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Derivative Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2012

Outstanding Foreign Currency Forward Contracts

The Company had the following outstanding foreign currency forward contracts that were entered into to hedge nonfunctional currency cash flows from forecasted revenues and expenses (in millions):

		Currency Denomination
Foreign Currency		September 30, 2012				December 31, 2011
Norwegian Krone		NOK	7,035			NOK	6,639
U.S. Dollar		$	393			$	402
Euro		€	383			€	456
Mexican Peso		MXN	102			MXN	—
Danish Krone		DKK	112			DKK	98
Singapore Dollar		SGD	16			SGD	10
British Pound Sterling		£	11			£	2

		Currency Denomination
Foreign Currency		September 30, 2012				December 31, 2011
Norwegian Krone		NOK	1,717			NOK	2,310
Russian Ruble		RUB	1,266			RUB	786
U.S. Dollar		$	936			$	483
Euro		€	253			€	161
Danish Krone		DKK	217			DKK	67
Brazilian Real		BRL	99			BRL	—
Singapore Dollar		SGD	43			SGD	5
British Pound Sterling		£	12			£	9
Canadian Dollar		CAD	2			CAD	—
Swedish Krone		SEK	—			SEK	4

Derivative Instruments and Balance Sheet Classifications

The Company has the following fair values of its derivative instruments and their balance sheet classifications (in millions):

NATIONAL OILWELL VARCO, INC.

Fair Values of Derivative Instruments

(In millions)

		Asset Derivatives										Liability Derivatives
				Fair Value										Fair Value
		Balance Sheet		September 30,				December 31,				Balance Sheet		September 30,				December 31,
		Location		2012				2011				Location		2012				2011
Derivatives designated as hedging instruments under ASC Topic 815
Foreign exchange contracts		Prepaid and other current assets		$	42			$	16			Accrued liabilities		$	16			$	62
Foreign exchange contracts		Other Assets			22				1			Other Liabilities			1				13
Total derivatives designated as hedging instruments under ASC Topic 815				$	64			$	17					$	17			$	75
Derivatives not designated as hedging instruments under ASC Topic 815
Foreign exchange contracts		Prepaid and other current assets		$	17			$	9			Accrued liabilities		$	17			$	21
Total derivatives not designated as hedging instruments under ASC Topic 815				$	17			$	9					$	17			$	21
Total derivatives				$	81			$	26					$	34			$	96

Effect of Derivative Instruments on Consolidated Statements of Income

The Effect of Derivative Instruments on the Consolidated Statements of Income

($ in millions)

Location of Gain (Loss)

Recognized in Income on

Amount of Gain (Loss)

Location of Gain (Loss)

Derivative (Ineffective

Recognized in Income on

Reclassified from

Amount of Gain (Loss)

Portion and Amount

Derivative (Ineffective

Derivatives in ASC Topic 815

Amount of Gain (Loss)

Accumulated OCI into

Reclassified from

Excluded from

Portion and Amount

Cash Flow Hedging

Recognized in OCI on

Income

Accumulated OCI into

Effectiveness

Excluded from

Relationships

Derivative (Effective Portion) (a)

(Effective Portion)

Income (Effective Portion)

Testing)

Effectiveness Testing) (b)

Nine Months Ended September 30,

Nine Months Ended September 30,

Nine Months Ended September 30,

2012

2011

2012

2011

2012

2011

Revenue

(9

)

11

Foreign exchange contracts

69

6

Cost of revenue

(22

)

38

Other income (expense), net

5

11

Total

69

6

(31

)

49

5

11

Derivatives Not Designated as		Location of Gain (Loss)		Amount of Gain (Loss)
Hedging Instruments under		Recognized in Income		Recognized in Income on
ASC Topic 815		on Derivative		Derivative
				Nine Months Ended September 30,
				2012				2011
Foreign exchange contracts		Other income (expense), net			8				0
Total					8				0

(a) The Company expects that $11 million of the Accumulated Other Comprehensive Income (Loss) will be reclassified into earnings within the next twelve months with an offset by gains from the underlying transactions resulting in no impact to earnings or cash flow.

(b) The amount of gain (loss) recognized in income represents $(1) million and $11 million related to the ineffective portion of the hedging relationships for the nine months ended September 30, 2012 and 2011, respectively, and $6 million and $13 million related to the amount excluded from the assessment of the hedge effectiveness for the nine months ended September 30, 2012 and 2011, respectively.

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Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 815

-SubTopic 10

-Section 50

-Paragraph 4F

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-URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624186-113959



Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 133

-Paragraph 44C

-Subparagraph c

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.



Reference 3: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 133

-Paragraph 205G

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.



Reference 4: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 815

-SubTopic 10

-Section 55

-Paragraph 184

-URI http://asc.fasb.org/extlink&oid=7485890&loc=SL5634876-113961

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+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 133

-Paragraph 205G

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.



Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 815

-SubTopic 10

-Section 50

-Paragraph 4B

-URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624163-113959



Reference 3: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 133

-Paragraph 44C

-Subparagraph a

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

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