XML 66 R14.htm IDEA: XBRL DOCUMENT v3.2.0.727
Financial Instruments
 6 Months Ended
Jun. 30, 2015
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments [Text Block]
Financial Instruments
We enter into derivative instruments for risk management purposes only, including derivatives designated as hedging instruments under the Derivatives and Hedging Topic of the FASB ASC and those utilized as economic hedges. We operate internationally and, in the normal course of business, are exposed to fluctuations in interest rates, foreign exchange rates and commodity prices. These fluctuations can increase the costs of financing, investing and operating the business. We have used derivative instruments, including swaps, forward contracts and options to manage certain foreign currency, interest rate and commodity price exposures.
The four quarter rolling average of the notional amount of foreign exchange contracts hedging foreign currency transactions was $15.0 billion and $13.9 billion at June 30, 2015 and December 31, 2014, respectively.
The following table summarizes the fair value of derivative instruments as of June 30, 2015 and December 31, 2014 which consist solely of foreign exchange contracts:
 
Asset Derivatives
 
Liability Derivatives
(Dollars in millions)
June 30, 2015
 
December 31, 2014
 
June 30, 2015
 
December 31, 2014
Derivatives designated as hedging instruments
$
18

 
$
3

 
$
272

 
$
248

Derivatives not designated as hedging instruments
56

 
139

 
67

 
71


As discussed in Note 4, on May 22, 2015 we issued approximately €750 million of Euro-denominated debt, which qualifies as a net investment hedge against our investments in European businesses under ASC 815, Derivatives and Hedging. As of June 30, 2015, the net investment hedge is deemed to be effective as defined under ASC 815.
The amount of gains and losses related to the Company's derivative financial instruments was as follows:
 
Quarter Ended June 30,
 
Six Months Ended June 30,
(Dollars in millions)
2015
 
2014
 
2015
 
2014
Gain (loss) recorded in Accumulated other comprehensive loss
$
62

 
$
102

 
$
(122
)
 
$
22

Loss reclassified from Accumulated other comprehensive loss into Product sales (effective portion)
$
43

 
$
13

 
$
100

 
$
31


Assuming current market conditions continue, a $153 million pre-tax loss is expected to be reclassified from Accumulated other comprehensive loss into Product sales to reflect the fixed prices obtained from foreign exchange hedging within the next 12 months. At June 30, 2015, all derivative contracts accounted for as cash flow hedges will mature by July 2017.
The effect on the Condensed Consolidated Statement of Operations of foreign exchange contracts not designated as hedging instruments was as follows:
 
Quarter Ended June 30,
 
Six Months Ended June 30,
(Dollars in millions)
2015
 
2014
 
2015
 
2014
Gain (loss) recognized in Other income, net
$
12

 
$
(14
)
 
$
30

 
$
12


We received $415 million and $37 million from settlements of derivative contracts during the six months ended June 30, 2015 and 2014, respectively.