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DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Tables) | 3 Months Ended
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Mar. 31, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Schedule of Derivative Financial Instruments Recognized in Condensed Consolidated Balance Sheet | The fair value of derivative financial instruments recognized in the Consolidated Balance Sheets is as follows:
(In millions) | Notional amount |  | Other current assets |  | Other noncurrent assets |  | Other current liabilities |  | Other noncurrent liabilities |  | Type of hedge |  | Term
March 31, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |
Derivatives designated as hedges |  |  |  |  |  |  |  |  |  |  |  |  |
Currency exchange contracts | $ | 1,138 |  |  | $ | 49 |  |  | $ | 3 |  |  | $ | 14 |  |  | $ | 5 |  |  | Cash flow |  | 1 to 34 months
Commodity contracts | 48 |  |  | 4 |  |  | — |  |  | 1 |  |  | — |  |  | Cash flow |  | 1 to 12 months
Currency exchange contracts | 587 |  |  | 1 |  |  | — |  |  | — |  |  | — |  |  | Net investment |  | 3 months
Total |  |  | $ | 53 |  |  | $ | 3 |  |  | $ | 15 |  |  | $ | 5 |  |  |  |  |
Derivatives not designated as hedges |  |  |  |  |  |  |  |  |  |  |  |  |
Currency exchange contracts | $ | 4,977 |  |  | $ | 22 |  |  |  |  | $ | 14 |  |  |  |  |  |  | 1 to 12 months
December 31, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |
Derivatives designated as hedges |  |  |  |  |  |  |  |  |  |  |  |  |
Currency exchange contracts | $ | 1,240 |  |  | $ | 35 |  |  | $ | 2 |  |  | $ | 17 |  |  | $ | 9 |  |  | Cash flow |  | 1 to 36 months
Commodity contracts | 64 |  |  | 4 |  |  | — |  |  | 2 |  |  | — |  |  | Cash flow |  | 1 to 12 months
Total |  |  | $ | 39 |  |  | $ | 2 |  |  | $ | 19 |  |  | $ | 9 |  |  |  |  |
Derivatives not designated as hedges |  |  |  |  |  |  |  |  |  |  |  |  |
Currency exchange contracts | $ | 4,683 |  |  | $ | 30 |  |  |  |  | $ | 14 |  |  |  |  |  |  | 1 to 12 months
Schedule of Notional Amounts of Outstanding Derivative Positions | As of March 31, 2023, the volume of outstanding commodity contracts that were entered into to hedge forecasted transactions:
Commodity |  | March 31, 2023 |  |  |  |  |  | Term
Aluminum |  | 4 |  |  |  |  | Millions of pounds |  | 1 to 12 months
Copper |  | 7 |  |  |  |  | Millions of pounds |  | 1 to 12 months
Gold |  | 1,690 |  |  |  |  | Troy ounces |  | 1 to 12 months
Silver |  | 510,167 |  |  |  |  | Troy ounces |  | 1 to 12 months
Schedule of Derivative Instruments Recorded in Balance Sheet | The following amounts were recorded on the Consolidated Balance Sheets related to fixed-to-floating interest rate swaps:
(In millions) | Carrying amount of the hedged assets (liabilities) |  | Cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged asset (liabilities) (a)
Location on Consolidated Balance Sheets | March 31, 2023 |  |  | December 31, 2022 |  | March 31, 2023 |  | December 31, 2022 |
Long-term debt | $ | (713) |  |  |  | $ | (713) |  |  | $ | (47) |  |  | $ | (48) |  |
(a) At March 31, 2023 and December 31, 2022, these amounts include the cumulative liability amount of fair value hedging adjustments remaining for which the hedge accounting has been discontinued of $47 million and $48 million, respectively.
Schedule of Impact of Hedging Activities to Consolidated Statement of Income | The impact of cash flow and fair value hedging activities to the Consolidated Statements of Income is as follows:
| Three months ended March 31, 2023
(In millions) | Net sales |  | Cost of products sold |  | Interest expense - net |  |
Amounts from Consolidated Statements of Income | $ | 5,483 |  |  | $ | 3,599 |  |  | $ | 50 |  |  |
Gain (loss) on derivatives designated as cash flow hedges |  |  |  |  |  |  |
Forward starting floating-to-fixed interest rate swaps |  |  |  |  |  |  |
Hedged item | $ | — |  |  | $ | — |  |  | $ | (3) |  |  |
Derivative designated as hedging instrument | — |  |  | — |  |  | 3 |  |  |
Currency exchange contracts |  |  |  |  |  |  |
Hedged item | $ | 2 |  |  | $ | (15) |  |  | $ | — |  |  |
Derivative designated as hedging instrument | (2) |  |  | 15 |  |  | — |  |  |
| Three months ended March 31, 2022
(In millions) | Net sales |  | Cost of products sold |  | Interest expense - net |  |
Amounts from Consolidated Statements of Income | $ | 4,843 |  |  | $ | 3,269 |  |  | $ | 32 |  |  |
Gain (loss) on derivatives designated as cash flow hedges |  |  |  |  |  |  |
Currency exchange contracts |  |  |  |  |  |  |
Hedged item | $ | 2 |  |  | $ | (3) |  |  | $ | — |  |  |
Derivative designated as hedging instrument | (2) |  |  | 3 |  |  | — |  |  |
Commodity contracts |  |  |  |  |  |  |
Hedged item | $ | — |  |  | $ | (1) |  |  | $ | — |  |  |
Derivative designated as hedging instrument | — |  |  | 1 |  |  | — |  |  |
Gain (loss) on derivatives designated as fair value hedges |  |  |  |  |  |  |
Fixed-to-floating interest rate swaps |  |  |  |  |  |  |
Hedged item | $ | — |  |  | $ | — |  |  | $ | 8 |  |  |
Derivative designated as hedging instrument | — |  |  | — |  |  | (8) |  |  |
Schedule of Amounts Recognized in Net Income | The impact of derivatives not designated as hedges to the Consolidated Statements of Income is as follows:
| Gain (loss) recognized in Consolidated Statements of Income |  |  |  | Consolidated Statements of Income classification
| Three months ended March 31 |  |
(In millions) | 2023 |  | 2022 |  |  |  |
Gain (loss) on derivatives not designated as hedges |  |  |  |  |  |  |
Currency exchange contracts | $ | 11 |  |  | $ | (8) |  |  |  |  | Interest expense - net
Commodity contracts | — |  |  | 1 |  |  |  |  | Other expense (income) - net and Cost of products sold (a)
Total | $ | 11 |  |  | $ | (7) |  |  |  |  |
(a) In the second quarter of 2022, Eaton changed the presentation of gains and losses associated with derivative contracts for commodities that are not designated as hedges from Cost of product sold to Other expense (income) - net on the Consolidated Statements of Income. Prior period amounts have not been reclassified as they are not material.
Schedule of Amounts Recognized in Accumulated Other Comprehensive Income | The impact of derivative and non-derivative instruments designated as hedges to the Consolidated Statements of Income and Comprehensive Income is as follows:
| Gain (loss) recognized in other comprehensive income (loss) |  | Location of gain (loss) reclassified from Accumulated other comprehensive loss |  | Gain (loss) reclassified from Accumulated other comprehensive loss
| Three months ended March 31 |  |  |  | Three months ended March 31
(In millions) | 2023 |  | 2022 |  |  |  | 2023 |  | 2022
Derivatives designated as cash flow hedges |  |  |  |  |  |  |  |  |
Forward starting floating-to-fixed interest rate swaps | $ | — |  |  | $ | 124 |  |  | Interest expense - net |  | $ | 3 |  |  | $ | — |
Currency exchange contracts | 31 |  |  | — |  |  | Net sales and Cost of products sold |  | 11 |  |  | — |
Commodity contracts | 2 |  |  | 5 |  |  | Cost of products sold |  | — |  |  | 1 |
Derivatives designated as net investment hedges |  |  |  |  |  |  |  |  |
Currency exchange contracts |  |  |  |  |  |  |  |  |
Effective portion | (14) |  |  | — |  |  | Gain (loss) on sale of business |  | — |  |  | — |
Amount excluded from effectiveness testing | 5 |  |  | — |  |  | Interest expense - net |  | 1 |  |  | — |
Non-derivative designated as net investment hedges |  |  |  |  |  |  |  |  |
Foreign currency denominated debt | (63) |  |  | 62 |  |  | Gain (loss) on sale of business |  | — |  |  | — |
Total | $ | (39) |  |  | $ | 191 |  |  |  |  | $ | 15 |  |  | $ | 1 |

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