expense related to the forecasted exchange loss on the debt.Summary of Derivative Instruments That Do Not Receive Hedge Accounting TreatmentAmount of Gain (Loss