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Derivative Instruments
 6 Months Ended
Jun. 30, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments DERIVATIVE INSTRUMENTS
Foreign Currency Hedges
We use operational and economic hedges, foreign currency exchange forward contracts, net investment hedges (both derivative and non-derivative financial instruments) and interest rate derivative instruments to manage the impact of currency exchange and interest rate fluctuations on earnings and cash flow. We do not enter into derivative instruments for speculative purposes. We have not changed our hedging strategies, accounting practices or objectives from those disclosed in our Annual Report on Form 10-K for 2018.
June 2019
Designated
Non-Designated
Total
Gross notional amount
$
842

$
4,928

$
5,770

Maximum term in days
 
 
586

Fair value:
 
 
 
Other current assets
$
9

$
93

$
102

Other noncurrent assets
1

—

1

Other current liabilities
(8
)
(15
)
(23
)
Other noncurrent liabilities
(1
)
—

(1
)
Total fair value
$
1

$
78

$
79


December 2018
Designated
Non-Designated
Total
Gross notional amount
$
870

$
5,466

$
6,336

Maximum term in days
 
 
586

Fair value:
 
 
 
Other current assets
$
15

$
28

$
43

Other noncurrent assets
1

33

34

Other current liabilities
(5
)
(15
)
(20
)
Total fair value
$
11

$
46

$
57


On June 30, 2019 the total after tax loss amount in AOCI related to our designated net investment hedges was $5. We evaluate the effectiveness of our net investment hedges quarterly. We have not recognized any ineffectiveness in 2019.
In July 2019 we entered into €1.0 billion in certain forward currency contracts and designated these as net investment hedges to hedge a portion of our investments in certain of our entities with functional currencies denominated in Euros. We have elected to use the spot method to assess effectiveness for our derivatives designated as net investment hedges. Accordingly, the change in fair value attributable to changes in the spot rate is recorded in AOCI. We
exclude the spot-forward difference from the assessment of hedge effectiveness and amortize this amount separately on a straight-line basis over the term of the forward contracts. This amortization will be recorded to Other income (expense), net on our Consolidated Statements of Earnings.
We are exposed to credit loss in the event of nonperformance by our counterparties on our outstanding derivative instruments but do not anticipate nonperformance by any of our counterparties. Should a counterparty default, our maximum loss exposure is the asset balance of the instrument.
Net Currency Exchange Rate Gains (Losses)
 
Three Months
 
Six Months
Recorded in:
2019
2018
 
2019
2018
Cost of sales
$
—

$
1

 
$
2

$
2

Other income (expense), net
(2
)
(2
)
 
(4
)
(4
)
Total
$
(2
)
$
(1
)
 
$
(2
)
$
(2
)

Pretax gains on derivatives designated as hedges recorded in AOCI that are expected to be reclassified to earnings within 12 months of the balance sheet date are $1 and $13 on June 30, 2019 and December 31, 2018. This reclassification is primarily due to the sale of inventory that includes previously hedged purchases. There were de minimis ineffective portions of derivatives, which are included in the table above.
Interest Rate Risk
On June 30, 2019 there were no open cash flow or fair value interest rate hedges.