Current report filing

HEDGING TRANSACTIONS AND DERIVATIVE FINANCIAL INSTRUMENTS (Tables)

v3.19.2
HEDGING TRANSACTIONS AND DERIVATIVE FINANCIAL INSTRUMENTS (Tables)
12 Months Ended
Dec. 31, 2018
Hedging Transactions and Derivative Financial Instruments Disclosures [Abstract]  
Derivative instruments, fair value, designated as hedging instruments
The following table presents the fair values of the Company's derivative instruments that were designated and qualified as part of a hedging relationship (in millions):
 
 
 
Fair Value1,2
Derivatives Designated as Hedging Instruments
Balance Sheet Location1
 
December 31,
2018

 
December 31,
2017

Assets:
 
 
 
 
 
Foreign currency contracts
Prepaid expenses and other assets
 
$
43

 
$
45

Foreign currency contracts
Other assets
 
114

 
79

Interest rate contracts
Other assets
 
88

 
52

Total assets
 
 
$
245

 
$
176

Liabilities:
 
 
 
 
 
Foreign currency contracts
Accounts payable and accrued expenses
 
$
19

 
$
77

Foreign currency contracts
Other liabilities
 
15

 
9

Commodity contracts
Accounts payable and accrued expenses
 
1

 
4

Interest rate contracts
Accounts payable and accrued expenses
 

 
30

Interest rate contracts
Other liabilities
 
40

 
39

Total liabilities
 
 
$
75

 
$
159

1 
All of the Company's derivative instruments are carried at fair value in our consolidated balance sheets after considering the impact of legally enforceable master netting agreements and cash collateral held or placed with the same counterparties, as applicable. Current disclosure requirements mandate that derivatives must also be disclosed without reflecting the impact of master netting agreements and cash collateral. Refer to Note 17 for the net presentation of the Company's derivative instruments.
2 
Refer to Note 17 for additional information related to the estimated fair value.
Derivative instruments, fair value, not designated as hedging instruments
The following table presents the fair values of the Company's derivative instruments that were not designated as hedging instruments (in millions):
 
 
 
Fair Value1,2
Derivatives Not Designated as Hedging Instruments
Balance Sheet Location1
 
December 31,
2018

 
December 31,
2017

Assets:
 
 
 
 
 
Foreign currency contracts
Prepaid expenses and other assets
 
$
61

 
$
20

Foreign currency contracts
Other assets
 

 
27

Commodity contracts
Prepaid expenses and other assets
 
2

 
25

Commodity contracts
Other assets
 

 
1

Other derivative instruments
Prepaid expenses and other assets
 
7

 
8

Total assets
 
 
$
70

 
$
81

Liabilities:
 
 
 
 
 
Foreign currency contracts
Accounts payable and accrued expenses
 
$
101

 
$
69

Foreign currency contracts
Other liabilities
 

 
28

Commodity contracts
Accounts payable and accrued expenses
 
38

 
7

Commodity contracts
Other liabilities
 
8

 

Other derivative instruments
Accounts payable and accrued expenses
 
13

 
1

Other derivative instruments
Other liabilities
 

 
1

Total liabilities
 
 
$
160

 
$
106

1 
All of the Company's derivative instruments are carried at fair value in our consolidated balance sheets after considering the impact of legally enforceable master netting agreements and cash collateral held or placed with the same counterparties, as applicable. Current disclosure requirements mandate that derivatives must also be disclosed without reflecting the impact of master netting agreements and cash collateral. Refer to Note 17 for the net presentation of the Company's derivative instruments.
2 
Refer to Note 17 for additional information related to the estimated fair value.
Derivative instruments, pretax impact that changes in the fair value of the derivatives designated as hedges had on AOCI and earnings
The following table presents the pretax impact that changes in the fair values of derivatives designated as cash flow hedges had on AOCI and earnings (in millions):
 
Gain (Loss)
Recognized
in OCI

 
Location of Gain (Loss)
Recognized in Income1
 
Gain (Loss)
Reclassified from
AOCI into Income
(Effective Portion)

 
Gain (Loss)
Recognized in Income
(Ineffective Portion and
Amount Excluded from
Effectiveness Testing)

 
2018
 
 
 
 
 
 
 
 
Foreign currency contracts
$
9

 
Net operating revenues
 
$
136

 
$
1

 
Foreign currency contracts
15

 
Cost of goods sold
 
8

 
(3
)
 
Foreign currency contracts

 
Interest expense
 
(9
)
 

 
Foreign currency contracts
23

 
Other income (loss) — net
 
(5
)
 
(4
)
 
Interest rate contracts
22

 
Interest expense
 
(40
)
 
(8
)
 
Commodity contracts
(1
)
 
Cost of goods sold
 

 
(5
)
 
Total
$
68

 
 
 
$
90

 
$
(19
)
 
2017
 
 
 
 
 
 
 
 
Foreign currency contracts
$
(226
)
 
Net operating revenues
 
$
443

 
$
1

 
Foreign currency contracts
(26
)
 
Cost of goods sold
 
(2
)
 

2 
Foreign currency contracts

 
Interest expense
 
(9
)
 

 
Foreign currency contracts
92

 
Other income (loss) — net
 
107

 
3

 
Interest rate contracts
(22
)
 
Interest expense
 
(37
)
 
2

 
Commodity contracts
(6
)
 
Cost of goods sold
 
(1
)
 

 
Total
$
(188
)
 
 
 
$
501

 
$
6

 
2016
 
 
 
 
 
 
 
 
Foreign currency contracts
$
69

 
Net operating revenues
 
$
567

 
$
(3
)
 
Foreign currency contracts
8

 
Cost of goods sold
 
35

 
(1
)
 
Foreign currency contracts

 
Interest expense
 
(9
)
 

 
Foreign currency contracts
13

 
Other income (loss) — net
 
(3
)
 
(3
)
 
Interest rate contracts
(126
)
 
Interest expense
 
(17
)
 
(2
)
 
Commodity contracts
(1
)
 
Cost of goods sold
 
(1
)
 

 
Total
$
(37
)
 
 
 
$
572

 
$
(9
)
 
1 
The Company records gains and losses reclassified from AOCI into income for the effective portion and ineffective portion, if any, to the same line items in our consolidated statements of income.
2 
Includes a de minimis amount of ineffectiveness in the hedging relationship.
Derivative instruments, fair value hedges, gain (loss) recognized in income
The following table summarizes the pretax impact that changes in the fair values of derivatives designated as fair value hedges had on earnings (in millions):
Hedging Instruments and Hedged Items
Location of Gain (Loss)
Recognized in Income
Gain (Loss)
Recognized in Income1

2018
 
 
Interest rate contracts
Interest expense
$
34

Fixed-rate debt
Interest expense
(38
)
Net impact to interest expense
 
$
(4
)
Foreign currency contracts
Other income (loss) — net
$
(6
)
Available-for-sale securities
Other income (loss) — net
6

Net impact to other income (loss) — net
 
$

Net impact of fair value hedging instruments
 
$
(4
)
2017
 
 
Interest rate contracts
Interest expense
$
(69
)
Fixed-rate debt
Interest expense
63

Net impact to interest expense
 
$
(6
)
Foreign currency contracts
Other income (loss) — net
$
(37
)
Available-for-sale securities
Other income (loss) — net
44

Net impact to other income (loss) — net
 
$
7

Net impact of fair value hedging instruments
 
$
1

2016
 
 
Interest rate contracts
Interest expense
$
170

Fixed-rate debt
Interest expense
(152
)
Net impact to interest expense
 
$
18

Foreign currency contracts
Other income (loss) — net
$
69

Available-for-sale securities
Other income (loss) — net
(73
)
Net impact to other income (loss) — net
 
$
(4
)
Net impact of fair value hedging instruments
 
$
14


1 The net impacts represent the ineffective portions of the hedge relationships and the amounts excluded from the assessment of hedge effectiveness.
Derivative instruments,fair value of net investment hedges, gain (loss) recognized in AOCI
The following table summarizes the notional values and pretax impact of changes in the fair values of instruments designated as net investment hedges (in millions):
 
Notional Amount
 
Gain (Loss) Recognized in OCI
 
as of December 31,
 
Year Ended December 31,
 
2018

2017

 
2018

2017

2016

Foreign currency contracts
$

$

 
$
(14
)
$
(7
)
$
(237
)
Foreign currency denominated debt
12,494

13,147

 
653

(1,505
)
304

Total
$
12,494

$
13,147

 
$
639

$
(1,512
)
$
67


Derivative instruments, not designated as hedging instruments, gain (loss) in earnings
The following table presents the pretax impact that changes in the fair values of derivatives not designated as hedging instruments had on earnings (in millions):
Derivatives Not Designated
as Hedging Instruments
Location of Gain (Loss)
Recognized in Income
 
Gain (Loss) Recognized in Income

 
Year Ended December 31,
 
2018

 
2017

 
2016

Foreign currency contracts
Net operating revenues
 
$
22

 
$
(30
)
 
$
(45
)
Foreign currency contracts
Cost of goods sold
 
9

 
(1
)
 
4

Foreign currency contracts
Other income (loss) — net
 
(264
)
 
73

 
(168
)
Commodity contracts
Net operating revenues
 

 
16

 
10

Commodity contracts
Cost of goods sold
 
(25
)
 
15

 
75

Commodity contracts
Selling, general and administrative expenses
 

 
1

 
6

Interest rate contracts
Interest expense
 
(1
)
 

 
(39
)
Other derivative instruments
Selling, general and administrative expenses
 
(18
)
 
46

 
16

Other derivative instruments
Other income (loss) — net
 
(22
)
 
1

 
(15
)
Total
 
 
$
(299
)
 
$
121

 
$
(156
)