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DERIVATIVE INSTRUMENTS | 12 Months Ended
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Oct. 30, 2022
DERIVATIVE INSTRUMENTS |
DERIVATIVE INSTRUMENTS | 26. DERIVATIVE INSTRUMENTS Cash Flow Hedges Certain interest rate contracts (swaps) were designated as hedges of future cash flows from borrowings. The total notional amounts of the receive-variable/pay-fixed interest rate contracts at October 30, 2022 and October 31, 2021 were $1,950 million and $2,700 million, respectively. Fair value gains or losses on cash flow hedges are recorded in OCI and subsequently reclassified into interest expense in the same periods during which the hedged transactions impact earnings. These amounts offset the effects of interest rate changes on the related borrowings. The amount of gain recorded in OCI at October 30, 2022 that is expected to be reclassified to interest expense or other operating expenses in the next twelve months if interest rates or exchange rates remain unchanged is $44 million after-tax. There were no gains or losses reclassified from OCI to earnings based on the probability that the original forecasted transaction would not occur. Fair Value Hedges Certain interest rate contracts (swaps) were designated as fair value hedges of borrowings. The total notional amounts of the receive-fixed/pay-variable interest rate contracts at October 30, 2022 and October 31, 2021 were $10,112 million and $8,043 million, respectively. The fair value gains or losses on these contracts were offset by fair value gains or losses on the hedged items (fixed-rate borrowings) with both items recorded in interest expense. The amounts recorded, at October 30, 2022 and October 31, 2021, in the consolidated balance sheets related to borrowings designated in fair value hedging relationships were as follows in millions of dollars. Fair value hedging adjustments are included in the carrying amount of the hedged item. ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Active Hedging | ​ | Discontinued Hedging | ​
​ | ​ | Relationships | ​ | Relationships | ​
​ | ​ | Carrying | ​ | Cumulative | ​ | Carrying | ​ | Cumulative | ​
​ | ​ | Amount of | ​ | Fair Value | ​ | Amount of | ​ | Fair Value | ​
​ | ​ | Hedged | ​ | Hedging | ​ | Formerly | ​ | Hedging | ​
​ | ​ | Item | ​ | Amount | ​ | Hedged Item | ​ | Amount | ​
2022 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Short-term borrowings | ​ | ​ | ​ | ​ | ​ | ​ | ​ | $ | 2,515 | ​ | $ | 15 | ​
Long-term borrowings | ​ | $ | 9,060 | ​ | $ | (1,006) | ​ | ​ | 5,520 | ​ | ​ | (19) | ​
2021 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Short-term borrowings | ​ | $ | 191 | ​ | $ | 3 | ​ | $ | 1,997 | ​ | $ | (2) | ​
Long-term borrowings | ​ | ​ | 7,847 | ​ | ​ | 29 | ​ | ​ | 6,287 | ​ | ​ | 223 | ​
​ Derivatives Not Designated as Hedging Instruments The company has certain interest rate contracts (swaps), foreign currency exchange contracts (futures, forwards, and swaps), and cross-currency interest rate contracts (swaps), which were not formally designated as hedges. These derivatives were held as economic hedges for underlying interest rate or foreign currency exposures for certain borrowings, purchases or sales of inventory, and sales incentive programs. The total notional amounts of the interest rate swaps at October 30, 2022 and October 31, 2021 were $10,568 million and $10,848 million, the foreign currency exchange contracts were $8,185 million and $7,584 million, and the cross-currency interest rate contracts were $260 million and $238 million, respectively. The fair value gains or losses from derivatives not designated as hedging instruments were recorded in the statements of consolidated income, generally offsetting over time the exposure on the hedged item. Fair values of derivative instruments in the consolidated balance sheets at October 30, 2022 and October 31, 2021 in millions of dollars follow: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | 2022 |  | 2021 |
Other Assets | ​ | ​ | ​ | ​ | ​ | ​ | ​
Designated as hedging instruments: | ​ | ​ | ​ | ​ | ​ | ​ | ​
Interest rate contracts |  | $ | 87 |  | $ | 166 | ​
Not designated as hedging instruments: | ​ | ​ | ​ | ​ | ​ | ​ | ​
Interest rate contracts | ​ |  | 212 | ​ | ​ | 73 | ​
Foreign exchange contracts | ​ |  | 66 | ​ | ​ | 31 | ​
Cross-currency interest rate contracts | ​ |  | 8 | ​ | ​ | 5 | ​
Total not designated | ​ |  | 286 | ​ | ​ | 109 | ​
Total derivative assets |  | $ | 373 |  | $ | 275 | ​
Accounts Payable and Accrued Expenses | ​ | ​ | ​ | ​ | ​ | ​ | ​
Designated as hedging instruments: | ​ | ​ | ​ | ​ | ​ | ​ | ​
Interest rate contracts |  | $ | 1,004 |  | $ | 99 | ​
Not designated as hedging instruments: | ​ | ​ | ​ | ​ | ​ | ​ | ​
Interest rate contracts | ​ | ​ | 107 | ​ | ​ | 33 | ​
Foreign exchange contracts | ​ |  | 118 | ​ | ​ | 94 | ​
Cross-currency interest rate contracts | ​ | ​ | 2 | ​ | ​ | 2 | ​
Total not designated | ​ |  | 227 | ​ | ​ | 129 | ​
Total derivative liabilities |  | $ | 1,231 |  | $ | 228 | ​
​ The classification and gains (losses), including accrued interest expense, related to derivative instruments on the statements of consolidated income consisted of the following in millions of dollars: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | 2022 |  | 2021 |  | 2020 |
Fair Value Hedges | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Interest rate contracts – Interest expense |  | $ | (1,144) |  | $ | (236) |  | $ | 496 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Cash Flow Hedges | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Recognized in OCI: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Interest rate contracts – OCI (pretax) | ​ |  | 89 | ​ |  | 8 | ​ |  | (18) | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Reclassified from OCI: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Interest rate contracts – Interest expense | ​ |  | 9 | ​ |  | (13) | ​ |  | (21) | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Not Designated as Hedges | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Interest rate contracts – Net sales | ​ | $ | 53 | ​ | $ | 13 | ​ | $ | (23) | ​
Interest rate contracts – Interest expense* |  | ​ | 81 |  | ​ | 14 |  | ​ | (2) | ​
Foreign exchange contracts – Net sales | ​ | ​ | (6) | ​ | ​ | ​ | ​ | ​ | ​ | ​
Foreign exchange contracts – Cost of sales | ​ |  | (64) | ​ |  | (101) | ​ |  | 93 | ​
Foreign exchange contracts – Other operating expenses* | ​ |  | 402 | ​ |  | (262) | ​ |  | 122 | ​
Total not designated |  | $ | 466 |  | $ | (336) |  | $ | 190 | ​
* Includes interest and foreign exchange gains (losses) from cross-currency interest rate contracts. ​ Counterparty Risk and Collateral Derivative instruments are subject to significant concentrations of credit risk to the banking sector. The company manages individual counterparty exposure by setting limits that consider the credit rating of the counterparty, the credit default swap spread of the counterparty, and other financial commitments and exposures between the company and the counterparty banks. All interest rate derivatives are transacted under International Swaps and Derivatives Association (ISDA) documentation. Some of these agreements include credit support provisions. Each master agreement permits the net settlement of amounts owed in the event of default or termination. Certain of the company’s derivative agreements contain credit support provisions that may require the company to post collateral based on the size of the net liability positions and credit ratings. The aggregate fair value of all derivatives with credit-risk-related contingent features that were in a net liability position at October 30, 2022 and October 31, 2021, was $1,113 million and $135 million, respectively. In accordance with the limits established in these agreements, the company posted $701 million of cash collateral at October 30, 2022 and no cash collateral at October 31, 2021. In addition, the company paid $8 million of collateral either in cash or pledged securities that was outstanding at both October 30, 2022 and October 31, 2021 to participate in an international futures market to hedge currency exposure, not included in the table below. Derivatives are recorded without offsetting for netting arrangements or collateral. The impact on the derivative assets and liabilities related to netting arrangements and collateral at October 30, 2022 and October 31, 2021 in millions of dollars follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Gross Amounts | ​ | Netting | ​ | ​ | ​ | Net | ​
​ |  | Recognized |  | Arrangements |  | Collateral |  | Amount |
2022 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Assets |  | $ | 373 |  | $ | (179) |  | $ | (54) |  | $ | 140 | ​
Liabilities | ​ |  | 1,231 | ​ |  | (179) | ​ | ​ | (701) | ​ | ​ | 351 | ​
2021 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Assets |  | $ | 275 |  | $ | (105) |  | ​ | ​ |  | $ | 170 | ​
Liabilities | ​ |  | 228 | ​ |  | (105) | ​ | $ | (5) | ​ | ​ | 118 | ​
​

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- 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
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