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DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES | 9 Months Ended
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Sep. 30, 2025
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 derivative contracts. 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. Income Effect of Derivative Financial Instruments The gains/(losses), by hedge designation, reported in income for the periods ended September 30 were as follows (in millions):
| Third Quarter |  | First Nine Months
Cash flow hedges | 2024 |  | 2025 |  | 2024 |  | 2025
Reclassified from AOCI to Cost of sales |  |  |  |  |  |  |
Foreign currency exchange contracts (a) | $ | 16 |  |  | $ | (23) |  |  | $ | 80 |  |  | $ | 72 |
Commodity contracts (b) | (11) |  |  | — |  |  | (40) |  |  | 10 |
Fair value hedges |  |  |  |  |  |  |
Interest rate contracts |  |  |  |  |  |  |
Net interest settlements and accruals on hedging instruments | (92) |  |  | (45) |  |  | (294) |  |  | (137) |
Fair value changes on hedging instruments | 585 |  |  | 34 |  |  | 316 |  |  | 598 |
Fair value changes on hedged debt | (553) |  |  | (33) |  |  | (316) |  |  | (576) |
Cross-currency interest rate swap contracts |  |  |  |  |  |  |
Net interest settlements and accruals on hedging instruments | (33) |  |  | (23) |  |  | (97) |  |  | (66) |
Fair value changes on hedging instruments | 266 |  |  | (14) |  |  | 155 |  |  | 490 |
Fair value changes on hedged debt | (261) |  |  | (1) |  |  | (159) |  |  | (476) |
Derivatives not designated as hedging instruments |  |  |  |  |  |  |
Foreign currency exchange contracts (c) | 133 |  |  | (55) |  |  | 328 |  |  | (64) |
Cross-currency interest rate swap contracts | 210 |  |  | (49) |  |  | 14 |  |  | 299 |
Interest rate contracts | (153) |  |  | — |  |  | (102) |  |  | (63) |
Commodity contracts | — |  |  | — |  |  | (11) |  |  | 22 |
Total | $ | 107 |  |  | $ | (209) |  |  | $ | (126) |  |  | $ | 109 |
__________ (a)For the third quarter and first nine months of 2024, a $388 million loss and a $51 million loss, respectively, were reported in Other comprehensive income/(loss), net of tax. For the third quarter and first nine months of 2025, a $331 million gain and a $274 million loss, respectively, were reported in Other comprehensive income/(loss), net of tax. (b)For the third quarter and first nine months of 2024, an $11 million gain and a $33 million gain, respectively, were reported in Other comprehensive income/(loss), net of tax. For the third quarter and first nine months of 2025, a $30 million gain and a $38 million gain, respectively, were reported in Other comprehensive income/(loss), net of tax. (c)For the third quarter and first nine months of 2024, a $138 million gain and a $196 million gain, respectively, were reported in Cost of sales, and a $5 million loss and a $132 million gain, respectively, were reported in Other income/(loss), net. For the third quarter and first nine months of 2025, a $61 million loss and a $65 million gain, respectively, were reported in Cost of sales, and a $6 million gain and a $129 million loss, respectively, were reported in Other income/(loss), net. NOTE 13. 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 were as follows (in millions):
| December 31, 2024 |  | September 30, 2025
| 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 | $ | 20,027 |  |  | $ | 578 |  |  | $ | 123 |  |  | $ | 16,248 |  |  | $ | 241 |  |  | $ | 102 |
Commodity contracts | 959 |  |  | 22 |  |  | 13 |  |  | 946 |  |  | 36 |  |  | 1 |
Fair value hedges |  |  |  |  |  |  |  |  |  |  |
Interest rate contracts | 16,194 |  |  | 66 |  |  | 645 |  |  | 20,218 |  |  | 391 |  |  | 258 |
Cross-currency interest rate swap contracts | 3,802 |  |  | 9 |  |  | 139 |  |  | 4,158 |  |  | 374 |  |  | 6 |
Derivatives not designated as hedging instruments |  |  |  |  |  |  |  |  |  |  |
Foreign currency exchange contracts | 20,799 |  |  | 301 |  |  | 192 |  |  | 22,138 |  |  | 153 |  |  | 202 |
Cross-currency interest rate swap contracts | 5,455 |  |  | 133 |  |  | 246 |  |  | 7,109 |  |  | 354 |  |  | 24 |
Interest rate contracts | 76,977 |  |  | 305 |  |  | 845 |  |  | 85,911 |  |  | 374 |  |  | 675 |
Commodity contracts | 944 |  |  | 14 |  |  | 31 |  |  | 789 |  |  | 20 |  |  | 7 |
Total derivative financial instruments, gross (a) (b) | $ | 145,157 |  |  | $ | 1,428 |  |  | $ | 2,234 |  |  | $ | 157,517 |  |  | $ | 1,943 |  |  | $ | 1,275 |
Current portion |  |  | $ | 869 |  |  | $ | 1,311 |  |  |  |  | $ | 548 |  |  | $ | 774 |
Non-current portion |  |  | 559 |  |  | 923 |  |  |  |  | 1,395 |  |  | 501 |
Total derivative financial instruments, gross |  |  | $ | 1,428 |  |  | $ | 2,234 |  |  |  |  | $ | 1,943 |  |  | $ | 1,275 |
__________ (a)At December 31, 2024 and September 30, 2025, we held collateral of $27 million and $28 million, respectively, and we posted collateral of $127 million and $114 million, respectively. (b)At December 31, 2024 and September 30, 2025, the fair value of assets and liabilities available for counterparty netting was $780 million and $888 million, respectively. All derivatives are categorized within Level 2 of the fair value hierarchy.

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