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Hedge accounting | 12 Months Ended
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Dec. 31, 2023
Disclosure of detailed information about hedged items [abstract] |
Hedge accounting | Hedge accounting The Group has three types of hedge relationships: hedge of net investment in foreign operations, fair value hedge and cash flow hedge. For hedge accounting purposes, the risk factors measured by the Group are: •Interest Rate: Risk of volatility in transactions subject to interest rate variations; •Currency: Risk of volatility in transactions subject to foreign exchange variation; •Stock Grant Charges: Risk of volatility in XP Inc stock prices, listed on NASDAQ. The structure of risk limits is extended to the risk factor level, where specific limits aim at improving the monitoring and understanding processes, as well as avoiding concentration of these risks. The structures designed for interest rate and exchange rate categories take into account total risk when there are compatible hedging instruments. In certain cases, management may decide to hedge a risk for the risk factor term and limit of the hedging instrument. a) Hedge of net investment in foreign operations The objective of the Group was to hedge the risk generated by the US$ variation from investments in our subsidiaries in the United States, XP Holding International and XP Advisors Inc. The Group has entered into derivatives contracts to protect against changes in future cash flows and exchange rate variation of net investments in foreign operations. The Group undertakes risk management through the economic relationship between hedge instruments and hedged items, in which it is expected that these instruments will move in opposite directions, in the same proportions, with the aim of neutralizing the risk factors.
|  | Hedged item |  | Hedge instrument
|  | Book Value |  | Variation in value recognized in Other comprehensive income |  | Notional value |  | Variation in the amounts used to calculate hedge ineffectiveness
|  | Assets |  | Liabilities |  |  |
Strategies |  | 2023
Foreign exchange risk |  |  |  |  |  |  |  |  |  |
Hedge of net investment in foreign operations |  | 450,853 |  |  | — |  |  | (34,603) |  |  | 446,442 |  |  | 41,235 |
Total |  | 450,853 |  |  | — |  |  | (34,603) |  |  | 446,442 |  |  | 41,235 |
|  | 2022
Foreign exchange risk |  |  |  |  |  |  |  |  |  |
Hedge of net investment in foreign operations |  | 395,594 |  |  | — |  |  | (17,281) |  |  | 414,043 |  |  | 18,480 |
Total |  | 395,594 |  |  | — |  |  | (17,281) |  |  | 414,043 |  |  | 18,480 |
|  | 2021
Foreign exchange risk |  |  |  |  |  |  |  |  |  |
Hedge of net investment in foreign operations | 310,069 |  |  | — |  |  | 19,474 |  |  | 440,022 |  |  | (18,758) |
Total |  | 310,069 |  |  | — |  |  | 19,474 |  |  | 440,022 |  |  | (18,758) |
b) Fair value hedge The Group’s fair value strategy consists of hedging the exposure to variation in fair value on the receipt, payment of interests and exchange variation on assets and liabilities. The group applies fair value hedges as follows: •Hedging the exposure of fixed income securities carried out through structured operations certificates. The market risk hedge strategy involves avoiding temporary fluctuations in earnings arising from changes in the interest rate market in Reais. Once this risk is offset, the Group seeks to index the portfolio to the CDI, through the use of derivatives (DI1 Futuro). The hedge is contracted in order to neutralize the total exposure to the market risk of the fixed-income funding portfolio, excluding the portion of the fixed-income compensation represented by the credit spread of Banco XP S.A., seeking to obtain the closest match deadlines and volumes as possible. •Hedging to protect the change in the fair value of the exchange and interest rate risk of the component of future cash flows arising from the XP Inc bond issued (financial liability) recognized in the balance sheet of XP Inc in July 2021 by contracting derivatives. •Hedging the exposure of fixed-income securities carried out through sovereign and corporate bonds issued in local or foreign currencies, mainly US Dollars. The market risk hedge strategy involves avoiding temporary fluctuations in the income statement arising from changes in the interest rate market. Once this risk is offset, the Group seeks to index the portfolio to the CDI, through the use of derivatives. The effects of hedge accounting on the financial position and performance of the Group are presented below:
|  | Hedged item |  | Hedge instrument
|  | Book Value |  | Variation in value recognized in income |  | Notional value |  | Variation in the amounts used to calculate hedge ineffectiveness
|  | Assets |  | Liabilities |  |  |
Strategies |  | 2023
Interest rate and foreign exchange risk |  |  |  |  |  |  |  |  |  |
Structured notes |  | — |  |  | 16,593,439 |  |  | (816,142) |  |  | 16,702,984 |  |  | 849,160 |
Issued bonds |  | — |  |  | 3,542,258 |  |  | 131,181 |  |  | 3,379,798 |  |  | (189,189) |
Total |  | — |  |  | 20,135,697 |  |  | (684,961) |  |  | 20,082,782 |  |  | 659,971 |
|  | Hedged item |  | Hedge instrument
|  | Book Value |  | Variation in value recognized in income |  | Notional value |  | Variation in the amounts used to calculate hedge ineffectiveness
|  | Assets |  | Liabilities |  |  |
Strategies |  | 2022
Interest rate and foreign exchange risk |  |  |  |  |  |  |  |  |  |
Structured notes |  | — |  |  | 10,648,559 |  |  | 726,798 |  |  | 10,663,672 |  |  | (734,656) |
Issued bonds |  | — |  |  | 3,889,699 |  |  | 323,881 |  |  | 3,646,613 |  |  | (362,994) |
Fixed income bonds |  | 3,589,909 |  |  | — |  |  | (163,541) |  |  | 3,577,084 |  |  | 165,164 |
Total |  | 3,589,909 |  |  | 14,538,258 |  |  | 887,138 |  |  | 17,887,369 |  |  | (932,486) |
c) Cash flow hedge In March 2022, XP Inc recorded a new hedge structure, in order to neutralize the impacts of XP share price variation on highly probable labor tax payments related to share-based compensation plans using SWAP-TRS contracts. The transaction has been elected for hedge accounting and classified as cash flow hedge in accordance with IFRS 9. Labor tax payments are due upon delivery of shares to employees under share-based compensation plans and are directly related to share price at that time. The effects of hedge accounting on the financial position and performance of the Group are presented below:
|  | Hedged item |  | Hedge instrument
|  | Book Value |  | Variation in value recognized in Other comprehensive income |  | Notional value |  | Variation in the amounts used to calculate hedge ineffectiveness
|  | Assets |  | Liabilities |  |  |
Strategies |  | 2023
Market price risk |  |  |  |  |  |  |  |  |  |
Long term incentive plan taxes |  | — |  |  | 414,315 |  |  | (59,517) |  |  | 438,765 |  |  | 70,906 |
Total |  | — |  |  | 414,315 |  |  | (59,517) |  |  | 438,765 |  |  | 70,906 |
|  | Hedged item |  | Hedge instrument
|  | Book Value |  | Variation in value recognized in Other comprehensive income |  | Notional value |  | Variation in the amounts used to calculate hedge ineffectiveness
|  | Assets |  | Liabilities |  |  |
Strategies |  | 2022
Market price risk |  |  |  |  |  |  |  |  |  |
Long term incentive plan taxes |  | — |  |  | 262,756 |  |  | 346,900 |  |  | 261,818 |  |  | (348,248) |
Total |  | — |  |  | 262,756 |  |  | 346,900 |  |  | 261,818 |  |  | (348,248) |
The table below presents, for each risk factor and hedging instruments categories, the nominal value and the adjustments to the fair value of the hedging instruments and the book value of the hedged object:
|  | 2023
|  | Notional amount |  | Book value |  | Variation in fair value used to calculate hedge ineffectiveness |  | Hedge ineffectiveness recognized in income
Hedge Instruments |  |  | Assets |  | Liabilities |  |
Interest rate risk |  |  |  |  |  |  |  |  |  |
Futures |  | 19,859,217 |  |  | — |  |  | 19,896,226 |  |  | 675,035 |  |  | (19,807) |
Foreign exchange risk |  |  |  |  |  |  |  |  |  |
Futures |  | 670,007 |  |  | 450,853 |  |  | 239,472 |  |  | 26,171 |  |  | 1,449 |
Market price risk |  |  |  |  |  |  |  |  |  |
Swaps |  | 438,765 |  |  | — |  |  | 414,315 |  |  | 70,906 |  |  | 11,389 |
|  | 2022
|  | Notional amount |  | Book value (i) |  | Variation in fair value used to calculate hedge ineffectiveness |  | Hedge ineffectiveness recognized in income
Hedge Instruments |  |  | Assets |  | Liabilities |  |
Interest rate risk |  |  |  |  |  |  |  |  |  |
Futures |  | 17,604,185 |  |  | 3,589,909 |  |  | 14,218,543 |  |  | (890,103) |  |  | (41,295) |
Foreign exchange risk |  |  |  |  |  |  |  |  |  |
Futures |  | 697,227 |  |  | 395,594 |  |  | 319,715 |  |  | (23,903) |  |  | (2,825) |
Market price risk |  |  |  |  |  |  |  |  |  |
Swaps |  | 261,818 |  |  | — |  |  | 262,756 |  |  | (348,248) |  |  | (1,348) |
The table below presents, for each strategy, the notional amount and the fair value adjustments of hedging instruments and the book value of the hedged item:
|  | December 31, 2023 |  | December 31, 2022 |  | December 31, 2021
|  | Hedge instruments |  | Hedge item |  | Hedge instruments |  | Hedge item |  | Hedge instruments |  | Hedge item
Strategies |  | Notional amount |  | Fair value adjustments |  | Book value |  | Notional amount |  | Fair value adjustments |  | Book value |  | Notional amount |  | Fair value adjustments |  | Book value
Hedge of fair value |  | 20,082,782 |  |  | 659,971 |  |  | (684,961) |  |  | 17,887,369 |  |  | (932,486) |  |  | 887,138 |  |  | 9,297,999 |  |  | (495,191) |  |  | 506,190 |
Hedge of net investment in foreign operations |  | 446,442 |  |  | 41,235 |  |  | (34,603) |  |  | 414,043 |  |  | 18,480 |  |  | (17,252) |  |  | 440,022 |  |  | (18,758) |  |  | 19,474 |
Hedge of cash flow |  | 438,765 |  |  | 70,906 |  |  | (59,517) |  |  | 261,818 |  |  | (348,248) |  |  | 346,900 |  |  | — |  |  | — |  |  | — |
Total |  | 20,967,989 |  |  | 772,112 |  |  | (779,081) |  |  | 18,563,230 |  |  | (1,262,254) |  |  | 1,216,786 |  |  | 9,738,021 |  |  | (513,949) |  |  | 525,664 |
The table below shows the breakdown notional value by maturity of the hedging strategies:
|  | 2023
|  | 0-1 year |  | 1-2 years |  | 2-3 years |  | 3-4 years |  | 4-5 years |  | 5-10 years |  | Total
Hedge of fair value |  | 696,906 |  |  | 1,653,677 |  |  | 6,001,602 |  |  | 6,920,470 |  |  | 2,888,836 |  |  | 1,921,291 |  |  | 20,082,782 |
Hedge of net investment in foreign operations |  | 400,918 |  |  | 45,524 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 446,442 |
Hedge of cash flow |  | 438,765 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 438,765 |
Total |  | 1,536,589 |  |  | 1,699,201 |  |  | 6,001,602 |  |  | 6,920,470 |  |  | 2,888,836 |  |  | 1,921,291 |  |  | 20,967,989 |
|  | 2022
|  | 0-1 year |  | 1-2 years |  | 2-3 years |  | 3-4 years |  | 4-5 years |  | 5-10 years |  | Total
Hedge of fair value |  | 229,368 |  |  | 707,421 |  |  | 2,773,333 |  |  | 5,913,477 |  |  | 5,930,291 |  |  | 2,333,479 |  |  | 17,887,369 |
Hedge of net investment in foreign operations |  | 381,958 |  |  | — |  |  | 32,085 |  |  | — |  |  | — |  |  | — |  |  | 414,043 |
Hedge of cash flow |  | 261,818 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 261,818 |
Total |  | 873,144 |  |  | 707,421 |  |  | 2,805,418 |  |  | 5,913,477 |  |  | 5,930,291 |  |  | 2,333,479 |  |  | 18,563,230 |
|  | 2021
|  | 0-1 year |  | 1-2 years |  | 2-3 years |  | 3-4 years |  | 4-5 years |  | 5-10 years |  | Total
Hedge of fair value |  | 136,636 |  |  | 276,219 |  |  | 478,745 |  |  | 972,199 |  |  | 4,510,125 |  |  | 2,924,075 |  |  | 9,297,999 |
Hedge of net investment in foreign operations |  | 384,217 |  |  | — |  |  | — |  |  | 55,805 |  |  | — |  |  | — |  |  | 440,022 |
Total |  | 520,853 |  |  | 276,219 |  |  | 478,745 |  |  | 1,028,004 |  |  | 4,510,125 |  |  | 2,924,075 |  |  | 9,738,021 |

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- Definition The disclosure of hedge accounting. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Note Expired 2023-01-01 -Name IFRS -Number 7 -IssueDate 2023-01-01 -Paragraph 22 -URI https://taxonomy.ifrs.org/xifrs-link?type=IFRS&num=7&code=ifrs-tx-2023-en-r&anchor=para_22&doctype=Standard -URIDate 2023-03-23 + Details
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