Quarterly report pursuant to Section 13 or 15(d)

DERIVATIVE INSTRUMENTS AND RISK MANAGEMENT (Tables)

v2.4.0.6
DERIVATIVE INSTRUMENTS AND RISK MANAGEMENT (Tables)
 9 Months Ended
Sep. 30, 2012
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Schedule of Notional Amounts of Outstanding Derivative Positions
As of September 30, 2012 and December 31, 2011, the notional amounts of our outstanding derivative positions were as follows (in millions):
 
September 30, 2012
 
December 31, 2011
Currency hedges:
 
 
 
 
 
Euro
EUR
1,701

 
EUR
1,685

British Pound Sterling
GBP
832

 
GBP
870

Canadian Dollar
CAD
363

 
CAD
318

Mexican Peso
MXN
4,400

 
MXN
—

Malaysian Ringgit
MYR
100

 
MYR
—

 
 
 
 
 
 
Interest rate hedges:
 
 
 
 
 
Fixed to Floating Interest Rate Swaps
$
6,424

 
$
6,424

Floating to Fixed Interest Rate Swaps
$
782

 
$
791

Interest Rate Basis Swaps
$
2,500

 
$
—

Schedule of Derivative Instruments in Statement of Financial Position, Fair Value
The following table indicates the location on the consolidated balance sheets in which 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 (in millions). The table is segregated between those derivative instruments that qualify and are designated as hedging instruments and those that are not, as well as by type of contract and whether the derivative is in an asset or liability position.
Asset Derivatives
Balance Sheet Location
 
Fair Value
Hierarchy Level
 
September 30, 2012
 
December 31, 2011
Derivatives designated as hedges:
 
 
 
 
 
 
 
Foreign exchange contracts
Other current assets
 
Level 2
 
$
75

 
$
164

Interest rate contracts
Other current assets
 
Level 2
 
10

 
—

Foreign exchange contracts
Other non-current assets
 
Level 2
 
18

 
—

Interest rate contracts
Other non-current assets
 
Level 2
 
446

 
401

Derivatives not designated as hedges:
 
 
 
 
 
 
 
Foreign exchange contracts
Other current assets
 
Level 2
 
60

 
2

Interest rate contracts
Other non-current assets
 
Level 2
 
107

 
82

Total Asset Derivatives
 
 
 
 
$
716

 
$
649

 
 
 
 
 
 
 
 
Liability Derivatives
Balance Sheet Location
 
Fair Value
Hierarchy Level
 
September 30, 2012
 
December 31, 2011

Derivatives designated as hedges:
 
 
 
 
 
 
 
Foreign exchange contracts
Other non-current liabilities
 
Level 2
 
$
170

 
$
185

Interest rate contracts
Other non-current liabilities
 
Level 2
 
14

 
13

Derivatives not designated as hedges:
 
 
 
 
 
 
 
Foreign exchange contracts
Other current liabilities
 
Level 2
 
62

 
—

Interest rate contracts
Other non-current liabilities
 
Level 2
 
47

 
10

Total Liability Derivatives
 
 
 
 
$
293

 
$
208

Schedule of Derivative Instruments, Effect on Other Comprehensive Income (Loss)
The following table indicates the amount and location in the statements of consolidated income for the three and nine months ended September 30, 2012 and 2011 in which derivative gains and losses, as well as the related amounts reclassified from AOCI, have been recognized for those derivatives designated as cash flow hedges (in millions):
Three Months Ended September 30:
 
 
 
 
 
 
 
 
 
 
 
 
2012
 
2011
 
 
 
2012
 
2011
Derivative Instruments in Cash Flow
Hedging Relationships
 
Amount of
Gain (Loss)
Recognized in
OCI on
Derivative
(Effective
Portion)
 
Amount of
Gain (Loss)
Recognized in
OCI on
Derivative
(Effective
Portion)
 
Location of Gain
(Loss) Reclassified
from Accumulated
OCI into Income
(Effective Portion)
 
Amount of
Gain (Loss)
Reclassified from
Accumulated OCI
into Income
(Effective
Portion)
 
Amount of
Gain (Loss)
Reclassified from
Accumulated OCI
into Income
(Effective
Portion)
Interest rate contracts
 
$
(11
)
 
$
(5
)
 
Interest Expense
 
$
(6
)
 
$
(4
)
Foreign exchange contracts
 
87

 
(117
)
 
Interest Expense
 
30

 
(24
)
Foreign exchange contracts
 
10

 
11

 
Other Operating
Expense
 
—

 
(3
)
Foreign exchange contracts
 
(37
)
 
118

 
Revenue
 
36

 
(25
)
Commodity contracts
 
—

 
—

 
Fuel Expense
 
—

 
—

Total
 
$
49

 
$
7

 
 
 
$
60

 
$
(56
)
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30:
 
 
 
 
 
 
 
 
 
 
 
 
2012
 
2011
 
 
 
2012
 
2011
Derivative Instruments in Cash Flow
Hedging Relationships
 
Amount of
Gain (Loss)
Recognized in
OCI on
Derivative
(Effective
Portion)
 
Amount of
Gain (Loss)
Recognized in
OCI on
Derivative
(Effective
Portion)
 
Location of Gain
(Loss) Reclassified
from Accumulated
OCI into Income
(Effective Portion)
 
Amount of
Gain (Loss)
Reclassified from
Accumulated OCI
into Income
(Effective
Portion)
 
Amount of
Gain (Loss)
Reclassified from
Accumulated OCI
into Income
(Effective
Portion)
Interest rate contracts
 
$
(72
)
 
$
(6
)
 
Interest Expense
 
$
(16
)
 
$
(14
)
Foreign exchange contracts
 
15

 
(120
)
 
Interest Expense
 
27

 
7

Foreign exchange contracts
 
(5
)
 
6

 
Other Operating
Expense
 
—

 
(3
)
Foreign exchange contracts
 
(40
)
 
(16
)
 
Revenue
 
33

 
(80
)
Commodity contracts
 
—

 
9

 
Fuel Expense
 
—

 
9

Total
 
$
(102
)
 
$
(127
)
 
 
 
$
44

 
$
(81
)
Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance
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 and foreign currency forward contracts not designated as hedges (in millions):
 
 
 
2012
 
2011
Derivative Instruments not Designated in
Hedging Relationships
Location of Gain (Loss)
Recognized in Income
 
Amount of
Gain (Loss)
Recognized
in Income
 
Amount of
Gain (Loss)
Recognized
in Income
Three Months Ended September 30:
 
 
 
 
 
Interest rate contracts
Interest Expense
 
$
(6
)
 
$
—

Foreign exchange contracts
Revenue
 
$
2

 
$
—

Foreign exchange contracts
Other Operating Expenses
 
$
(7
)
 
$
11

Foreign exchange contracts
Investment Income
 
$
(24
)
 
$
—

Nine Months Ended September 30:
 
 
 
 
 
Interest rate contracts
Interest Expense
 
$
(11
)
 
$
—

Foreign exchange contracts
Revenue
 
$
2

 
$
—

Foreign exchange contracts
Other Operating Expenses
 
$
27

 
$
(2
)
Foreign exchange contracts
Investment Income
 
$
(24
)
 
$
—

The following table indicates the amount and location in the statements of consolidated income in which derivative gains and losses, as well as the associated gains and losses on the underlying exposure, have been recognized for those derivatives designated as fair value hedges for the three and nine months ended September 30, 2012 and 2011 (in millions):
 
 
 
2012
 
2011
 
 
 
 
 
2012
 
2011
Derivative Instruments in Fair Value
Hedging Relationships
Location of
Gain (Loss)
Recognized in
Income
 
Amount of
Gain (Loss)
Recognized
in Income
 
Amount of
Gain (Loss)
Recognized
in Income
 
Hedged Items in
Fair Value
Hedging
Relationships
 
Location of 
Gain (Loss)
Recognized In
 Income
 
Amount of
Gain (Loss)
Recognized
in Income
 
Amount of
Gain (Loss)
Recognized
in Income
Three Months Ended September 30:
 
 
 
 
 
 
 
Interest rate contracts
Interest
Expense
 
$
19

 
$
237

 
Fixed-Rate
Debt and
Capital Leases
 
Interest
Expense
 
$
(19
)
 
$
(237
)
Nine Months Ended September 30:
 
 
 
 
 
 
 
 
 
 
Interest rate contracts
Interest
Expense
 
$
55

 
$
350

 
Fixed-Rate
Debt and
Capital Leases
 
Interest
Expense
 
$
(55
)
 
$
(350
)