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Derivative instruments and hedging activities (Tables)
 9 Months Ended
Sep. 30, 2019
Summary of Notional Amounts for Hedged Items, Designated as Hedge Accounting
The following table summarizes the notional amounts for hedged items, when transactions are designated as hedge accounting:
                 
 
September 30,
   
December 31,
 
 
2019
   
2018
 
 
(U.S. $ in millions)
 
Cross-currency swap
—
cash flow hedge
  $
588
    $
588
 
Cross-currency swap—net investment hedge
   
1,000
     
1,000
 
Interest rate swap
—
fair value hedge
   
—  
     
500
 
                 
  $
1,588
    $
2,088
 
                 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Summary of Classification and Fair Values of Derivative Instruments
The following table summarizes the classification and fair values of derivative instruments:
                                 
 
Fair value
 
 
Designated as hedging
instruments
   
 
 
 
 
 
 
 
 
 
Not designated as hedging
instruments
 
 
September 30,
2019
   
 
 
 
 
 
 
 
 
 
 
 
December 31,
2018
   
September 30,
2019
   
 
 
 
 
 
 
 
 
 
December 31,
2018
 
Reported under
 
(U.S. $ in millions)
 
Asset derivatives:
   
     
     
     
 
Other current assets:
    
     
     
     
 
Option and forward contracts
  $
—  
    $
—  
     $
40
    $
18
 
Other non-current assets:
    
     
     
     
 
Cross-currency swaps
—
cash flow hedge
   
103
     
58
      —      
—  
  
Cross-currency swaps—
net investment hedge
  
 
2
 
 
 
—
 
 
 
—
 
 
 
—
 
Liability derivatives:
   
     
     
     
 
Other current liabilities:
    
     
     
     
 
Option and forward contracts
   
—  
     
—  
      
(18
 )    
(26
 )
Other taxes and long-term liabilities:
    
     
     
     
 
Cross-currency swaps
—
net investment hedge
   
—
     
(41
 )    
—  
     
—  
  
Senior notes and loans:
    
     
     
     
 
Interest rate swaps
—
fair value hedge
   
—  
     
(9
 )    
—  
     
—  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivatives Not Designated as Hedging Instruments [Table Text Block]
The table below provides information regarding the location and amount of
pre-tax
(gains) losses from derivatives designated in fair value or cash flow hedging relationships:
 
 
                                 
 
Financial expenses, net
   
Other comprehensive income
 
 
Three months ended,
   
Three months ended,
 
 
September 30,
2019
   
September 30,
2018**
   
September 30,
2019
   
September 30,
2018**
 
Reported under
 
(U.S. $ in millions)
 
Line items in which effects of hedges are recorded
  $
211
    $
229
    $
53
     $
84
 
Cross-currency swaps
—
cash flow hedge
(1)
    
(1
 )    
(1
)
    
(33
)    
(4
 )
Cross-currency swaps
—
net investment hedge
(2)
    
(7
 )    
(6
 )    
(39
)   $
(7
 )
Interest rate swaps
—
fair value hedge
(3)
   $
*
     $
*
     $
—  
    $
—  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
* Represents an amount less than $0.5 million.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
** Comparative figures are based on prior hedge accounting standard.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                 
 
Financial expenses, net
   
Other comprehensive income
 
 
Nine months ended,
   
Nine months ended,
 
 
September
 
30,
2019
   
September
 
30,
2018**
   
September
 
30,
2019
   
September
 
30,
2018**
 
Reported under
 
(U.S. $ in millions)
 
Line items in which effects of hedges are recorded
  $
635
    $
736
    $
(117
 )   $
502
 
Cross-currency swaps—cash flow hedge
(1)
    
(2
 )    
(1
 )    
(49
 )    
(18
 )
Cross-currency swaps
—
net investment hedge
(2)
    
(22
 )    
(22
 )    
(46
 )   $
(36
 )
Interest rate swaps
—
fair value hedge
(3)
   $
2
    $
*
     $
—
 
 
     $
—
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
* Represents an amount less than $0.5 million.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
** Comparative figures are based on prior hedge accounting standard.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Information Regarding The Location And Amount Of Pretax (Gains) Losses Of Derivatives Designated In Fair Value Or Cash Flow Hedging Relationships
The table below provides information regarding the location and amount of
pre-tax
(gains) losses from derivatives not designated as hedging instruments:
                                 
 
Financial expenses, net
   
Net revenues
 
 
Three months ended,
   
Three months ended,
 
 
September
 
30,
2019
   
September
 
30,
2018
   
September
 
30,
2019
   
September 30,
2018
 
Reported under
 
(U.S. $ in millions)
 
Line items in which effects of hedges are recorded
   
211
     
229
     
(4,264
)    
(4,529
 )
Option and forward contracts
(4)
   $
(35
)   $
(6
 )   $
—
 
 
     $
—
 
 
  
Option and forward contracts Economic hedge
(5)
    
—  
     
—
 
 
      
(4
)    
1
  
             
 
Financial expenses, net
   
Net revenues
 
 
Nine months ended,
   
Nine months ended,
 
 
September 30,
2019
   
September 30,
2018
   
September 30,
2019
   
September
 
30,
2018
 
Reported under
 
(U.S. $ in millions)
 
Line items in which effects of hedges are recorded
   
635
     
736
      
(12,896
 )    
(14,295
 )
Option and forward contracts
(4)
   $
(42
 )   $
(11
 )   $
—
 
 
     $
—
 
 
  
Option and forward contracts Economic hedge
(5)
    
—  
     
—
      
*
      
*
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
*
Represents an amount less than $0.5 million.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) With respect to cross-currency swap agreements, Teva recognized gains which mainly reflect the differences between the fixed interest rate and the floating interest rate.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(2) In each of the first and second quarters of 2017, Teva entered into a cross currency swap agreement with a notional amount of $500 million maturing in 2020. These cross currency swaps were designated as a net investment hedge of Teva’s foreign subsidiaries euro denominated net assets, in order to reduce the risk of adverse exchange rate fluctuations. With respect to these cross currency swap agreements, Teva recognized gains which mainly reflect the differences between the
float-for-float
interest rates paid and received. No amounts were reclassified from accumulated other comprehensive income into income related to the sale of a subsidiary.
 
 
 
 
 
 
(3) In the fourth quarter of 2016, Teva entered into an interest rate swap agreement designated as fair value hedge relating to its 2.8% senior notes due 2023 with respect to $500 million notional amount of outstanding debt. With respect to this interest rate swap agreement, Teva recognized a loss which mainly reflects the differences between the fixed interest rate and the
floating
interest
rate.
In the
third quarter of 2
019, Teva terminated this interest rate swap agreement. The settlement of these transactions resulted in a gain position of $10 million. The fair value hedge accounting adjustments of these instruments, which are recorded under senior
notes and loans, are amortized under financial expenses-net over the life of the debt as additional interest ex
pense
.
 
 
 
 
 
 
(4) Teva uses foreign exchange contracts (mainly option and forward contracts) to hedge balance sheet items from currency exposure. These foreign exchange contracts are not designated as hedging instruments for accounting purposes. In connection with these foreign exchange contracts, Teva recognizes gains or losses that offset the revaluation of the balance sheet items also recorded under financial expenses—net.
 
 
 
 
 
 
(5)
Teva entered into option and forward contracts designed to limit the exposure of foreign exchange fluctuations on the
e
uro (EUR), the British
p
ound (GBP), the Russian
r
uble (RUB) and some other currencies denominated revenues with respect to the quarter for which such instruments are purchased. These derivative instruments do not meet the criteria for hedge accounting, however, they are accounted for as economic hedge. These derivative instruments are recognized on the balance sheet at their fair value, with changes in the fair value recognized under the same line item in the statements of income as the underlying exposure being hedged. The cash flows associated with these derivatives are reflected as cash flows from operating activities in the consolidated statements of cash flows
.