Annual report pursuant to Section 13 and 15(d)

DERIVATIVE INSTRUMENTS AND RISK MANAGEMENT (Tables)

v3.6.0.2
DERIVATIVE INSTRUMENTS AND RISK MANAGEMENT (Tables)
12 Months Ended
Dec. 31, 2016
Notional Amounts of Outstanding Derivative Positions
The notional amounts of our outstanding derivative positions were as follows as of December 31, 2016 and 2015 (in millions):
 
 
 
2016
 
2015
Currency Hedges:
 
 
 
 
 
Euro
EUR
 
3,702

 
3,750

British Pound Sterling
GBP
 
1,380

 
1,140

Canadian Dollar
CAD
 
1,053

 
177

Indian Rupee
INR
 
76

 

Mexican Peso
MXN
 

 
3,863

Japanese Yen
JPY
 
3,972

 
20,000

Singapore Dollar
SGD
 
32

 

 
 
 
 
 
 
Interest Rate Hedges:
 
 
 
 
 
Fixed to Floating Interest Rate Swaps
USD
 
5,799

 
5,799

Floating to Fixed Interest Rate Swaps
USD
 
778

 
778

 
 
 
 
 
 
Investment Market Price Hedges:
 
 
 
 
 
Marketable Securities
EUR
 
76

 
496

Balance sheet location of derivative assets and liabilities and their related fair values
The following table indicates the location on the consolidated balance sheets in which our derivative assets and liabilities have been recognized, and the related fair values of those derivatives as of December 31, 2016 and 2015 (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.
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 on our 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 on the consolidated balance sheets had we elected to apply the right of offset.
 
 
 
Gross Amounts Presented in
Consolidated Balance Sheets
 
Net Amounts if Right of
Offset had been Applied
Asset Derivatives
Balance Sheet Location
 
2016
 
2015
 
2016
 
2015
Derivatives designated as hedges:
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
Other current assets
 
$
176

 
$
408

 
$
176

 
$
408

Foreign exchange contracts
Other non-current assets
 
131

 
92

 
126

 
92

Interest rate contracts
Other non-current assets
 
137

 
204

 
119

 
185

Derivatives not designated as hedges:
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
Other current assets
 
1

 
2

 
1

 

Investment market price contracts
Other current assets
 

 
5

 

 

Interest rate contracts
Other non-current assets
 
42

 
57

 
40

 
53

Total Asset Derivatives
 
 
$
487

 
$
768

 
$
462

 
$
738


 
 
 
Gross Amounts Presented in
Consolidated Balance Sheets
 
Net Amounts if Right of
Offset had been Applied
Liability Derivatives
Balance Sheet Location
 
2016
 
2015
 
2016
 
2015
Derivatives Designated As Hedges:
 
 
 
 
 
 
 
 
 
Interest rate contracts
Other current liabilities
 
1

 

 
1

 

Foreign exchange contracts
Other non-current liabilities
 
6

 

 
1

 

Interest rate contracts
Other non-current liabilities
 
21

 
19

 
3

 

Derivatives Not Designated As Hedges:
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
Other current liabilities
 

 
12

 

 
10

Interest rate contracts
Other current liabilities
 

 

 

 

Investment market price contracts
Other current liabilities
 
10

 
9

 
10

 
4

Interest rate contracts
Other non-current liabilities
 
7

 
13

 
5

 
9

Total Liability Derivatives
 
 
$
45

 
$
53

 
$
20

 
$
23

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 within "unrealized gain (loss) on cash flow hedges" for the years ended December 31, 2016 and 2015 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
Derivative (Effective Portion)
 
2016
 
2015
Interest rate contracts
 
$
1

 
$
(1
)
Foreign exchange contracts
 
198

 
275

Total
 
$
199

 
$
274

The following table indicates the amount of gains and losses that have been recognized in AOCI within "foreign currency translation gain (loss)" for the years ended December 31, 2016 and 2015 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 (Effective Portion)
 
2016
 
2015
Foreign denominated debt
 
$
119

 
$
(33
)
Total
 
$
119

 
$
(33
)
Fair Values of Derivative Assets and Liabilities by Hedge Type
The fair values of our derivative assets and liabilities as of December 31, 2016 and 2015 by hedge type are as follows (in millions):
 
 
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total
2016
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
Foreign Exchange Contracts
 
$

 
$
308

 
$

 
$
308

Interest Rate Contracts
 

 
179

 

 
179

Total
 
$

 
$
487

 
$

 
$
487

Liabilities:
 
 
 
 
 
 
 
 
Foreign Exchange Contracts
 
$

 
$
6

 
$

 
$
6

Investment Market Price Contracts
 

 
10

 

 
10

Interest Rate Contracts
 

 
29

 

 
29

Total
 
$

 
$
45

 
$

 
$
45

 
 
 
 
 
 
 
 
 
  
 
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total
2015
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
Foreign Exchange Contracts
 
$

 
$
502

 
$

 
$
502

Investment Market Price Contracts
 

 
5

 

 
5

Interest Rate Contracts
 

 
261

 

 
261

Total
 
$

 
$
768

 
$

 
$
768

Liabilities:
 
 
 
 
 
 
 
 
Foreign Exchange Contracts
 
$

 
$
12

 
$

 
$
12

Investment Market Price Contracts
 

 
9

 

 
9

Interest Rate Contracts
 

 
32

 

 
32

Total
 
$

 
$
53

 
$

 
$
53

Designated as Hedging Instrument  
Amount and Location in the Income Statement for Derivatives Designated as Fair Value Hedges
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 years ended December 31, 2016 and 2015 (in millions):
Derivative Instruments
in Fair Value Hedging
Relationships
 
Location 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
 
 
2016
 
2015
 
 
 
2016
 
2015
Interest rate contracts
 
Interest Expense
 
$
(71
)
 
$
(7
)
 
Fixed-Rate Debt
and Capital Leases
 
Interest Expense
 
$
71

 
$
7

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 foreign currency forwards, interest rate swaps, investment market price and commodity contracts not designated as hedges for the years ended December 31, 2016 and 2015 (in millions):
Derivative Instruments Not Designated in
Hedging Relationships
 
Location of Gain
(Loss) Recognized
in Income
 
Amount of Gain (Loss) Recognized in Income
 
 
2016
 
2015
Commodity contracts
 
Fuel Expense
 
$

 
$
(2
)
Foreign exchange contracts
 
Other Operating Expenses
 

 
22

Foreign exchange contracts
 
Investment income and other
 
(145
)
 
43

Investment market price contracts
 
Investment income and other
 
(5
)
 
(5
)
Foreign exchange contracts
 
Interest Expense
 

 
(14
)
Interest rate contracts
 
Interest Expense
 
(8
)
 
(7
)
Total
 
 
 
$
(158
)
 
$
37