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Derivative Financial Instruments and Hedging Activities (Notes) | 12 Months Ended
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Dec. 31, 2021
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES | DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES In the normal course of business, our operations are exposed to global market risks, including the effect of changes in foreign currency exchange rates, certain commodity prices, and interest rates. To manage these risks, we enter into highly effective derivative contracts: •Foreign currency exchange contracts, including forwards, that are used to manage foreign exchange exposure; •Commodity contracts, including forwards, that are used to manage commodity price risk; •Interest rate contracts, including swaps, that are used to manage the effects of interest rate fluctuations; and •Cross-currency interest rate swap contracts that are used to manage foreign currency and interest rate exposures on foreign-denominated debt. Our derivatives are over-the-counter customized derivative transactions and are not exchange-traded. We review our hedging program, derivative positions, and overall risk management strategy on a regular basis. Derivative Financial Instruments and Hedge Accounting. Derivative assets are reported in Other assets and derivative liabilities are reported in Payables and Other liabilities and deferred revenue. We have elected to apply hedge accounting to certain derivatives. Derivatives that are designated in hedging relationships are evaluated for effectiveness using regression analysis at the time they are designated and throughout the hedge period. Some derivatives do not qualify for hedge accounting; for others, we elect not to apply hedge accounting. Cash Flow Hedges. We have designated certain forward contracts as cash flow hedges of forecasted transactions with exposure to foreign currency exchange and commodity price risks. Changes in the fair value of cash flow hedges are deferred in Accumulated other comprehensive income/(loss) and are recognized in Cost of sales when the hedged item affects earnings. Our policy is to de-designate foreign currency exchange cash flow hedges prior to the time forecasted transactions are recognized as assets or liabilities on our consolidated balance sheets and report subsequent changes in fair value through Cost of sales. If it becomes probable that the originally forecasted transaction will not occur, the related amount included in Accumulated other comprehensive income/(loss) is reclassified and recognized in earnings. The cash flows associated with hedges designated until maturity are reported in Net cash provided by/(used in) operating activities on our consolidated statement of cash flows. Our cash flow hedges mature within three years. NOTE 20. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued) Fair Value Hedges. Our Ford Credit segment uses derivatives to reduce the risk of changes in the fair value of debt. We have designated certain receive-fixed, pay-float interest rate and cross-currency interest rate swaps as fair value hedges of fixed-rate debt. The risk being hedged is the risk of changes in the fair value of the hedged debt attributable to changes in the benchmark interest rate and foreign exchange. We report the change in fair value of the hedged debt related to the change in benchmark interest rate in Ford Credit debt and Ford Credit interest, operating, and other expenses. We report the change in fair value of the hedged debt and hedging instrument related to foreign currency in Other income/(loss), net. Net interest settlements and accruals, and fair value changes on hedging instruments due to the benchmark interest rate change are reported in Ford Credit interest, operating, and other expenses. The cash flows associated with fair value hedges are reported in Net cash provided by/(used in) operating activities on our consolidated statements of cash flows. When a fair value hedge is de-designated, or when the derivative is terminated before maturity, the fair value adjustment to the hedged debt continues to be reported as part of the carrying value of the debt and is recognized in Ford Credit interest, operating, and other expenses over its remaining life. Derivatives Not Designated as Hedging Instruments. For total Company excluding Ford Credit, we report changes in the fair value of derivatives not designated as hedging instruments through Cost of sales. Cash flows associated with non-designated or de-designated derivatives are reported in Net cash provided by/(used in) investing activities on our consolidated statements of cash flows. Our Ford Credit segment reports the gains/(losses) on derivatives not designated as hedging instruments in Other income/(loss), net. Cash flows associated with non-designated or de-designated derivatives are reported in Net cash provided by/(used in) investing activities on our consolidated statements of cash flows. Normal Purchases and Normal Sales Classification. We have elected to apply the normal purchases and normal sales classification for physical supply contracts that are entered into for the purpose of procuring commodities to be used in production over a reasonable period in the normal course of our business. NOTE 20. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued) Income Effect of Derivative Financial Instruments The gains/(losses), by hedge designation, reported in income for the years ended December 31 were as follows (in millions):
| 2019 |  | 2020 |  | 2021
Cash flow hedges |  |  |  |  |
Reclassified from AOCI to Cost of sales |  |  |  |  |
Foreign currency exchange contracts (a) | $ | 29 |  |  | $ | (11) |  |  | $ | (412) |
Commodity contracts (b) | (32) |  |  | (55) |  |  | 132 |
Fair value hedges |  |  |  |  |
Interest rate contracts |  |  |  |  |
Net interest settlements and accruals on hedging instruments | (16) |  |  | 290 |  |  | 393 |
Fair value changes on hedging instruments | 706 |  |  | 986 |  |  | (1,001) |
Fair value changes on hedged debt | (694) |  |  | (985) |  |  | 957 |
Cross-currency interest rate swap contracts |  |  |  |  |
Net interest settlements and accruals on hedging instruments | — |  |  | (2) |  |  | (8) |
Fair value changes on hedging instruments | — |  |  | 38 |  |  | (93) |
Fair value changes on hedged debt | — |  |  | (37) |  |  | 82 |
Derivatives not designated as hedging instruments |  |  |  |  |
Foreign currency exchange contracts (c) | 84 |  |  | (310) |  |  | 375 |
Cross-currency interest rate swap contracts | (229) |  |  | 486 |  |  | (507) |
Interest rate contracts | (13) |  |  | (100) |  |  | (3) |
Commodity contracts | — |  |  | 47 |  |  | 170 |
Total | $ | (165) |  |  | $ | 347 |  |  | $ | 85 |
__________ (a)For 2019, 2020, and 2021, an $839 million loss, a $198 million gain, and a $453 million loss, respectively, were reported in Other comprehensive income/(loss), net of tax. (b)For 2019, 2020, and 2021, a $36 million loss, a $9 million gain, and a $284 million gain, respectively, were reported in Other comprehensive income/(loss), net of tax. (c)For 2019, 2020, and 2021, a $32 million gain, a $228 million loss, and a $230 million gain, respectively, were reported in Cost of sales and a $52 million gain, an $82 million loss, and a $145 million gain were reported in Other income/(loss), net, respectively. NOTE 20. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued) Balance Sheet Effect of Derivative Financial Instruments Derivative assets and liabilities are reported on our consolidated balance sheets at fair value and are presented on a gross basis. The notional amounts of the derivative instruments do not necessarily represent amounts exchanged by the parties and are not a direct measure of our financial exposure. We also enter into master agreements with counterparties that may allow for netting of exposures in the event of default or breach of the counterparty agreement. Collateral represents cash received or paid under reciprocal arrangements that we have entered into with our derivative counterparties, which we do not use to offset our derivative assets and liabilities. The fair value of our derivative instruments and the associated notional amounts at December 31 were as follows (in millions):
| 2020 |  | 2021
| Notional |  | Fair Value of Assets |  | Fair Value of Liabilities |  | Notional |  | Fair Value of Assets |  | Fair Value of Liabilities
Cash flow hedges |  |  |  |  |  |  |  |  |  |  |
Foreign currency exchange contracts | $ | 15,860 |  |  | $ | 47 |  |  | $ | 383 |  |  | $ | 11,534 |  |  | $ | 74 |  |  | $ | 346 |
Commodity contracts | 703 |  |  | 40 |  |  | 5 |  |  | 931 |  |  | 182 |  |  | 5 |
Fair value hedges |  |  |  |  |  |  |  |  |  |  |
Interest rate contracts | 26,924 |  |  | 1,331 |  |  | 4 |  |  | 23,893 |  |  | 544 |  |  | 274 |
Cross-currency interest rate swap contracts | 885 |  |  | 46 |  |  | — |  |  | 885 |  |  | — |  |  | 49 |
Derivatives not designated as hedging instruments |  |  |  |  |  |  |  |  |  |  |
Foreign currency exchange contracts | 25,956 |  |  | 172 |  |  | 399 |  |  | 28,463 |  |  | 281 |  |  | 198 |
Cross-currency interest rate swap contracts | 6,849 |  |  | 557 |  |  | 1 |  |  | 6,533 |  |  | 117 |  |  | 61 |
Interest rate contracts | 70,318 |  |  | 663 |  |  | 439 |  |  | 50,060 |  |  | 338 |  |  | 126 |
Commodity contracts | 599 |  |  | 74 |  |  | 4 |  |  | 997 |  |  | 54 |  |  | 11 |
Total derivative financial instruments, gross (a) (b) | $ | 148,094 |  |  | $ | 2,930 |  |  | $ | 1,235 |  |  | $ | 123,296 |  |  | $ | 1,590 |  |  | $ | 1,070 |
Current portion |  |  | $ | 974 |  |  | $ | 859 |  |  |  |  | $ | 924 |  |  | $ | 535 |
Non-current portion |  |  | 1,956 |  |  | 376 |  |  |  |  | 666 |  |  | 535 |
Total derivative financial instruments, gross |  |  | $ | 2,930 |  |  | $ | 1,235 |  |  |  |  | $ | 1,590 |  |  | $ | 1,070 |
__________ (a)At December 31, 2020 and 2021, we held collateral of $9 million and $26 million, respectively, and we posted collateral of $96 million and $71 million, respectively. (b)At December 31, 2020 and 2021, the fair value of assets and liabilities available for counterparty netting was $505 million and $719 million, respectively. All derivatives are categorized within Level 2 of the fair value hierarchy.

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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 http://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 http://asc.fasb.org/extlink&oid=123477628&loc=d3e90205-114008 + Details
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