Annual report pursuant to Section 13 and 15(d)

HEDGING TRANSACTIONS AND DERIVATIVE FINANCIAL INSTRUMENTS (Tables)

v3.19.3.a.u2
HEDGING TRANSACTIONS AND DERIVATIVE FINANCIAL INSTRUMENTS (Tables)
12 Months Ended
Dec. 31, 2019
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,
2019

 
December 31,
2018

Assets:
 
 
 
 
 
Foreign currency contracts
Prepaid expenses and other assets
 
$
24

 
$
43

Foreign currency contracts
Other assets
 
91

 
114

Interest rate contracts
Prepaid expenses and other assets
 
10

 

Interest rate contracts
Other assets
 
427

 
88

Total assets
 
 
$
552

 
$
245

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

 
$
19

Foreign currency contracts
Other liabilities
 
48

 
15

Commodity contracts
Accounts payable and accrued expenses
 

 
1

Interest rate contracts
Other liabilities
 
21

 
40

Total liabilities
 
 
$
109

 
$
75

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 18 for the net presentation of the Company's derivative instruments.
2 
Refer to Note 18 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,
2019

 
December 31,
2018

Assets:
 
 
 
 
 
Foreign currency contracts
Prepaid expenses and other assets
 
$
13

 
$
61

Commodity contracts
Prepaid expenses and other assets
 
8

 
2

Commodity contracts
Other assets
 
2

 

Other derivative instruments
Prepaid expenses and other assets
 
12

 
7

Other derivative instruments
Other assets
 
1

 

Total assets
 
 
$
36

 
$
70

Liabilities:
 
 
 
 
 
Foreign currency contracts
Accounts payable and accrued expenses
 
$
39

 
$
101

Commodity contracts
Accounts payable and accrued expenses
 
13

 
38

Commodity contracts
Other liabilities
 
1

 
8

Other derivative instruments
Accounts payable and accrued expenses
 

 
13

Total liabilities
 
 
$
53

 
$
160

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 18 for the net presentation of the Company's derivative instruments.
2 
Refer to Note 18 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)

2 
2019
 
 
 
 
 
 
 
 
Foreign currency contracts
$
(58
)
 
Net operating revenues
 
$
(3
)
 
$

 
Foreign currency contracts
1

 
Cost of goods sold
 
11

 

 
Foreign currency contracts

 
Interest expense
 
(9
)
 

 
Foreign currency contracts
(97
)
 
Other income (loss) — net
 
(119
)
 

 
Interest rate contracts
(47
)
 
Interest expense
 
(42
)
 

 
Commodity contracts
1

 
Cost of goods sold
 

 

 
Total
$
(200
)
 
 
 
$
(162
)
 
$

 
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
)
 

3 
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

 
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 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.
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 Income

2019
 
 
Interest rate contracts
Interest expense
$
368

Fixed-rate debt
Interest expense
(369
)
Net impact to interest expense
 
$
(1
)
Net impact of fair value hedging instruments
 
$
(1
)
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


Schedule of Derivative Instruments in Statement of Financial Position, Fair Value [Table Text Block]
The following table summarizes the amounts recorded in the 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
Balance Sheet Location of Hedged Item
December 31,
2019

December 31,
2018

 
December 31,
2019

December 31,
2018

Current maturities of long-term debt
$
1,004

$

 
$
5

$

Long-term debt
12,087

8,043

 
448

62

1 Cumulative amount of fair value hedging adjustments does not include changes due to foreign currency exchange rates.

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,
 
2019

2018

 
2019

2018

2017

Foreign currency contracts
$

$

 
$
51

$
(14
)
$
(7
)
Foreign currency denominated debt
12,334

12,494

 
144

653

(1,505
)
Total
$
12,334

$
12,494

 
$
195

$
639

$
(1,512
)

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,
 
2019

 
2018

 
2017

Foreign currency contracts
Net operating revenues
 
$
(4
)
 
$
22

 
$
(30
)
Foreign currency contracts
Cost of goods sold
 
1

 
9

 
(1
)
Foreign currency contracts
Other income (loss) — net
 
(66
)
 
(264
)
 
73

Commodity contracts
Net operating revenues
 

 

 
16

Commodity contracts
Cost of goods sold
 
(23
)
 
(25
)
 
15

Commodity contracts
Selling, general and administrative expenses
 

 

 
1

Interest rate contracts
Interest expense
 

 
(1
)
 

Other derivative instruments
Selling, general and administrative expenses
 
47

 
(18
)
 
46

Other derivative instruments
Other income (loss) — net
 
48

 
(22
)
 
1

Total
 
 
$
3

 
$
(299
)
 
$
121