This excerpt taken from the DT 20-F filed Mar 15, 2005.
Hedging interest rate and foreign exchange risk
In 2003, Deutsche Telekom utilized cross-currency interest rate swaps as hedging instruments for foreign currency denominated fixed-rate liabilities, converting them into functional currency denominated variable-rate liabilities. These cross-currency interest rate swaps were designated as hedging instruments in qualifying, highly effective, fair-value hedges of foreign currency denominated fixed-rate liabilities. For the year ended December 31, 2003, Deutsche Telekom recognized EUR 31 million in earnings representing hedge ineffectiveness on cross-currency interest rate swaps. All components of the cross-currency interest rate swap gain or loss were included in the assessment of the hedge effectiveness.
On January 1, 2004, Deutsche Telekom removed the designation of these hedging relationships. As a consequence, the Company ceased recording hedge accounting basis adjustments to the carrying value of the hedged item and started to amortize the accumulated basis as an adjustment to earnings (interest expense) over the expected remaining life of the hedged item using the effective yield method. The amortization of the hedge accounting adjustment recorded in 2004 was EUR 0.4 millon.