Hedging Financial Instruments

12 Months Ended

Dec. 31, 2022

Disclosure of detailed information about hedging instruments [abstract]

Hedging Financial Instruments

21.HEDGING FINANCIAL INSTRUMENTS

Chunghwa’s hedge strategy is to enter into forward exchange contracts - buy to avoid its foreign currency exposure to certain foreign currency denominated equipment payments in the following six months. In addition, Chunghwa’s management considers the market condition to determine the hedge ratio and enters into forward exchange contracts with the banks to avoid the foreign currency risk.

Chunghwa signed equipment purchase contracts with suppliers and entered into forward exchange contracts to avoid foreign currency risk exposure to Euro-denominated purchase commitments. Those forward exchange contracts were designated as cash flow hedges. When forecast purchases actually take place, basis adjustments are made to the initial carrying amounts of hedged items.

For the hedges of highly probable forecast sales and purchases, as the critical terms (i.e. the notional amount, life and underlying) of the forward foreign exchange contracts and their corresponding hedged items are the same, the Company performs a qualitative assessment of effectiveness and it is expected that the value of the forward contracts and the value of the corresponding hedged items will systematically change in opposite direction in response to movements in the underlying exchange rates.

The main source of hedge ineffectiveness in these hedging relationships is the effect of credit risks of the Company and the counterparty on the fair value of the forward exchange contracts. Such credit risks do not impact the fair value of the hedged item attributable to changes in foreign exchange rates. No other sources of ineffectiveness emerged from these hedging relationships.

The following tables summarized the information relating to the hedges for foreign currency risk.

December 31, 2020

Notional

Forward

Line Item in

Carrying Amount

Change in Fair Values of Hedging Instruments Used for Calculating Hedge

Hedging Instruments

Currency

Amount

Maturity

Rate

Balance Sheet

Asset

Liability

Ineffectiveness

(In Millions)

NT$

NT$

NT$

(In Millions)

Cash flow hedge

Forecast purchases -   forward exchange   contracts

NT$/EUR

NT$ 201/ EUR 6

2021.03

$

34.45

Hedging financial assets (liabilities)

$

2

$

—

$

2

	Change in Value of Hedged  Item Used for			Accumulated Gain or Loss on Hedging Instruments in Other Equity
Hedged Items	Calculating Hedge Ineffectiveness			Continuing Hedges		Hedge Accounting No Longer Applied
	NT$			NT$		NT$
				(In Millions)
Cash flow hedge
Forecast equipment purchases	$	(2	)	$	2	$	—

December 31, 2021

Notional

Forward

Line Item in

Carrying Amount

Change in Fair Values of Hedging Instruments Used for Calculating Hedge

Hedging Instruments

Currency

Amount

Maturity

Rate

Balance Sheet

Asset

Liability

Ineffectiveness

(In Millions)

NT$

NT$

NT$

(In Millions)

Cash flow hedge

Forecast purchases -   forward exchange   contracts

NT$/EUR

NT$ 228/ EUR 7

2022.03

$

32.54

Hedging financial assets (liabilities)

$

—

$

8

$

(10

)

	Change in Value of Hedged  Item Used for		Accumulated Gain or Loss on Hedging Instruments in Other Equity
Hedged Items	Calculating Hedge Ineffectiveness		Continuing Hedges			Hedge Accounting No Longer Applied
	NT$		NT$			NT$
			(In Millions)
Cash flow hedge
Forecast equipment purchases	$	10	$	(8	)	$	—

December 31, 2022

Notional

Forward

Line Item in

Carrying Amount

Change in Fair Values of Hedging Instruments Used for Calculating Hedge

Hedging Instruments

Currency

Amount

Maturity

Rate

Balance Sheet

Asset

Liability

Ineffectiveness

(In Millions)

NT$

NT$

NT$

(In Millions)

Cash flow hedge

Forecast purchases -   forward exchange   contracts

NT$/EUR

NT$ 423/ EUR 13

2023.03

$

31.69

Hedging financial assets (liabilities)

$

13

$

—

$

21

	Change in Value of Hedged  Item Used for			Accumulated Gain or Loss on Hedging Instruments in Other Equity
Hedged Items	Calculating Hedge Ineffectiveness			Continuing Hedges		Hedge Accounting No Longer Applied
	NT$			NT$		NT$
				(In Millions)
Cash flow hedge
Forecast equipment purchases	$	(21	)	$	13	$	—

Year ended December 31, 2020

	Comprehensive Income						Reclassification from Equity to Assets and the Adjusted Line Item
	Hedging Gain or Loss		Amount of Hedge Ineffectiveness		Line Item in Which Hedge		Amount Reclassified to Assets and		Due to Hedged Future Cash Flows No
Hedge	Recognized		Recognized in		Ineffectiveness		the Adjusted		Longer Expected
Transaction	in OCI		Profit or Loss		is Included		Line Item		to Occur
	NT$		NT$		NT$		NT$		NT$
	(In Millions)
Cash flow hedge
Forecast   equipment   purchases	$	2	$	—		—	$	21	$	—
							Construction in progress and equipment to be accepted		Other gains and losses

Year ended December 31, 2021

Comprehensive Income

Reclassification from Equity to Assets and the Adjusted Line Item

Hedging Gain or Loss

Amount of Hedge Ineffectiveness

Line Item in Which Hedge

Amount Reclassified to Assets and

Due to Hedged Future Cash Flows No

Hedge

Recognized

Recognized in

Ineffectiveness

the Adjusted

Longer Expected

Transaction

in OCI

Profit or Loss

is Included

Line Item

to Occur

NT$

NT$

NT$

NT$

NT$

(In Millions)

Cash flow hedge

Forecast   equipment   purchases

$

(10

)

$

—

—

$

(43

)

$

—

Construction in progress and equipment to be accepted

Other gains and losses

Year ended December 31, 2022

	Comprehensive Income						Reclassification from Equity to Assets and the Adjusted Line Item
	Hedging Gain or Loss		Amount of Hedge Ineffectiveness		Line Item in Which Hedge		Amount Reclassified to Assets and		Due to Hedged Future Cash Flows No
Hedge	Recognized		Recognized in		Ineffectiveness		the Adjusted		Longer Expected
Transaction	in OCI		Profit or Loss		is Included		Line Item		to Occur
	NT$		NT$		NT$		NT$		NT$
	(In Millions)
Cash flow hedge
Forecast   equipment   purchases	$	21	$	—		—	$	6	$	—
							Construction in progress and equipment to be accepted		Other gains and losses