Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2014

Derivative instruments were recorded at fair value in the condensed consolidated balance sheets as of September 30, 2014 and December 31, 2013 as follows:


	September 30, 2014				December 31, 2013
	Asset		Liability		Asset		Liability
	Derivatives		Derivatives		Derivatives		Derivatives
	(in millions)

Derivatives designated as hedging instruments:
Currency exchange contracts	$	58	$	–	$	3	$	11
Commodity contracts		12		26		2		3
Interest rate contracts		56		–		209		–

	$	126	$	26	$	214	$	14

Derivatives not designated as hedging instruments:
Currency exchange contracts	$	535	$	12	$	84	$	8
Commodity contracts		157		138		60		51
Interest rate contracts		53		32		64		38

	$	745	$	182	$	208	$	97


Total fair value	$	871	$	208	$	422	$	111

Notional Values of Derivative Instruments

The net notional values of our derivative instruments as of September 30, 2014 and December 31, 2013 were:


	Notional Amount
	September 30,		December 31,
	2014		2013
	(in millions)

Currency exchange contracts:
Intercompany loans and forecasted interest payments	$	5,514	$	4,369
Forecasted transactions		7,039		2,565
Commodity contracts		1,225		805
Interest rate contracts		4,000		2,273
Net investment hedge – euro notes		4,105		4,466
Net investment hedge – pound sterling notes		1,054		1,076

Hedges of Net Investments in International Operations

After-tax gains / (losses) related to hedges of net investments in international operations in the form of euro and pound sterling-denominated debt were:
	For the Three Months Ended					For the Nine Months Ended					Location of Gain / (Loss) Recognized in AOCI
	September 30,					September 30,
	2014		2013			2014		2013
	(in millions)

Euro notes	$	219	$	(28	)	$	219	$	(18	)	Currency Translation
Pound sterling notes		37		(40	)		14		3		Adjustment

Derivative

Schedule of Derivative Instruments Fair Value and Measurement Inputs

The fair values (asset / (liability)) of our derivative instruments at September 30, 2014 were determined using:


			Quoted Prices in
			Active Markets			Significant		Significant
	Total		for Identical			Other Observable		Unobservable
	Fair Value of Net		Assets			Inputs		Inputs
	Asset / (Liability)		(Level 1)			(Level 2)		(Level 3)
	(in millions)

Currency exchange contracts	$	581	$	–		$	581	$	–
Commodity contracts		5		(10	)		15		–
Interest rate contracts		77		–			77		–

Total derivatives	$	663	$	(10	)	$	673	$	–

The fair values (asset / (liability)) of our derivative instruments at December 31, 2013 were determined using:


			Quoted Prices in
			Active Markets			Significant		Significant
	Total		for Identical			Other Observable		Unobservable
	Fair Value of Net		Assets			Inputs		Inputs
	Asset / (Liability)		(Level 1)			(Level 2)		(Level 3)
	(in millions)

Currency exchange contracts	$	68	$	–		$	68	$	–
Commodity contracts		8		(4	)		12		–
Interest rate contracts		235		–			235		–

Total derivatives	$	311	$	(4	)	$	315	$	–

Cash Flow Hedges

Schedule of Cash Flow Hedges Effect on Accumulated Other Comprehensive Income, Net of Taxes

Cash flow hedge activity, net of taxes, within accumulated other comprehensive earnings / (losses) included:


	For the Three Months Ended					For the Nine Months Ended
	September 30,					September 30,
	2014			2013		2014			2013
	(in millions)

Accumulated gain / (loss) at beginning of period	$	44		$	72	$	117		$	(38	)
Transfer of realized losses / (gains) in fair value to earnings		(17	)		6		(20	)		38
Unrealized gain / (loss) in fair value		47			4		(23	)		82

Accumulated gain / (loss) at end of period	$	74		$	82	$	74		$	82

Schedule of Effects of Derivative Instruments

After-tax gains / (losses) reclassified from accumulated other comprehensive earnings / (losses) into net earnings were:


	For the Three Months Ended					For the Nine Months Ended
	September 30,					September 30,
	2014		2013			2014			2013
	(in millions)

Currency exchange contracts – forecasted transactions	$	12	$	(6	)	$	8		$	(18	)
Commodity contracts		5		–			14			(19	)
Interest rate contracts		–		–			(2	)		(1	)

Total	$	17	$	(6	)	$	20		$	(38	)

After-tax gains / (losses) recognized in other comprehensive earnings / (losses) were:


	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2014			2013			2014			2013
	(in millions)

Currency exchange contracts – forecasted transactions	$	58		$	(16	)	$	65		$	(12	)
Commodity contracts		7			7			10			(1	)
Interest rate contracts		(18	)		13			(98	)		95

Total	$	47		$	4		$	(23	)	$	82

Fair Value Hedges

Schedule of Effects of Derivative Instruments

Pre-tax gains / (losses) due to changes in fair value of our interest rate swaps and related hedged long-term debt were recorded in interest and other expense / (income):


	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2014			2013		2014			2013
	(in millions)

Derivatives	$	(13	)	$	–	$	1		$	–
Borrowings		13			–		(1	)		–

Economic Hedging

Schedule of Effects of Derivative Instruments

Pre-tax gains / (losses) recorded in net earnings for economic hedges which are not designated as hedging instruments were:


												Location of
	For the Three Months Ended						For the Nine Months Ended					Gain / (Loss)
	September 30,						September 30,					Recognized
	2014			2013			2014			2013		in Earnings
	(in millions)

Currency exchange contracts:
Intercompany loans and forecasted interest payments	$	4		$	4		$	5		$	7	Interest expense
Forecasted purchases		29			10			(11	)		36	Cost of sales
Forecasted transactions		419			–			405			–	Interest and other expense / (income)
Forecasted transactions		(4	)		(2	)		(7	)		1	Selling, general and administrative expenses
Interest rate contracts		(1	)		2			–			–	Interest expense
Commodity contracts		12			28			82			62	Cost of sales

Total	$	459		$	42		$	474		$	106

- Definition

Tabular disclosure of the fair value of financial instruments, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

+ References+ Details