v3.22.4

Financial Instruments | 12 Months Ended
--- | ---
Dec. 31, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Financial Instruments | FINANCIAL INSTRUMENTS RECURRING FAIR VALUE MEASUREMENTS Our assets and liabilities measured at fair value on a recurring basis consist of derivative instruments and investment securities.
| 2022 | 2021
| Level 1 | Level 2 | Level 3 | Net Balance | Level 1 | Level 2 | Level 3 | Net Balance
Assets |  |  |  |  |  |  |  |
Derivatives | $ | — |  | $ | 18 |  | $ | — |  | $ | 18 |  | $ | — |  | $ | 29 |  | $ | — |  | $ | 29 |
Investment securities | 748 |  | — |  | — |  | 748 |  | 1,033 |  | — |  | 8 |  | 1,041 |
Total assets | 748 |  | 18 |  | — |  | 766 |  | 1,033 |  | 29 |  | 8 |  | 1,070 |
Liabilities |  |  |  |  |  |  |  |
Derivatives | — |  | (86) |  | — |  | (86) |  | — |  | (49) |  | — |  | (49) |
Total liabilities | $ | — |  | $ | (86) |  | $ | — |  | $ | (86) |  | $ | — |  | $ | (49) |  | $ | — |  | $ | (49) |
There were no transfers between Level 1, 2 and 3 during 2022. The following table provides a reconciliation of recurring Level 3 fair value measurements for investment securities:
| 2022 | 2021
Balance at beginning of year | $ | 8 |  | $ | 30 |
Proceeds at maturity | (8) |  | (22) |
Balance at end of year | $ | — |  | $ | 8 |
The most significant unobservable input used in the valuation of our Level 3 instruments is the discount rate. Discount rates are determined based on inputs that market participants would use when pricing investments, including credit and liquidity risk. An increase in the discount rate would result in a decrease in the fair value of our investment securities. There are no unrealized gains or losses recognized in the consolidated statements of income (loss) on account of any Level 3 instrument still held at the reporting date.
| 2022 | 2021
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value
Investment securities (1) |  |  |  |  |  |  |  |
Non-U.S. debt securities | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | 8 |  | $ | — |  | $ | — |  | $ | 8 |
Equity securities | 557 |  | 191 |  | — |  | 748 |  | 579 |  | 455 |  | (1) |  | 1,033 |
Total | $ | 557 |  | $ | 191 |  | $ | — |  | $ | 748 |  | $ | 587 |  | $ | 455 |  | $ | (1) |  | $ | 1,041 |
(1)Gains (losses) recorded to earnings related to these securities were $(271) million, $(843) million and $1.4 billion for the years ended December 31, 2022, 2021, and 2020, respectively. As of December 31, 2022 and 2021, our equity securities with readily determinable fair values are comprised primarily of our investment in C3.ai, Inc. ("C3 AI") of $97 million and $270 million, respectively, and ADNOC Drilling of $649 million and $741 million, respectively. We remeasured our investments to fair value based on quoted prices in active markets. At December 31, 2022 and 2021, our investment in C3 AI consists of 8,650,476 shares of Class A common stock ("C3 AI Shares"). There were no C3 AI Shares sold during 2022. During 2021, we sold approximately 2.2 million of our C3 AI shares and received proceeds of $145 million. For the years ended December 31, 2022 and 2021, we recorded unrealized losses of $174 million and $1,085 million, respectively, from the net change in fair value of our investment in C3 AI, which is reported in “Other non-operating income (loss), net” in our consolidated statements of income (loss). At December 31, 2022 and 2021, our investment in ADNOC Drilling consists of 800,000,000 shares. For the years ended December 31, 2022 and 2021, we recorded an unrealized loss of $91 million and an unrealized gain of $241 million, respectively, from the net change in fair value of our investment in ADNOC Drilling, which is reported in “Other non-operating income (loss), net” in our consolidated statements of income (loss). As of December 31, 2022 and 2021, $748 million and $1,041 million of total investment securities are recorded in "All other current assets," respectively. FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS Our financial instruments include cash and equivalents, current receivables, certain investments, accounts payable, short and long-term debt, and derivative financial instruments. Except for long-term debt, the estimated fair value of these financial instruments at December 31, 2022 and 2021 approximates their carrying value as reflected in our consolidated financial statements. For further information on the fair value of our debt, see "Note 9. Borrowings." DERIVATIVES AND HEDGING We use derivatives to manage our risks and do not use derivatives for speculation. The table below summarizes the fair value of all derivatives, including hedging instruments and embedded derivatives.
| 2022 | 2021
| Assets | (Liabilities) | Assets | (Liabilities)
Derivatives accounted for as hedges |  |  |  |
Currency exchange contracts | $ | 1 |  | $ | — |  | $ | — |  | $ | (3) |
Interest rate swap contracts | — |  | (69) |  | — |  | (10) |
Derivatives not accounted for as hedges |  |  |  |
Currency exchange contracts and other | 17 |  | (17) |  | 29 |  | (36) |
Total derivatives | $ | 18 |  | $ | (86) |  | $ | 29 |  | $ | (49) |
Derivatives are classified in the consolidated statements of financial position depending on their respective maturity date. As of December 31, 2022 and 2021, $17 million and $28 million of derivative assets are recorded in "All other current assets" and $1 million and $1 million are recorded in "All other assets" of the consolidated statements of financial position, respectively. As of December 31, 2022 and 2021, $17 million and $39 million of derivative liabilities are recorded in "All other current liabilities" and $69 million and $10 million are recorded in "All other liabilities" of the consolidated statements of financial position, respectively. FORMS OF HEDGING Cash flow hedges We use cash flow hedging primarily to reduce or eliminate the effects of foreign exchange rate changes on purchase and sale contracts. Accordingly, the vast majority of our derivative activity in this category consists of currency exchange contracts. Changes in the fair value of cash flow hedges are recorded in a separate component of equity (referred to as "Accumulated Other Comprehensive Income", or "AOCI") and are recorded in earnings in the period in which the hedged transaction occurs. See "Note 12. Members' Equity" for further information on activity in AOCI for cash flow hedges. The maximum term of cash flow hedges that hedge forecasted transactions was less than one year at December 31, 2022 and 2021. Fair Value Hedges All of our long-term debt is comprised of fixed rate instruments. We are subject to interest rate risk on our debt portfolio and may use interest rate swaps to manage the economic effect of fixed rate obligations associated with certain debt. Under these arrangements, we agree to exchange, at specified intervals, the difference between fixed and floating interest amounts calculated by reference to an agreed-upon notional principal amount. As of December 31, 2022 and 2021, we had interest rate swaps with a notional amount of $500 million that converted a portion of our $1,350 million aggregate principal amount of 3.337% fixed rate Senior Notes due 2027 into a floating rate instrument with an interest rate based on a LIBOR index as a hedge of its exposure to changes in fair value that are attributable to interest rate risk. We concluded that the interest rate swap met the criteria necessary to qualify for the short-cut method of hedge accounting, and as such, an assumption is made that the change in the fair value of the hedged debt, due to changes in the benchmark rate, exactly offsets the change in the fair value of the interest rate swaps. Therefore, the derivative is considered to be effective at achieving offsetting changes in the fair value of the hedged liability, and no ineffectiveness is recognized. The mark-to-market of this fair value hedge is recorded as gains or losses in interest expense and is equally offset by the gain or loss of the underlying debt instrument, which also is recorded in interest expense. Economic Hedges These derivatives are not designated as hedges from an accounting standpoint (and therefore we do not apply hedge accounting to the relationship), but otherwise serve the same economic purpose as other hedging arrangements. Economic hedges are marked to fair value through earnings each period. The following table summarizes the gains (losses) from derivatives not designated as hedges in the consolidated statements of income (loss):
Derivatives not designated as hedging instruments | Consolidated statements of income (loss) caption | 2022 | 2021 | 2020
Currency exchange contracts (1) | Cost of goods sold | $ | 24 |  | $ | (9) |  | $ | 59 |
Currency exchange contracts | Cost of services sold | 18 |  | 5 |  | 62 |
Commodity derivatives | Cost of goods sold | (6) |  | 1 |  | 2 |
Other derivatives | Other non-operating income (loss), net | 2 |  | — |  | 8 |
Total (2) |  | $ | 38 |  | $ | (3) |  | $ | 131 |
(1)Excludes a loss of nil, gains of $7 million and losses of $14 million on embedded derivatives for the years ended December 31, 2022, 2021 and 2020, respectively, as embedded derivatives are not considered to be hedging instruments in our economic hedges. (2)The effect on earnings of derivatives not designated as hedges is substantially offset by the change in fair value of the economically hedged items in the current and future periods. NOTIONAL AMOUNT OF DERIVATIVES The notional amount of a derivative is the number of units of the underlying. A substantial majority of the outstanding notional amount of $3.8 billion and $3.9 billion at December 31, 2022 and 2021, respectively, is related to hedges of anticipated sales and purchases in foreign currency, commodity purchases, changes in interest rates, and contractual terms in contracts that are considered embedded derivatives and for intercompany borrowings in foreign currencies. We generally disclose derivative notional amounts on a gross basis to indicate the total counterparty risk. Where we have gross purchase and sale derivative contracts for a particular currency, we look to execute these contracts with the same counterparty to reduce our exposure. The notional amount of these derivative instruments do not generally represent cash amounts exchanged by us and the counterparties, but rather the nominal amount upon which changes in the value of the derivatives are measured. COUNTERPARTY CREDIT RISK Fair values of our derivatives can change significantly from period to period based on, among other factors, market movements and changes in our positions. We manage counterparty credit risk (the risk that counterparties will default and not make payments to us according to the terms of our agreements) on an individual counterparty basis.

X
- References No definition available. + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for derivatives and fair value of assets and liabilities. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -URI https://asc.fasb.org/topic&trid=2155941 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI https://asc.fasb.org/topic&trid=2229140 + Details
Name: | us-gaap_DerivativesAndFairValueTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration