Quarterly report pursuant to Section 13 or 15(d)

Hedging Transactions and Derivative Financial Instruments (Tables)

v3.19.3
Hedging Transactions and Derivative Financial Instruments (Tables)
 9 Months Ended
Sep. 27, 2019
Foreign Currency Fair Value Hedge Derivative [Line Items]  
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
September 27,
2019

December 31, 2018

Assets:
 
 
 
Foreign currency contracts
Prepaid expenses and other assets
$
80

$
43

Foreign currency contracts
Other assets
103

114

Interest rate contracts
Other assets
695

88

Total assets
 
$
878

$
245

Liabilities:
 
 
 
Foreign currency contracts
Accounts payable and accrued expenses
$
38

$
19

Foreign currency contracts
Other liabilities
36

15

Commodity contracts
Accounts payable and accrued expenses
—

1

Interest rate contracts
Other liabilities
—

40

Total liabilities
 
$
74

$
75

1 All of the Company's derivative instruments are carried at fair value in our condensed 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 16 for the net presentation of the Company's derivative instruments.
2 Refer to Note 16 for additional information related to the estimated fair value.
Schedule of Other Derivatives Not Designated as Hedging Instruments, Statements of Financial Performance and Financial Position, Location [Table Text Block]
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
September 27,
2019

December 31, 2018

Assets:
 
 
 
Foreign currency contracts
Prepaid expenses and other assets
$
52

$
61

Commodity contracts
Prepaid expenses and other assets
1

2

Other derivative instruments
Prepaid expenses and other assets
10

7

Other derivative instruments
Other assets
2

—

Total assets
 
$
65

$
70

Liabilities:
 
 
 
Foreign currency contracts
Accounts payable and accrued expenses
$
33

$
101

Foreign currency contracts
Other liabilities
4

—

Commodity contracts
Accounts payable and accrued expenses
60

38

Commodity contracts
Other liabilities
4

8

Other derivative instruments
Accounts payable and accrued expenses
—

13

Total liabilities
 
$
101

$
160

1 All of the Company's derivative instruments are carried at fair value in our condensed 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 16 for the net presentation of the Company's derivative instruments.
2 Refer to Note 16 for additional information related to the estimated fair value.
Derivative instruments, designated as hedging instruments, gain (loss) in statement of financial performance
The following tables present the pretax impact that changes in the fair values of derivatives designated as cash flow hedges had on other comprehensive income ("OCI"), 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)2

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

2 
Three Months Ended September 27, 2019
 
 
 
 
 
Foreign currency contracts
$
71

Net operating revenues
$
(5
)
$
—

 
Foreign currency contracts
3

Cost of goods sold
2

—

 
Foreign currency contracts
—

Interest expense
(3
)
—

 
Foreign currency contracts
(46
)
Other income (loss) — net
(46
)
—

 
Interest rate contracts
(30
)
Interest expense
(10
)
—

 
Commodity contracts
1

Cost of goods sold
—

—

 
Total
$
(1
)

$
(62
)
$
—

 
Three Months Ended September 28, 2018
 
 
 
 
 
Foreign currency contracts
$
2

Net operating revenues
$
43

$
—

3 
Foreign currency contracts
3

Cost of goods sold
4

—

3 
Foreign currency contracts
—

Interest expense
(2
)
—

 
Foreign currency contracts
20

Other income (loss) — net
23

2

 
Interest rate contracts
—

Interest expense
(9
)
—

 
Total
$
25

 
$
59

$
2

 


1 The Company records gains and losses reclassified from AOCI into income for the effective portion and the ineffective portion, if any, to the same line items in our condensed consolidated statement of income.
2 Effective January 1, 2019, ASU 2017-12 eliminated the requirement to separately measure and report hedge ineffectiveness for cash flow hedges. No components of the Company’s hedging instruments were excluded from the assessment of hedge effectiveness.
3 Includes a de minimis amount of ineffectiveness in the hedging relationship.
 
Gain (Loss) Recognized
in OCI

Location of Gain (Loss)
Recognized in Income1
Gain (Loss)
Reclassified from
AOCI into Income
(Effective Portion)2

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

2 
Nine Months Ended September 27, 2019
 
 
 
 
 
Foreign currency contracts
$
44

Net operating revenues
$
2

$
—

 
Foreign currency contracts
1

Cost of goods sold
9

—

 
Foreign currency contracts
—

Interest expense
(7
)
—

 
Foreign currency contracts
(99
)
Other income (loss) — net
(139
)
—

 
Interest rate contracts
(47
)
Interest expense
(30
)
—

 
Commodity contracts
1

Cost of goods sold
—

—

 
Total
$
(100
)
 
$
(165
)
$
—

 
Nine Months Ended September 28, 2018
 
 
 
 
 
Foreign currency contracts
$
10

Net operating revenues
$
97

$
1

 
Foreign currency contracts
13

Cost of goods sold
5

(3
)
 
Foreign currency contracts
—

Interest expense
(6
)
—

 
Foreign currency contracts
46

Other income (loss) — net
3

4

 
Interest rate contracts
22

Interest expense
(29
)
(8
)
 
Commodity contracts
—

Cost of goods sold
—

(5
)
 
Total
$
91

 
$
70

$
(11
)
 

1 The Company records gains and losses reclassified from AOCI into income for the effective portion and the ineffective portion, if any, to the same line items in our condensed consolidated statement of income.
2 Effective January 1, 2019, ASU 2017-12 eliminated the requirement to separately measure and report hedge ineffectiveness for cash flow hedges. No components of the Company’s hedging instruments were excluded from the assessment of hedge effectiveness.
Derivative instruments, fair value hedges, gain (loss) recognized in income
The following tables summarize 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 Income
Three Months Ended
September 27,
2019

September 28,
2018

Interest rate contracts
Interest expense
$
206

$
(38
)
Fixed-rate debt
Interest expense
(200
)
41

Net impact to interest expense
 
$
6

$
3

Net impact of fair value hedging instruments
 
$
6

$
3


Hedging Instruments and Hedged Items
Location of Gain (Loss) Recognized in Income
Gain (Loss)
Recognized in Income
Nine Months Ended
September 27,
2019

September 28,
2018

Interest rate contracts
Interest expense
$
647

$
(57
)
Fixed-rate debt
Interest expense
(637
)
50

Net impact to interest expense
 
$
10

$
(7
)
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
 
$
10

$
(7
)

Schedule of Derivative Instruments in Statement of Financial Position, Fair Value [Table Text Block]
The following table summarizes the amounts recorded in the condensed consolidated balance sheets related to hedged items in fair value hedging relationships (in millions):
 
Carrying Value of the Hedged Item
 
Cumulative Amount of Fair Value
Hedging Adjustments Included in the
Carrying Value of the Hedged Item1
 
September 27,
2019

December 31,
2018

 
September 27,
2019

December 31,
2018

Long-term debt
$
13,091

$
8,043

 
$
710

$
62

1 Cumulative amount of fair value hedging adjustments does not include changes due to foreign currency exchange rates.
Schedule of Net Investment Hedges in Accumulated Other Comprehensive Income (Loss) [Table Text Block]
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
 
Three Months Ended
 
Nine Months Ended
 
September 27,
2019

December 31, 2018

 
September 27,
2019

September 28,
2018

 
September 27,
2019

September 28,
2018

Foreign currency contracts
$
325

$
—

 
$
13

$
6

 
$
42

$
6

Foreign currency denominated debt
12,034

12,494

 
476

53

 
444

347

Total
$
12,359

$
12,494

 
$
489

$
59

 
$
486

$
353


Schedule of Derivative Instruments Not Designated as Hedging Instruments Gain (Loss) in Statement of Financial Performance [Table Text Block]
The following tables present 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
Three Months Ended
September 27,
2019

September 28,
2018

Foreign currency contracts
Net operating revenues
$
15

$
8

Foreign currency contracts
Cost of goods sold
2

9

Foreign currency contracts
Other income (loss) — net
(21
)
29

Commodity contracts
Cost of goods sold
(60
)
3

Other derivative instruments
Selling, general and administrative expenses
4

18

Other derivative instruments
Other income (loss) — net
5

—

Total
 
$
(55
)
$
67

Derivatives Not Designated as Hedging Instruments
Location of Gain (Loss) Recognized in Income
Gain (Loss)
Recognized in Income
Nine Months Ended
September 27,
2019

September 28,
2018

Foreign currency contracts
Net operating revenues
$
2

$
34

Foreign currency contracts
Cost of goods sold
4

3

Foreign currency contracts
Other income (loss) — net
(46
)
(87
)
Interest rate contracts
Interest expense
—

(1
)
Commodity contracts
Cost of goods sold
(58
)
15

Other derivative instruments
Selling, general and administrative expenses
32

11

Other derivative instruments
Other income (loss) — net
39

—

Total
 
$
(27
)
$
(25
)