XML 30 R18.htm IDEA: XBRL DOCUMENT
v3.22.2.2

Derivatives | 9 Months Ended
--- | ---
Sep. 30, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivatives | Derivatives The Company uses interest rate swaps, currency swaps, and forward and option contracts to manage risks generally associated with foreign exchange rate, interest rate and commodity price fluctuations. Note 14 to the Consolidated Financial Statements in 3M's Current Report on Form 8-K dated April 26, 2022 (which updated 3M's 2021 Annual Report on Form 10-K) explains the types of derivatives and financial instruments used by 3M, how and why 3M uses such instruments, and how such instruments are accounted for. It also contains information regarding previously initiated contracts or instruments. Additional information with respect to derivatives is included elsewhere as follows: •Impact on other comprehensive income of nonderivative hedging and derivative instruments is included in Note 7. •Fair value of derivative instruments is included in Note 13. •Derivatives and/or hedging instruments associated with the Company’s long-term debt are described in Note 12 to the Consolidated Financial Statements in 3M's Current Report on Form 8-K dated April 26, 2022 (which updated 3M’s 2021 Annual Report on Form 10-K). Refer to the section below titled Statement of Income Location and Impact of Cash Flow and Fair Value Derivative Instruments and Derivatives Not Designated as Hedging Instruments for details on the location within the consolidated statements of income for amounts of gains and losses related to derivative instruments designated as cash flow or fair value hedges (along with similar information relative to the hedged items) and derivatives not designated as hedging instruments. Additional information relative to cash flow hedges, fair value hedges, net investment hedges and derivatives not designated as hedging instruments is included below as applicable. Cash Flow Hedges: As of September 30, 2022, the Company had a balance of $143 million associated with the after-tax net unrealized gain associated with cash flow hedging instruments recorded in accumulated other comprehensive income. This includes a remaining balance of $95 million (after-tax loss) related to the forward starting interest rate swap and treasury rate lock contracts, which will be amortized over the respective lives of the notes. Based on exchange rates as of September 30, 2022, of the total after-tax net unrealized balance as of September 30, 2022, 3M expects to reclassify approximately $166 million after-tax net unrealized gain over the next 12 months (with the impact offset by earnings/losses from underlying hedged items). The amount of pretax gain (loss) recognized in other comprehensive income related to derivative instruments designated as cash flow hedges is provided in the following table.
|  | Pretax Gain (Loss) Recognized in Other Comprehensive Income on Derivative
|  | Three months ended September 30, |  | Nine months ended September 30,
(Millions) |  | 2022 |  | 2021 |  | 2022 |  | 2021
Foreign currency forward/option contracts |  | $ | 173 |  |  | $ | 44 |  |  | $ | 307 |  |  | $ | 84 |
Interest rate contracts |  | — |  | — |  | — |  | —
Total |  | $ | 173 |  |  | $ | 44 |  |  | $ | 307 |  |  | $ | 84 |
Fair Value Hedges: The following amounts were recorded on the consolidated balance sheet related to cumulative basis adjustments for fair value hedges:
(Millions) |  | Carrying Value of the Hedged Liabilities |  | Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Value of the Hedged Liabilities
Location on the Consolidated Balance Sheet |  | September 30, 2022 |  | December 31, 2021 |  | September 30, 2022 |  | December 31, 2021
Short-term borrowings and current portion of long-term debt |  | $ | — |  | $ | — |  | $ | — |  | $ | —
Long-term debt |  | 891 |  | 997 |  | (111) |  | (4)
Total |  | $ | 891 |  | $ | 997 |  | $ | (111) |  | $ | (4)
Net Investment Hedges: At September 30, 2022, the total notional amount of foreign exchange forward contracts designated in net investment hedges was approximately 150 million euros, along with a principal amount of long-term debt instruments designated in net investment hedges totaling 2.4 billion euros. The maturity dates of these derivative and nonderivative instruments designated in net investment hedges range from 2023 to 2031. The amount of gain (loss) excluded from effectiveness testing recognized in income relative to instruments designated in net investment hedge relationships is not material. The amount of pretax gain (loss) recognized in other comprehensive income related to derivative and nonderivative instruments designated as net investment hedges are as follows.
|  | Pretax Gain (Loss) Recognized as Cumulative Translation within Other Comprehensive Income
|  | Three months ended September 30, |  | Nine months ended September 30, |  |
(Millions) |  | 2022 |  | 2021 |  | 2022 |  | 2021 |  |  |  |
Foreign currency denominated debt |  | $ | 188 |  |  | $ | 83 |  |  | $ | 380 |  |  | $ | 195 |  |  |  |  |
Foreign currency forward contracts |  | 11 |  |  | 3 |  |  | 22 |  |  | 4 |  |  |  |  |
Total |  | $ | 199 |  |  | $ | 86 |  |  | $ | 402 |  |  | $ | 199 |  |  |  |  |
Statement of Income Location and Impact of Cash Flow and Fair Value Derivative Instruments and Derivatives Not Designated as Hedging Instruments The location in the consolidated statement of income and pre-tax amounts recognized in income related to derivative instruments designated in cash flow or fair value hedging relationships and for derivatives not designated as hedging instruments are as follows:
|  | Location and Amount of Gain (Loss) Recognized in Income
|  | Three months ended September 30, |  | Nine months ended September 30,
|  | Cost of sales |  | Other expense (income), net |  | Cost of sales |  | Other expense (income), net
(Millions) |  | 2022 |  | 2021 |  | 2022 |  | 2021 |  | 2022 |  | 2021 |  | 2022 |  | 2021
Information regarding cash flow and fair value hedging relationships: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Total amounts of income and expense line items presented in the consolidated statement of income in which the effects of derivatives are recorded |  | $ | 4,728 |  | $ | 4,853 |  | $ | 24 |  | $ | 31 |  | $ | 14,647 |  | $ | 14,097 |  | $ | 112 |  | $ | 113
Gain or (loss) on cash flow hedging relationships: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency forward/option contracts: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Amount of gain or (loss) reclassified from accumulated other comprehensive income into income |  | 33 |  |  | (15) |  | — |  | — |  | 59 |  |  | (32) |  | — |  | —
Interest rate contracts: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Amount of gain or (loss) reclassified from accumulated other comprehensive income into income |  | — |  | — |  | (3) |  |  | (3) |  |  | — |  | — |  | (7) |  |  | (7) |
Gain or (loss) on fair value hedging relationships: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate contracts: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Hedged items |  | — |  | — |  | 36 |  |  | 1 |  |  | — |  | — |  | 107 |  |  | 3 |
Derivatives designated as hedging instruments |  | — |  | — |  | (36) |  | (1) |  |  | — |  | — |  | (107) |  | (3) |
Information regarding derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Gain or (loss) on derivatives not designated as instruments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency forward/option contracts |  | (44) |  | — |  |  | (21) |  | (35) |  |  | (110) |  | — |  |  | 3 |  | (7) |
Location, Fair Value, and Gross Notional Amounts of Derivative Instruments The following tables summarize the fair value of 3M’s derivative instruments, excluding nonderivative instruments used as hedging instruments, and their location in the consolidated balance sheet. Notional amounts below are presented at period end foreign exchange rates, except for certain interest rate swaps, which are presented using the inception date’s foreign exchange rate.
|  | Gross Notional Amount |  | Assets |  | Liabilities
(Millions) |  |  | Location |  | Fair Value Amount |  | Location |  | Fair Value Amount
| September 30, 2022 |  | December 31, 2021 |  |  | September 30, 2022 |  | December 31, 2021 |  |  | September 30, 2022 |  | December 31, 2021
Derivatives designated as hedging instruments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency forward/option contracts |  | 2,015 |  |  | 1,768 |  |  | Other current assets |  | $ | 209 |  |  | $ | 54 |  |  | Other current liabilities |  | $ | 1 |  |  | $ | 19 |
Foreign currency forward/option contracts |  | 1,004 |  |  | 800 |  |  | Other assets |  | 111 |  |  | 41 |  |  | Other liabilities |  | 3 |  |  | 1 |
Interest rate contracts |  | 800 |  |  | 800 |  |  | Other assets |  | — |  |  | — |  |  | Other liabilities |  | 115 |  |  | 9 |
Total derivatives designated as hedging instruments |  |  |  |  |  |  |  | 320 |  |  | 95 |  |  |  |  | 119 |  |  | 29 |
Derivatives not designated as hedging instruments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency forward/option contracts |  | 3,657 |  |  | 3,731 |  |  | Other current assets |  | 21 |  |  | 24 |  |  | Other current liabilities |  | 77 |  |  | 4 |
Total derivatives not designated as hedging instruments |  |  |  |  |  |  |  | 21 |  |  | 24 |  |  |  |  | 77 |  |  | 4 |
Total derivative instruments |  |  |  |  |  |  |  | $ | 341 |  |  | $ | 119 |  |  |  |  | $ | 196 |  |  | $ | 33 |
Credit Risk and Offsetting of Assets and Liabilities of Derivative Instruments The Company is exposed to credit loss in the event of nonperformance by counterparties in interest rate swaps, currency swaps, and forward and option contracts. However, the Company’s risk is limited to the fair value of the instruments. The Company actively monitors its exposure to credit risk through the use of credit approvals and credit limits, and by selecting major international banks and financial institutions as counterparties. 3M enters into master netting arrangements with counterparties when possible to mitigate credit risk in derivative transactions. A master netting arrangement may allow each counterparty to net settle amounts owed between a 3M entity and the counterparty as a result of multiple, separate derivative transactions. The Company does not anticipate nonperformance by any of these counterparties. 3M has elected to present the fair value of derivative assets and liabilities within the Company’s consolidated balance sheet on a gross basis even when derivative transactions are subject to master netting arrangements and may otherwise qualify for net presentation. However, the following tables provide information as if the Company had elected to offset the asset and liability balances of derivative instruments, netted in accordance with various criteria in the event of default or termination as stipulated by the terms of netting arrangements with each of the counterparties. For each counterparty, if netted, the Company would offset the asset and liability balances of all derivatives at the end of the reporting period based on the 3M entity that is a party to the transactions. Derivatives not subject to master netting agreements are not eligible for net presentation. Offsetting of Financial Assets under Master Netting Agreements with Derivative Counterparties
|  |  |  |  |  | Gross Amounts not Offset in the Consolidated Balance Sheet that are Subject to Master Netting Agreements |  |  |  |
|  | Gross Amount of Derivative Assets Presented in the Consolidated Balance Sheet |  | Gross Amount of Eligible Offsetting Recognized Derivative Liabilities |  | Cash Collateral Received |  | Net Amount of Derivative Assets
(Millions) |  | September 30, 2022 |  | December 31, 2021 |  | September 30, 2022 |  | December 31, 2021 |  | September 30, 2022 |  | December 31, 2021 |  | September 30, 2022 |  | December 31, 2021
Derivatives subject to master netting agreements |  | $ | 341 |  | $ | 119 |  | $ | 43 |  | $ | 25 |  | $ | — |  | $ | — |  |  | $ | 298 |  | $ | 94 |
Derivatives not subject to master netting agreements |  | — |  | — |  |  |  |  |  |  |  |  |  | — |  | — |
Total |  | $ | 341 |  | $ | 119 |  |  |  |  |  |  |  |  |  | $ | 298 |  | $ | 94 |
Offsetting of Financial Liabilities under Master Netting Agreements with Derivative Counterparties
|  |  |  |  |  | Gross Amounts not Offset in the Consolidated Balance Sheet that are Subject to Master Netting Agreements |  |  |  |
|  | Gross Amount of Derivative Liabilities Presented in the Consolidated Balance Sheet |  | Gross Amount of Eligible Offsetting Recognized Derivative Assets |  | Cash Collateral Received |  | Net Amount of Derivative Liabilities
(Millions) |  | September 30, 2022 |  | December 31, 2021 |  | September 30, 2022 |  | December 31, 2021 |  | September 30, 2022 |  | December 31, 2021 |  | September 30, 2022 |  | December 31, 2021
Derivatives subject to master netting agreements |  | $ | 194 |  | $ | 33 |  | $ | 43 |  | $ | 25 |  | $ | — |  | $ | — |  |  | $ | 151 |  | $ | 8 |
Derivatives not subject to master netting agreements |  | 2 |  | — |  |  |  |  |  |  |  |  |  | 2 |  | — |
Total |  | $ | 196 |  | $ | 33 |  |  |  |  |  |  |  |  |  | $ | 153 |  | $ | 8 |
Currency Effects 3M estimates that year-on-year foreign currency transaction effects, including hedging impacts, increased pre-tax income by approximately $43 million and $70 million for the three and nine months ended September 30, 2022, respectively, and decreased pre-tax income by approximately $36 million and $94 million for the three and nine months ended September 30, 2021, respectively. These estimates include transaction gains and losses, including derivative instruments designed to reduce foreign currency exchange rate risks.

X
- References No definition available. + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI https://asc.fasb.org/topic&trid=2229140 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 40 -Section 50 -Paragraph 5 -Subparagraph (f) -URI https://asc.fasb.org/extlink&oid=126731327&loc=d3e90205-114008 + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration