Quarterly report pursuant to Section 13 or 15(d)

DERIVATIVE INSTRUMENTS AND RISK MANAGEMENT (Tables)

v3.3.0.814
DERIVATIVE INSTRUMENTS AND RISK MANAGEMENT (Tables)
9 Months Ended
Sep. 30, 2015
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Schedule of Notional Amounts of Outstanding Derivative Positions
As of September 30, 2015 and December 31, 2014, the notional amounts of our outstanding derivative positions were as follows (in millions):
 
September 30, 2015
 
December 31, 2014
Currency hedges:
 
 
 
 
 
British Pound Sterling
GBP
1,223

 
GBP
1,149

Canadian Dollar
CAD
252

 
CAD
293

Euro
EUR
1,842

 
EUR
2,833

Indian Rupee
INR
205

 
INR
85

Malaysian Ringgit
MYR

 
MYR
150

Mexican Peso
MXN
2,571

 
MXN
152

 
 
 
 
 
 
Interest rate hedges:
 
 
 
 
 
Fixed to Floating Interest Rate Swaps
$
5,799

 
$
5,799

Floating to Fixed Interest Rate Swaps
$
779

 
$
779

Interest Rate Basis Swaps
$

 
$
1,500

 
 
 
 
 
 
Investment market price hedges:
 
 
 
 
 
Marketable Securities
EUR
251

 
EUR

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.
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.
 
 
 
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
 
 
September 30,
2015
 
December 31,
2014
 
September 30,
2015
 
December 31,
2014
Derivatives designated as hedges:
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
Other current assets
 
Level 2
 
$
357

 
$
204

 
$
357

 
$
204

Foreign exchange contracts
Derivative assets

 
Level 2
 
109

 
229

 
109

 
229

Interest rate contracts
Derivative assets

 
Level 2
 
275

 
227

 
262

 
194

Derivatives not designated as hedges:
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
Other current assets
 
Level 2
 
5

 
2

 
5

 
2

Interest rate contracts
Derivative assets
 
Level 2
 
71

 
59

 
64

 
57

Total Asset Derivatives
 
 
 
 
$
817

 
$
721

 
$
797

 
$
686

 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
 
 
September 30,
2015
 
December 31,
2014
 
September 30,
2015
 
December 31,
2014
Derivatives designated as hedges:
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
Other non-current liabilities
 
Level 2
 
$

 
$
34

 
$

 
$
34

Interest rate contracts
Other non-current liabilities
 
Level 2
 
13

 
35

 

 
2

Derivatives not designated as hedges:
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
Other current liabilities
 
Level 2
 
3

 

 
3

 

Interest rate contracts
Other current liabilities
 
Level 2
 

 
1

 

 
1

Investment market price contracts
Other current liabilities
 
Level 2
 
36

 

 
36

 

Interest rate contracts
Other non-current liabilities
 
Level 2
 
25

 
7

 
18

 
5

Total Liability Derivatives
 
 
 
 
$
77

 
$
77

 
$
57

 
$
42

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 three and nine months ended September 30, 2015 and 2014 for those derivatives designated as cash flow hedges (in millions):
Three Months Ended September 30:
 
 
 
 
Derivative Instruments in Cash Flow Hedging Relationships
 
Amount of Gain (Loss) Recognized in AOCI on Derivative (Effective Portion)
 
2015
 
2014
Interest rate contracts
 
$
(1
)
 
$

Foreign exchange contracts
 
44

 
277

Total
 
$
43

 
$
277

 
 
 
 
 
Nine Months Ended September 30:
 
 
 
 
Derivative Instruments in Cash Flow Hedging Relationships
 
Amount of Gain (Loss) Recognized in AOCI on Derivative (Effective Portion)
 
2015
 
2014
Interest rate contracts
 
$
(1
)
 
$
(3
)
Foreign exchange contracts
 
191

 
209

Total
 
$
190

 
$
206

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, foreign currency forward and investment market price forward contracts not designated as hedges for the three and nine months ended September 30, 2015 and 2014 (in millions):
Derivative Instruments Not Designated in
Hedging Relationships
Location of Gain (Loss)
Recognized in Income
 
Amount of Gain (Loss)
Recognized in Income
 
2015
 
2014
Three Months Ended September 30:
 
 
 
 
 
Interest rate contracts
Interest Expense
 
$
(2
)
 
$
(1
)
Foreign exchange contracts
Other Operating Expenses
 
2

 
24

Foreign exchange contracts
Investment Income
 
14

 
(5
)
Foreign exchange contracts
Interest Expense
 
(30
)
 

Investment market price contracts
Investment Income
 
(27
)
 

 
 
 
$
(43
)
 
$
18

Nine Months Ended September 30:
 
 
 
 
 
Interest rate contracts
Interest Expense
 
$
(5
)
 
$
(4
)
Foreign exchange contracts
Other Operating Expenses
 
18

 
20

Foreign exchange contracts
Investment Income
 
49

 
(3
)
Foreign exchange contracts
Interest Expense
 
6

 

Investment market price contracts

Investment Income
 
(36
)
 

 
 
 
$
32

 
$
13

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, 2015 and 2014 (in millions):
Derivative Instruments
in Fair Value
Hedging Relationships
Location of Gain (Loss) Recognized in Income
 
Derivative Amount of Gain (Loss) Recognized in Income
 
Hedged Items in
Fair Value
Hedging
Relationships
 
Location of 
Gain (Loss)
Recognized In
 Income
 
Hedged Items Amount of Gain (Loss)
Recognized in Income
 
2015
 
2014
 
 
 
2015
 
2014
Three Months Ended September 30:
 
 
 
 
 
 
 
Interest rate contracts
Interest Expense
 
$
80

 
$
(49
)
 
Fixed-Rate
Debt and
Capital Leases
 
Interest
Expense
 
$
(80
)
 
$
49

Nine Months Ended September 30:
 
 
 
 
 
 
 
 
 
 
Interest rate contracts
Interest
Expense
 
$
71

 
$
34

 
Fixed-Rate
Debt and
Capital Leases
 
Interest
Expense
 
$
(71
)
 
$
(34
)