Quarterly report pursuant to Section 13 or 15(d)

Hedging Transactions and Derivative Financial Instruments (Tables)

v3.5.0.2
Hedging Transactions and Derivative Financial Instruments (Tables)
6 Months Ended
Jul. 01, 2016
Hedging Transactions and Derivative Financial Instruments  
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
July 1, 2016

December 31, 2015

Assets:
 
 
 
Foreign currency contracts
Prepaid expenses and other assets
$
452

$
572

Foreign currency contracts
Other assets
146

246

Commodity contracts
Prepaid expenses and other assets
1

1

Interest rate contracts
Prepaid expenses and other assets
3

20

Interest rate contracts
Other assets
307

62

Total assets
 
$
909

$
901

Liabilities:
 
 
 
Foreign currency contracts
Accounts payable and accrued expenses
$
242

$
51

Foreign currency contracts
Other liabilities
77

75

Interest rate contracts
Accounts payable and accrued expenses
297

53

Interest rate contracts
Other liabilities
71

231

Total liabilities
 
$
687

$
410

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 14 for the net presentation of the Company's derivative instruments.
2 Refer to Note 14 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
July 1, 2016

December 31, 2015

Assets:
 
 
 
Foreign currency contracts
Prepaid expenses and other assets
$
236

$
105

Foreign currency contracts
Other assets
1

241

Commodity contracts
Prepaid expenses and other assets
19

2

Commodity contracts
Other assets
5

1

Other derivative instruments
Prepaid expenses and other assets
7

17

Other derivative instruments
Other assets

3

Total assets
 
$
268

$
369

Liabilities:
 
 
 
Foreign currency contracts
Accounts payable and accrued expenses
$
105

$
59

Foreign currency contracts
Other liabilities
6

9

Commodity contracts
Accounts payable and accrued expenses
75

154

Commodity contracts
Other liabilities
1

19

Interest rate contracts
Other liabilities
1

1

Other derivative instruments
Accounts payable and accrued expenses
2

5

Other derivative instruments
Other liabilities
3

2

Total liabilities
 
$
193

$
249

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 14 for the net presentation of the Company's derivative instruments.
2 Refer to Note 14 for additional information related to the estimated fair value.
Derivative instruments, designated as hedging instruments, gain (loss) in statement of financial performance
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 three months ended July 1, 2016 (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)

 
Foreign currency contracts
$
46

Net operating revenues
$
138

$
(1
)
 
Foreign currency contracts
(19
)
Cost of goods sold
13

(1
)
 
Foreign currency contracts

Interest expense
(2
)

 
Foreign currency contracts
(53
)
Other income (loss) — net
(45
)

 
Interest rate contracts
(95
)
Interest expense
(2
)

 
Commodity contracts
1

Cost of goods sold


 
Total
$
(120
)
 
$
102

$
(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 statements of income.
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 six months ended July 1, 2016 (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)

 
Foreign currency contracts
$
(300
)
Net operating revenues
$
278

$
(1
)
 
Foreign currency contracts
(43
)
Cost of goods sold
33

(1
)
 
Foreign currency contracts

Interest expense
(4
)

 
Foreign currency contracts
(11
)
Other income (loss) — net
(2
)

 
Interest rate contracts
(252
)
Interest expense
(4
)

 
Commodity contracts
1

Cost of goods sold


 
Total
$
(605
)
 
$
301

$
(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 statements of income.
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 three months ended July 3, 2015 (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)

 
Foreign currency contracts
$
(38
)
Net operating revenues
$
178

$

2 
Foreign currency contracts
11

Cost of goods sold
16


2 
Foreign currency contracts

Interest expense
(2
)

 
Interest rate contracts
168

Interest expense


 
Commodity contracts

Cost of goods sold
(1
)

 
Total
$
141

 
$
191

$

 
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 statements of income.
2 Includes a de minimis amount of ineffectiveness in the hedging relationship.
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 six months ended July 3, 2015 (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)

 
Foreign currency contracts
$
726

Net operating revenues
$
298

$

2 
Foreign currency contracts
30

Cost of goods sold
28


2 
Foreign currency contracts
18

Interest expense
(4
)

 
Interest rate contracts
36

Interest expense
(3
)

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

 
Total
$
809

 
$
318

$

 
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 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 three months ended July 1, 2016 and July 3, 2015 (in millions):
Hedging Instruments and Hedged Items
Location of Gain (Loss)
Recognized in Income
Gain (Loss)
Recognized in Income1
Three Months Ended
July 1, 2016

July 3, 2015

Interest rate contracts
Interest expense
$
92

$
(251
)
Fixed-rate debt
Interest expense
(86
)
250

Net impact to interest expense
 
$
6

$
(1
)
Foreign currency contracts
Other income (loss) — net
$
(21
)
$
23

Available-for-sale securities
Other income (loss) — net
26

(26
)
Net impact to other income (loss) — net

$
5

$
(3
)
Net impact of fair value hedging instruments

$
11

$
(4
)
1 The net impacts represent the ineffective portions of the hedge relationships and the amounts excluded from the assessment of hedge effectiveness.
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 six months ended July 1, 2016 and July 3, 2015 (in millions):
Hedging Instruments and Hedged Items
Location of Gain (Loss)
Recognized in Income
Gain (Loss)
Recognized in Income1
Six Months Ended
July 1, 2016

July 3, 2015

Interest rate contracts
Interest expense
$
398

$
(222
)
Fixed-rate debt
Interest expense
(363
)
231

Net impact to interest expense
 
$
35

$
9

Foreign currency contracts
Other income (loss) — net
$
30

$
135

Available-for-sale securities
Other income (loss) — net
(32
)
(144
)
Net impact to other income (loss) — net

$
(2
)
$
(9
)
Net impact of fair value hedging instruments

$
33

$

1 The net impacts represent the ineffective portions of the hedge relationships and the amounts excluded from the assessment of hedge effectiveness.
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
 
Six Months Ended
 
July 1, 2016

December 31, 2015

 
July 1, 2016

July 3, 2015

 
July 1, 2016

July 3, 2015

Foreign currency denominated debt
$
10,737

$
10,912

 
$
265

$
(356
)
 
$
(256
)
$
(282
)
Foreign currency contracts
853

1,347

 
(81
)
(18
)
 
(226
)
406

Total
$
11,590

$
12,259

 
$
184

$
(374
)
 
$
(482
)
$
124


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):

 
Three Months Ended
Derivatives Not Designated
as Hedging Instruments
Location of Gain (Loss)
Recognized in Income
July 1, 2016

July 3, 2015

Foreign currency contracts
Net operating revenues
$
(3
)
$

Foreign currency contracts
Cost of goods sold
7

1

Foreign currency contracts
Other income (loss) — net
(54
)
(32
)
Commodity contracts
Net operating revenues
4

4

Commodity contracts
Cost of goods sold
54

5

Commodity contracts
Selling, general and administrative expenses
6

6

Other derivative instruments
Selling, general and administrative expenses

1

Other derivative instruments
Other income (loss) — net
(4
)
6

Total
 
$
10

$
(9
)

 
Six Months Ended
Derivatives Not Designated
as Hedging Instruments
Location of Gain (Loss)
Recognized in Income
July 1, 2016

July 3, 2015

Foreign currency contracts
Net operating revenues
$
(28
)
$
9

Foreign currency contracts
Cost of goods sold
4

1

Foreign currency contracts
Other income (loss) — net
(116
)
(49
)
Commodity contracts
Net operating revenues
3

1

Commodity contracts
Cost of goods sold
77

(19
)
Commodity contracts
Selling, general and administrative expenses
4

1

Other derivative instruments
Selling, general and administrative expenses
8

1

Other derivative instruments
Other income (loss) — net
(14
)
(62
)
Total
 
$
(62
)
$
(117
)