Annual report pursuant to Section 13 and 15(d)

DERIVATIVE INSTRUMENTS AND RISK MANAGEMENT (Tables)

v3.20.4
DERIVATIVE INSTRUMENTS AND RISK MANAGEMENT (Tables)
 12 Months Ended
Dec. 31, 2020
Schedule of Derivatives Instruments Statements of Financial Performance and Financial Position The following table indicates the amount of gains and (losses) that have been recognized in the statements of consolidated income for fair value and cash flow hedges, as well as the associated gain or (loss) for the underlying hedged item for fair value hedges for the years ended December 31, 2020 and 2019 (in millions):


2020 2019
Location and Amount of Gain (Loss) Recognized in Income on Fair Value and Cash Flow Hedging Relationships Revenue Interest Expense Investment Income and Other Revenue Interest Expense Investment Income and Other
Gain or (loss) on fair value hedging relationships:
Interest Contracts:
Hedged items $ —  $ (8) $ —  $ —  $ (38) $ — 
Derivatives designated as hedging instruments —  8  —  —  38  — 
Gain or (loss) on cash flow hedging relationships:
Interest Contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive income —  (8) —  —  (15) — 
Foreign Currency Exchange Contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive income 196  —  —  177  —  — 
Total amounts of income and expense line items presented in the statement of income in which the effects of fair value or cash flow hedges are recorded $ 196  $ (8) $ —  $ 177  $ (15) $ — 
Notional Amounts of Outstanding Derivative Positions
The notional amounts of our outstanding derivative positions were as follows as of December 31, 2020 and 2019 (in millions):
  2020 2019
Currency hedges:
Euro EUR 4,197  4,571 
British Pound Sterling GBP 1,400  1,494 
Canadian Dollar CAD 1,576  1,402 
Hong Kong Dollar HKD 3,717  3,327 
Interest rate hedges:
Fixed to Floating Interest Rate Swaps USD 3,250  3,674 
Floating to Fixed Interest Rate Swaps USD 778  778 
Balance sheet location of derivative assets and liabilities and their related fair values
The following table indicates the location in the consolidated balance sheets where our derivative assets and liabilities have been recognized, the fair value hierarchy level applicable to each derivative type and the related fair values of those derivatives.
We have master netting arrangements with substantially all of our counterparties giving us the right of offset for our derivative positions. However, we have not elected to offset the fair value positions of our derivative contracts recorded in the consolidated balance sheets. The columns labeled "Net Amounts if Right of Offset had been Applied" indicate the potential net fair value positions by type of contract and location in the consolidated balance sheets had we elected to apply the right of offset as of December 31, 2020 and December 31, 2019 (in millions):
Fair Value Hierarchy Level Gross Amounts Presented in Consolidated Balance Sheets Net Amounts if Right of Offset had been Applied
Asset Derivatives Balance Sheet  Location 2020 2019 2020 2019
Derivatives designated as hedges:
Foreign currency exchange contracts Other current assets Level 2 $ 56  $ 138  $ 45  $ 131 
Interest rate contracts Other current assets Level 2 2  2  2  2 
Foreign currency exchange contracts Other non-current assets Level 2 35  252  4  236 
Interest rate contracts Other non-current assets Level 2 29  21  26  20 
Derivatives not designated as hedges:
Foreign currency exchange contracts Other current assets Level 2 4  7  4  7 
Interest rate contracts Other non-current assets Level 2 —  12  —  11 
Total Asset Derivatives $ 126  $ 432  $ 81  $ 407 

Fair Value Hierarchy Level Gross Amounts Presented in Consolidated Balance Sheets Net Amounts if Right of Offset had been Applied
Liability Derivatives Balance Sheet Location 2020 2019 2020 2019
Derivatives designated as hedges:
Foreign currency exchange contracts Other current liabilities Level 2 $ 34  $ 7  $ 23  $ — 
Foreign currency exchange contracts Other non-current liabilities Level 2 142  16  111  — 
Interest rate contracts Other non-current liabilities Level 2 13  11  10  10 
Derivatives not designated as hedges:
Foreign currency exchange contracts Other current liabilities Level 2 2  —  2  — 
Interest rate contracts Other current liabilities 1  —  1  — 
Interest rate contracts Other non-current liabilities Level 2 —  3  —  2 
Total Liability Derivatives $ 192  $ 37  $ 147  $ 12 
The following table indicates the amounts that were recorded in the consolidated balance sheets related to cumulative basis adjustments for fair value hedges as of December 31, 2020 and 2019 (in millions):
2020 2019
Line Item in the Consolidated Balance Sheets in Which the Hedged Item is Included Carrying Amount of Hedged Liabilities Cumulative Amount of Fair Value Hedge Adjustments Carrying Amount of Hedged Liabilities Cumulative Amount of Fair Value Hedge Adjustments
Long-Term Debt and Finance Leases $ 2,816  $ 42  $ 3,234  $ 40 
Schedule of Derivative Instruments, Effect on Other Comprehensive Income (Loss)
The following table indicates the amount of gains and (losses) that have been recognized in AOCI for the years ended December 31, 2020 and 2019 for those derivatives designated as cash flow hedges (in millions):
Derivative Instruments in Cash Flow Hedging Relationships Amount of Gain (Loss) Recognized in AOCI on Derivatives
2020 2019
Interest rate contracts $ —  $ 6 
Foreign currency exchange contracts (253) 250 
Total $ (253) $ 256 
The following table indicates the amount of gains and (losses) that have been recognized in AOCI within foreign currency translation adjustment for the years ended December 31, 2020 and 2019 for those instruments designated as net investment hedges (in millions):
Non-derivative Instruments in Net Investment Hedging Relationships Amount of Gain (Loss) Recognized in AOCI on Debt
2020 2019
Foreign denominated debt $ (265) $ 75 
Total $ (265) $ 75 
Not Designated as Hedging Instrument  
Amount and Location in the Income Statement for Derivatives Designated as Fair Value Hedges
The following is a summary of the amounts recorded in the statements of consolidated income related to fair value changes and settlements of these interest rate swaps, foreign currency forward and investment market price forward contracts not designated as hedges for the years ended December 31, 2020 and 2019 (in millions):
Derivative Instruments Not Designated in
Hedging Relationships		 Location of Gain
(Loss) Recognized
in Income		 Amount of Gain (Loss) Recognized in Income
2020 2019
Interest rate contracts Interest expense $ (9) $ (9)
Foreign currency exchange contracts Investment income and other 27  (1)
Total $ 18  $ (10)