Notes to the consolidated financial statements of Aegon N.V.  Note 2 144 Fair value hedges Cash flow hedges Net investment hedges 2.10 Investments in joint ventures For hedge accounting purposes, a distinction is made between fair value hedges, cash flow hedges and hedges of a net investment in  a foreign operation. Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognized in the profit and loss  account, together with fair value adjustments to the hedged item attributable to the hedged risk. If the hedge relationship no longer  meets the criteria for hedge accounting, the cumulative adjustment of the hedged item is, in the case of interest bearing instruments,  amortized through the profit and loss account over the remaining term of the original hedge or recognized directly when the hedged  item is derecognized. Aegon applies fair value hedge accounting to portfolio hedges of interest rate risk (fair value macro hedging) under the EU ‘carve out’  of IFRS. The EU ‘carve out’ macro hedging enables a group of derivatives (or proportions thereof) to be viewed in combination and  jointly designated as the hedging instrument and removes some of the limitations in fair value hedge accounting. Under the EU ‘carve  out’, ineffectiveness in fair value hedge accounting only arises when the revised projection of the amount of cash flows in scheduled  time buckets falls below the designated amount of that bucket. Aegon applies fair value hedge accounting for portfolio hedges of  interest rate risk (macro hedging) under the EU ‘carve out’ to mortgage loans. Changes in the fair value of the derivatives are recognized  in the profit and loss account, together with the fair value adjustment on the mortgages (hedged items) insofar as attributable to  interest rate risk (the hedged risk).  Cash flow hedges are hedges of the exposure to variability in cash flows that is attributable to a particular risk of a forecasted  transaction or a recognized asset or liability and could affect profit or loss. To the extent that the hedge is effective, the change in  the fair value of the derivative is recognized in the related revaluation reserve in shareholders’ equity. Any ineffectiveness is recognized  directly in the income statement. The amount recorded in shareholders’ equity is released to the income statement to coincide  with the hedged transaction, except when the hedged transaction is an acquisition of a non-financial asset or liability. In this case,  the amount in shareholders’ equity is included in the initial cost of the asset or liability. Net investment hedges are hedges of currency exposures on a net investment in a foreign operation. To the extent that the hedge is  effective, the change in the fair value of the hedging instrument is recognized in shareholders’ equity. Any ineffectiveness is recognized  in the income statement. The amount in shareholders’ equity is released to the income statement when the foreign operation is  disposed of. Hedge accounting is discontinued prospectively for hedges that are no longer considered effective. When hedge accounting is  discontinued for a fair value hedge, the derivative continues to be carried on the statement of financial position with changes in its fair  value recognized in the income statement. When hedge accounting is discontinued for a cash flow hedge because the cash flow is no  longer expected to occur, the accumulated gain or loss in shareholders’ equity is recognized immediately in the income statement. In  other situations where hedge accounting is discontinued for a cash flow hedge, including those where the derivative is sold, terminated  or exercised, accumulated gains or losses in shareholders’ equity are amortized into the income statement when the income statement  is impacted by the variability of the cash flow from the hedged item. Investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and  obligations each investor has rather than the legal structure of the joint arrangement. Joint control exists when it is contractually  agreed to share control of an economic activity. This exists only when decisions about the relevant activities require the unanimous  consent of the parties sharing control. Aegon has assessed the nature of its joint arrangements and determined them to be joint  ventures. Joint ventures are accounted for using the equity method. Under the equity method of accounting, interests in joint ventures are initially recognized at cost, which includes positive goodwill  arising on acquisition. Negative goodwill is recognized in the income statement on the acquisition date. If joint ventures are obtained in  successive share purchases, each significant transaction is accounted for separately. The carrying amount is subsequently adjusted to reflect the change in the Group’s share in the net assets of the joint venture and is  subject to impairment testing. The net assets are determined based on the Group’s accounting policies. Any gains and losses recorded  in other comprehensive income by the joint venture are reflected in other reserves in shareholders’ equity, while the share in the joint  Annual Report 2013