Annual report pursuant to Section 13 and 15(d)

HEDGING TRANSACTIONS AND DERIVATIVE FINANCIAL INSTRUMENTS (Tables)

v3.6.0.2
HEDGING TRANSACTIONS AND DERIVATIVE FINANCIAL INSTRUMENTS (Tables)
12 Months Ended
Dec. 31, 2016
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,
2016

 
December 31,
2015

Assets:
 
 
 
 
 
Foreign currency contracts
Prepaid expenses and other assets
 
$
400

 
$
572

Foreign currency contracts
Other assets
 
60

 
246

Commodity contracts
Prepaid expenses and other assets
 

 
1

Interest rate contracts
Prepaid expenses and other assets
 

 
20

Interest rate contracts
Other assets
 
105

 
62

Total assets
 
 
$
565

 
$
901

Liabilities:
 
 
 
 
 
Foreign currency contracts
Accounts payable and accrued expenses
 
$
40

 
$
51

Foreign currency contracts
Other liabilities
 
54

 
75

Commodity contracts
Accounts payable and accrued expenses
 
1

 

Interest rate contracts
Accounts payable and accrued expenses
 
36

 
53

Interest rate contracts
Other liabilities
 
47

 
231

Total liabilities
 
 
$
178

 
$
410

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 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, 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,
2016

 
December 31,
2015

Assets:
 
 
 
 
 
Foreign currency contracts
Prepaid expenses and other assets
 
$
284

 
$
105

Foreign currency contracts
Other assets
 

 
241

Commodity contracts
Prepaid expenses and other assets
 
27

 
2

Commodity contracts
Other assets
 
1

 
1

Other derivative instruments
Prepaid expenses and other assets
 
4

 
17

Other derivative instruments
Other assets
 
1

 
3

Total assets
 
 
$
317

 
$
369

Liabilities:
 
 
 
 
 
Foreign currency contracts
Accounts payable and accrued expenses
 
$
60

 
$
59

Foreign currency contracts
Other liabilities
 
16

 
9

Commodity contracts
Accounts payable and accrued expenses
 
16

 
154

Commodity contracts
Other liabilities
 
1

 
19

Interest rate contracts
Accounts payable and accrued expenses
 
8

 

Interest rate contracts
Other liabilities
 
1

 
1

Other derivative instruments
Accounts payable and accrued expenses
 
2

 
5

Other derivative instruments
Other liabilities
 
5

 
2

Total liabilities
 
 
$
109

 
$
249

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 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, 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 during the years ended December 31, 2016, 2015 and 2014 (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)

 
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
)
 
2015
 
 
 
 
 
 
 
 
Foreign currency contracts
$
949

 
Net operating revenues
 
$
618

 
$
12

 
Foreign currency contracts
60

 
Cost of goods sold
 
62

 

2 
Foreign currency contracts
18

 
Interest expense
 
(9
)
 

 
Foreign currency contracts
(38
)
 
Other income (loss) — net
 
(40
)
 

 
Interest rate contracts
(153
)
 
Interest expense
 
(3
)
 
1

 
Commodity contracts
(1
)
 
Cost of goods sold
 
(3
)
 

 
Total
$
835

 
 
 
$
625

 
$
13

 
2014
 
 
 
 
 
 
 
 
Foreign currency contracts
$
973

 
Net operating revenues
 
$
121

 
$

2 
Foreign currency contracts
50

 
Cost of goods sold
 
34

 

2 
Foreign currency contracts
(218
)
 
Other income (loss) — net
 
(108
)
 

 
Interest rate contracts
(180
)
 
Interest expense
 

 

 
Commodity contracts

 
Cost of goods sold
 
3

 

 
Total
$
625

 
 
 
$
50

 
$

 
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 during the years ended December 31, 2016, 2015 and 2014 (in millions):
Hedging Instruments and Hedged Items
Location of Gain (Loss)
Recognized in Income
Gain (Loss)
Recognized in Income1

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

2015
 
 
Interest rate contracts
Interest expense
$
(172
)
Fixed-rate debt
Interest expense
169

Net impact to interest expense
 
$
(3
)
Foreign currency contracts
Other income (loss) — net
$
110

Available-for-sale securities
Other income (loss) — net
(131
)
Net impact to other income (loss) — net
 
$
(21
)
Net impact of fair value hedging instruments
 
$
(24
)
2014
 
 
Interest rate contracts
Interest expense
$
18

Fixed-rate debt
Interest expense
11

Net impact to interest expense
 
$
29

Foreign currency contracts
Other income (loss) — net
$
132

Available-for-sale securities
Other income (loss) — net
(165
)
Net impact to other income (loss) — net
 
$
(33
)
Net impact of fair value hedging instruments
 
$
(4
)

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,
 
2016

2015

 
2016

2015

2014

Foreign currency contracts
$
100

$
1,347

 
$
(237
)
$
661

$
80

Foreign currency denominated debt
11,113

10,912

 
304

(24
)

Total
$
11,213

$
12,259

 
$
67

$
637

$
80

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 during the years ended December 31, 2016, 2015 and 2014 (in millions):
Derivatives Not Designated
as Hedging Instruments
Location of Gain (Loss)
Recognized in Income
 
Year Ended December 31,
 
2016

 
2015

 
2014

Foreign currency contracts
Net operating revenues
 
$
(45
)
 
$
41

 
$
(6
)
Foreign currency contracts
Cost of goods sold
 
4

 
3

 

Foreign currency contracts
Other income (loss) — net
 
(168
)
 
(92
)
 
(85
)
Commodity contracts
Net operating revenues
 
10

 
(16
)
 
(48
)
Commodity contracts
Cost of goods sold
 
75

 
(209
)
 
(8
)
Commodity contracts
Selling, general and administrative expenses
 
6

 
(25
)
 
(79
)
Interest rate contracts
Interest expense
 
(39
)
 

 

Other derivative instruments
Selling, general and administrative expenses
 
16

 
1

 
24

Other derivative instruments
Other income (loss) — net
 
(15
)
 
(37
)
 
39

Total
 
 
$
(156
)
 
$
(334
)
 
$
(163
)