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Hedges and Derivative Financial Instruments (Tables)
 6 Months Ended
Jun. 30, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Schedule of Derivative Instruments
The following table summarizes our outstanding derivative contracts and their effects in our Consolidated Condensed Balance Sheets at June 30, 2020 and December 31, 2019:
 

 

Fair Value of



 


Notional Amount

Hedge Assets

Hedge Liabilities

Maximum Term (Months)
Millions of dollars

2020
 
2019

2020
 
2019

2020
 
2019


2020
 
2019
Derivatives accounted for as hedges(1)


















Commodity swaps/options

$
235

 
$
174

 
$
7

 
$
4

 
$
24

 
$
10

 
(CF)
 
36
 
21
Foreign exchange forwards/options

2,962

 
3,177

 
132

 
94

 
10

 
84

 
(CF/NI)
 
140
 
32
Cross-currency swaps
 
1,275

 
1,275

 
90

 
25

 
—

 
23

 
(CF)
 
104
 
110
Interest rate derivatives
 
300

 
300

 
—

 
6

 
60

 
—

 
(CF)
 
59
 
65
Total derivatives accounted for as hedges







$
229


$
129


$
94


$
117







Derivatives not accounted for as hedges


















Commodity swaps/options

1

 
1

 
—

 
—

 
—

 
—

 
N/A
 
1
 
7
Foreign exchange forwards/options(2)

$
3,719

 
$
3,182

 
$
41

 
$
15

 
$
41

 
$
22

 
N/A
 
15
 
12
Total derivatives not accounted for as hedges







41


15


41


22







Total derivatives





$
270


$
144


$
135


$
139
































Current





$
141

 
$
55

 
$
51

 
$
61







Noncurrent







129

 
89

 
84

 
78







Total derivatives





$
270


$
144


$
135


$
139








(1) 
Derivatives accounted for as hedges are considered either cash flow (CF) or net investment (NI) hedges.
(2) 
Foreign exchange forwards/options have increased due to hedging of a future intercompany loan.
The following table summarizes our foreign currency denominated debt and foreign exchange forwards/options designated as net investment hedges at June 30, 2020 and December 31, 2019:
 
 
Notional (Local)
 
Notional (USD)
 
Current Maturity
Instrument
 
2020
 
2019
 
2020
 
2019
 
Senior note - 0.625%
 
€
—

 
€
500

 
$
—

 
$
569

 
March 2020
Foreign exchange forwards/options
 
MXN
7,200

 
MXN
7,200

 
$
312

 
$
382

 
August 2022
Schedule of Effects of Derivative Instruments on Consolidated Statements of Income
The following tables summarize the effects of derivative instruments and foreign currency debt designated as net investment hedges in our Consolidated Condensed Statements of Comprehensive Income for the periods presented:
 
 
 
 
Three Months Ended June 30,
 
 
 
Gain (Loss)
Recognized in OCI
(Effective Portion ) (3)
Cash Flow Hedges - Millions of dollars
 
 
2020
 
2019
Commodity swaps/options
 
$
24

 
$
(22
)
Foreign exchange forwards/options
 
(10
)
 
(4
)
Cross-currency swaps
 
(25
)
 
—

Interest rate derivatives
 
5

 
(5
)
Net Investment Hedges
 
 
 
 
Foreign currency
 
(14
)
 
(20
)
 
 
(20
)
 
(51
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30,
 
 
Location of Gain (Loss) Reclassified from
OCI into Earnings
(Effective Portion)
 
Gain (Loss) Reclassified from
OCI into Earnings
(Effective Portion)
Cash Flow Hedges - Millions of dollars
 
 
2020
 
2019
Commodity swaps/options (4)
 
Cost of products sold
 
$
(10
)
 
$
(6
)
Foreign exchange forwards/options
 
Net sales
 
3

 
(1
)
Foreign exchange forwards/options
 
Cost of products sold
 
9

 
6

Foreign exchange forwards/options
 
Interest and sundry (income) expense
 
1

 
(4
)
Cross-currency swaps
 
Interest and sundry (income) expense
 
(16
)
 
(8
)
Interest rate derivatives
 
Interest expense
 
—

 
3

 
 
 
 
(13
)
 
(10
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30,
 
 
Location of Gain (Loss) Recognized on Derivatives not
Accounted for as Hedges
 
Gain (Loss) Recognized on Derivatives not
Accounted for as Hedges
Derivatives not Accounted for as Hedges - Millions of dollars
 
 
2020
 
2019
Foreign exchange forwards/options
 
Interest and sundry (income) expense
 
$
(25
)
 
$
(35
)
(3) 
Change in gain (loss) recognized in OCI (effective portion) for the three months ended June 30, 2020 is primarily driven by currency fluctuations and declines in commodity prices and interest rates compared to the prior year. The tax impact of the cash flow hedges was $(4) million and $5 million for the three months ended June 30, 2020 and 2019, respectively. The tax impact of the net investment hedges was $7 million and $5 million for the three months ended June 30, 2020 and 2019, respectively.
(4) 
Cost for commodity swaps/options are recognized in cost of sales as products are sold.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30,
 
 
 
 
 
 
Gain (Loss)
Recognized in OCI
(Effective Portion)(4)
Cash Flow Hedges - Millions of dollars
 
 
 
 
 
2020
 
2019
Commodity swaps/options
 
$
(31
)
 
$
—

Foreign exchange
 
95

 
24

Cross-currency swaps
 
95

 
—

Interest rate derivatives
 
(66
)
 
(22
)
Net Investment Hedges
 
 
 
 
Foreign currency
 
53

 
(19
)
 
 
$
146

 
$
(17
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30,
 
 
Location of Gain (Loss) Reclassified from
OCI into Earnings
(Effective Portion)
 
Gain (Loss) Reclassified from
OCI into Earnings
(Effective Portion)
Cash Flow Hedges - Millions of dollars
 
 
2020
 
2019
Commodity swaps/options (3)
 
Cost of products sold
 
$
(17
)
 
$
(9
)
Foreign exchange forwards/options
 
Net sales
 
3

 
(2
)
Foreign exchange forwards/options
 
Cost of products sold
 
9

 
11

Foreign exchange forwards/options
 
Interest and sundry (income) expense
 
(31
)
 
33

Cross-currency swaps
 
Interest and sundry (income) expense
 
11

 
—

Interest rate derivatives
 
Interest expense
 
—

 
4

 
 
 
 
$
(25
)
 
$
37

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30,
 
 
Location of Gain (Loss) Recognized on Derivatives not
Accounted for as Hedges
 
Gain (Loss) Recognized on Derivatives not
Accounted for as Hedges (2)
Derivatives not Accounted for as Hedges - Millions of dollars
 
 
2020
 
2019
Foreign exchange forwards/options
 
Interest and sundry (income) expense
 
$
17

 
$
(6
)

(4) 
Change in gain (loss) recognized in OCI (effective portion) for the six months ended June 30, 2020 is primarily driven by currency fluctuations and declines in commodity prices and interest rates compared to the prior year. The tax impact of the cash flow hedges was $(27) million and $10 million for the six months ended June 30, 2020 and 2019, respectively. The tax impact of the net investment hedges was $(17) million and $6 million for the six months ended June 30, 2020 and 2019, respectively.