Quarterly report pursuant to Section 13 or 15(d)

Hedging Transactions and Derivative Financial Instruments (Tables)

v3.10.0.1
Hedging Transactions and Derivative Financial Instruments (Tables)
9 Months Ended
Sep. 28, 2018
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
September 28,
2018

December 31, 2017

Assets:
 
 
 
Foreign currency contracts
Prepaid expenses and other assets
$
57

$
45

Foreign currency contracts
Other assets
133

79

Interest rate contracts
Other assets
25

52

Total assets
 
$
215

$
176

Liabilities:
 
 
 
Foreign currency contracts
Accounts payable and accrued expenses
$
26

$
69

Foreign currency contracts
Other liabilities
4

9

Foreign currency contracts
Liabilities held for sale — discontinued operations

8

Commodity contracts
Liabilities held for sale — discontinued operations

4

Interest rate contracts
Accounts payable and accrued expenses

30

Interest rate contracts
Other liabilities
68

39

Total liabilities
 
$
98

$
159

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 15 for the net presentation of the Company's derivative instruments.
2 Refer to Note 15 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 28,
2018

December 31, 2017

Assets:
 
 
 
Foreign currency contracts
Prepaid expenses and other assets
$
146

$
20

Foreign currency contracts
Other assets
9

27

Commodity contracts
Prepaid expenses and other assets
11

25

Commodity contracts
Other assets

1

Other derivative instruments
Prepaid expenses and other assets
9

8

Total assets
 
$
175

$
81

Liabilities:
 
 
 
Foreign currency contracts
Accounts payable and accrued expenses
$
28

$
69

Foreign currency contracts
Other liabilities
54

28

Foreign currency contracts
Liabilities held for sale — discontinued operations
1


Commodity contracts
Accounts payable and accrued expenses
9

7

Commodity contracts
Other liabilities
1


Other derivative instruments
Accounts payable and accrued expenses
1

1

Other derivative instruments
Other liabilities
1

1

Total liabilities
 
$
95

$
106

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 15 for the net presentation of the Company's derivative instruments.
2 Refer to Note 15 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 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)

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

Net operating revenues
$
43

$

2 
Foreign currency contracts
3

Cost of goods sold
4


2 
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

 
Three Months Ended September 29, 2017
 
 
 
 
 
Foreign currency contracts
$
(35
)
Net operating revenues
$
116

$

2 
Foreign currency contracts
(11
)
Cost of goods sold
(4
)

2 
Foreign currency contracts

Interest expense
(2
)

 
Foreign currency contracts
100

Other income (loss) — net
100

7

 
Interest rate contracts
(1
)
Interest expense
(9
)

 
Commodity contracts

Cost of goods sold
(1
)

 
Total
$
53

 
$
200

$
7

 

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.
 
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)

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

Net operating revenues
$
97

$
1

 
Foreign currency contracts
13

Cost of goods sold
5


2 
Foreign currency contracts

Interest expense
(6
)

 
Foreign currency contracts
46

Other income (loss) — net
3

4

 
Foreign currency contracts

Income from discontinued operations

(3
)
 
Interest rate contracts
22

Interest expense
(29
)
(8
)
 
Commodity contracts

Income from discontinued operations

(5
)
 
Total
$
91

 
$
70

$
(11
)
 
Nine Months Ended September 29, 2017
 
 
 
 
 
Foreign currency contracts
$
(216
)
Net operating revenues
$
339

$
(1
)
 
Foreign currency contracts
(27
)
Cost of goods sold
1


2 
Foreign currency contracts

Interest expense
(7
)

 
Foreign currency contracts
113

Other income (loss) — net
152

7

 
Interest rate contracts
(25
)
Interest expense
(26
)
2

 
Commodity contracts
(1
)
Cost of goods sold


 
Total
$
(156
)
 
$
459

$
8

 
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 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 Income1
Three Months Ended
September 28,
2018

September 29,
2017

Interest rate contracts
Interest expense
$
(38
)
$
19

Fixed-rate debt
Interest expense
41

(15
)
Net impact to interest expense
 
$
3

$
4

Foreign currency contracts
Other income (loss) — net
$

$
(23
)
Available-for-sale securities
Other income (loss) — net

26

Net impact to other income (loss) — net

 
$

$
3

Net impact of fair value hedging instruments
 
$
3

$
7


Hedging Instruments and Hedged Items
Location of Gain (Loss)
Recognized in Income
Gain (Loss)
Recognized in Income1
Nine Months Ended
September 28,
2018

September 29,
2017

Interest rate contracts
Interest expense
$
(57
)
$
(46
)
Fixed-rate debt
Interest expense
50

42

Net impact to interest expense
 
$
(7
)
$
(4
)
Foreign currency contracts
Other income (loss) — net
$
(6
)
$
(66
)
Available-for-sale securities
Other income (loss) — net
6

72

Net impact to other income (loss) — net
 
$

$
6

Net impact of fair value hedging instruments
 
$
(7
)
$
2

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
 
Nine Months Ended
 
September 28,
2018

December 31, 2017

 
September 28,
2018

September 29,
2017

 
September 28,
2018

September 29,
2017

Foreign currency contracts
$
388

$

 
$
6

$
(4
)
 
$
6

$
(19
)
Foreign currency denominated debt
12,800

13,147

 
53

(549
)
 
347

(1,475
)
Total
$
13,188

$
13,147

 
$
59

$
(553
)
 
$
353

$
(1,494
)
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 28,
2018

September 29,
2017

Foreign currency contracts
Net operating revenues
$
8

$
(5
)
Foreign currency contracts
Cost of goods sold
7


Foreign currency contracts
Other income (loss) — net
29

47

Foreign currency contracts
Income from discontinued operations
2


Commodity contracts
Net operating revenues

12

Commodity contracts
Cost of goods sold
3

(15
)
Commodity contracts
Selling, general and administrative expenses

3

Other derivative instruments
Selling, general and administrative expenses
18

8

Other derivative instruments
Other income (loss) — net

1

Total
 
$
67

$
51

Derivatives Not Designated
as Hedging Instruments
Location of Gain (Loss)
Recognized in Income
Gain (Loss)
Recognized in Income
Nine Months Ended
September 28,
2018

September 29,
2017

Foreign currency contracts
Net operating revenues
$
34

$
(23
)
Foreign currency contracts
Cost of goods sold
6


Foreign currency contracts
Other income (loss) — net
(87
)
149

Foreign currency contracts
Income from discontinued operations
(3
)

Interest rate contracts
Interest expense
(1
)

Commodity contracts
Net operating revenues

7

Commodity contracts
Cost of goods sold
10

13

Commodity contracts
Income from discontinued operations
5


Other derivative instruments
Selling, general and administrative expenses
11

33

Other derivative instruments
Other income (loss) — net

2

Total
 
$
(25
)
$
181