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Financial Instruments (Tables) | 9 Months Ended
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Sep. 30, 2016
Fair Value of Derivatives Instruments | Derivative instruments were recorded at fair value in the condensed consolidated balance sheets as follows:
|  | As of September 30, 2016 |  |  | As of December 31, 2015 |
|  | Asset |  |  | Liability |  |  | Asset |  |  | Liability |
|  | Derivatives |  |  | Derivatives |  |  | Derivatives |  |  | Derivatives |
|  | (in millions) |
Derivatives designated as accounting hedges: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Currency exchange contracts |  | $ | 4 |  |  | $ | 8 |  |  | $ | 20 |  |  | $ | 7 |
Commodity contracts |  |  | 38 |  |  |  | 16 |  |  |  | 37 |  |  |  | 35 |
Interest rate contracts |  |  | 10 |  |  |  | 16 |  |  |  | 12 |  |  |  | 57 |
|  | $ | 52 |  |  | $ | 40 |  |  | $ | 69 |  |  | $ | 99 |
Derivatives not designated as accounting hedges: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Currency exchange contracts |  | $ | 14 |  |  | $ | 57 |  |  | $ | 61 |  |  | $ | 33 |
Commodity contracts |  |  | 52 |  |  |  | 47 |  |  |  | 70 |  |  |  | 56 |
Interest rate contracts |  |  | 29 |  |  |  | 20 |  |  |  | 43 |  |  |  | 28 |
|  | $ | 95 |  |  | $ | 124 |  |  | $ | 174 |  |  | $ | 117 |
Total fair value |  | $ | 147 |  |  | $ | 164 |  |  | $ | 243 |  |  | $ | 216 |
Notional Values of Derivative Instruments | The net notional values of our derivative instruments were:
|  | Notional Amount |
|  | As of September 30, |  |  | As of December 31, |
|  | 2016 |  |  | 2015 |
|  | (in millions) |
Currency exchange contracts: |  |  |  |  |  |  |  |
Intercompany loans and forecasted interest payments |  | $ | 3,211 |  |  | $ | 4,148 |
Forecasted transactions |  |  | 1,318 |  |  |  | 1,094 |
Commodity contracts |  |  | 654 |  |  |  | 732 |
Interest rate contracts |  |  | 2,050 |  |  |  | 3,033 |
Net investment hedge – euro notes |  |  | 5,280 |  |  |  | 4,345 |
Net investment hedge – pound sterling notes |  |  | 1,236 |  |  |  | 1,404 |
Net investment hedge – Swiss franc notes |  |  | 1,518 |  |  |  | 1,073 |
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, pound sterling and Swiss franc-denominated debt were: |
|  |  |  |  |  |  |  | Location of |
|  | For the Three Months Ended |  |  | For the Nine Months Ended |  |  | Gain / (Loss) |
|  | September 30, |  |  | September 30, |  |  | Recognized in |
|  | 2016 |  |  | 2015 |  |  | 2016 |  |  | 2015 |  |  | AOCI |
|  | (in millions) |  |  |  |
Euro notes |  | $ | (38 | ) |  | $ | (8 | ) |  | $ | (110 | ) |  | $ | 188 |  |  |  | Currency |
Pound sterling notes |  |  | 21 |  |  |  | 30 |  |  |  | 107 |  |  |  | 17 |  |  |  | Translation |
Swiss franc notes |  |  | (4 | ) |  |  | 18 |  |  |  | (33 | ) |  |  | (13 | ) |  |  | Adjustment |
Derivative |
Schedule of Derivative Instruments Fair Value and Measurement Inputs | The fair values (asset / (liability)) of our derivative instruments were determined using:
|  | As of September 30, 2016 |
|  |  |  |  | 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 |  | $ | (47 | ) |  | $ | – |  |  | $ | (47 | ) |  | $ | – |
Commodity contracts |  |  | 27 |  |  |  | 17 |  |  |  | 10 |  |  |  | – |
Interest rate contracts |  |  | 3 |  |  |  | – |  |  |  | 3 |  |  |  | – |
Total derivatives |  | $ | (17 | ) |  | $ | 17 |  |  | $ | (34 | ) |  | $ | – |
|  | As of December 31, 2015 |
|  |  |  |  | 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 |  | $ | 41 |  |  | $ | – |  |  | $ | 41 |  |  | $ | – |
Commodity contracts |  |  | 16 |  |  |  | 29 |  |  |  | (13 | ) |  |  | – |
Interest rate contracts |  |  | (30 | ) |  |  | – |  |  |  | (30 | ) |  |  | – |
Total derivatives |  | $ | 27 |  |  | $ | 29 |  |  | $ | (2 | ) |  | $ | – |
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, |
|  | 2016 |  |  | 2015 |  |  | 2016 |  |  | 2015 |
|  | (in millions) |
Accumulated gain / (loss) at beginning of period |  | $ | (36 | ) |  | $ | (53 | ) |  | $ | (45 | ) |  | $ | (2 | )
Transfer of realized losses / (gains) in fair value to earnings |  |  | (2 | ) |  |  | 60 |  |  |  | 64 |  |  |  | 6 |
Unrealized gain / (loss) in fair value |  |  | 4 |  |  |  | (69 | ) |  |  | (53 | ) |  |  | (66 | )
Accumulated gain / (loss) at end of period |  | $ | (34 | ) |  | $ | (62 | ) |  | $ | (34 | ) |  | $ | (62 | )
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, |
|  | 2016 |  |  | 2015 |  |  | 2016 |  |  | 2015 |
|  | (in millions) |
Currency exchange contracts – forecasted transactions |  | $ | (6 | ) |  | $ | (11 | ) |  | $ | (3 | ) |  | $ | 73 |
Commodity contracts |  |  | 8 |  |  |  | (49 | ) |  |  | (1 | ) |  |  | (53 | )
Interest rate contracts |  |  | – |  |  |  | – |  |  |  | (60 | ) |  |  | (26 | )
Total |  | $ | 2 |  |  | $ | (60 | ) |  | $ | (64 | ) |  | $ | (6 | )
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, |
|  | 2016 |  |  | 2015 |  |  | 2016 |  |  | 2015 |
|  | (in millions) |
Currency exchange contracts – forecasted transactions |  | $ | (11 | ) |  | $ | 8 |  |  | $ | (21 | ) |  | $ | 33 |
Commodity contracts |  |  | 10 |  |  |  | (38 | ) |  |  | 19 |  |  |  | (61 | )
Interest rate contracts |  |  | 5 |  |  |  | (39 | ) |  |  | (51 | ) |  |  | (38 | )
Total |  | $ | 4 |  |  | $ | (69 | ) |  | $ | (53 | ) |  | $ | (66 | )
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, net:
|  | For the Three Months Ended |  |  | For the Nine Months Ended |  |  |  |
|  | September 30, |  |  | September 30, |  |
|  | 2016 |  |  | 2015 |  |  | 2016 |  |  | 2015 |  |
|  | (in millions) |  |
Derivatives |  | $ | (11 | ) |  | $ | 4 |  |  | $ | (2 | ) |  | $ | 8 |  |
Borrowings |  |  | 11 |  |  |  | (4 | ) |  |  | 2 |  |  |  | (8 | ) |  |  |  |
Economic Hedging |
Schedule of Effects of Derivative Instruments |
Pre-tax gains / (losses) recorded in net earnings for economic hedges were: |
|  |  |  |  |  |  |  |  |  |  |  |  |  | Location of |
|  | For the Three Months Ended |  |  | For the Nine Months Ended |  |  | Gain / (Loss) |
|  | September 30, |  |  | September 30, |  |  | Recognized |
|  | 2016 |  |  | 2015 |  |  | 2016 |  |  | 2015 |  |  | in Earnings |
|  | (in millions) |  |  |  |
Currency exchange contracts: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Intercompany loans and forecasted interest payments |  | $ | 7 |  |  | $ | 8 |  |  | $ | 18 |  |  | $ | 22 |  |  |  | Interest and other expense, net |
Forecasted transactions |  |  | (14 | ) |  |  | 43 |  |  |  | (91 | ) |  |  | 33 |  |  |  | Cost of sales |
Forecasted transactions |  |  | 2 |  |  |  | 36 |  |  |  | 10 |  |  |  | 437 |  |  |  | Interest and other expense, net |
Forecasted transactions |  |  | 4 |  |  |  | 5 |  |  |  | 16 |  |  |  | (11 | ) |  |  | Selling, general and administrative expenses |
Interest rate contracts |  |  | – |  |  |  | – |  |  |  | – |  |  |  | – |  |  |  | Interest and other expense, net |
Commodity contracts |  |  | (13 | ) |  |  | (99 | ) |  |  | (26 | ) |  |  | (158 | ) |  |  | Cost of sales |
Total |  | $ | (14 | ) |  | $ | (7 | ) |  | $ | (73 | ) |  | $ | 323 |  |  |  |  |

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