Quarterly report pursuant to Section 13 or 15(d)

DERIVATIVE INSTRUMENTS AND RISK MANAGEMENT (Tables)

v3.5.0.2
DERIVATIVE INSTRUMENTS AND RISK MANAGEMENT (Tables)
 9 Months Ended
Sep. 30, 2016
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Schedule of Notional Amounts of Outstanding Derivative Positions
As of September 30, 2016 and December 31, 2015, the notional amounts of our outstanding derivative positions were as follows (in millions):
 
September 30, 2016
 
December 31, 2015
Currency hedges:
 
 
 
 
 
British Pound Sterling
GBP
925

 
GBP
1,140

Canadian Dollar
CAD
936

 
CAD
177

Euro
EUR
3,625

 
EUR
3,750

Indian Rupee
INR
206

 
INR
—

Mexican Peso
MXN
1,000

 
MXN
3,863

Japanese Yen
JPY
3,233

 
JPY
20,000

Singapore Dollar
SGD
23

 
SGD
—

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

 
$
5,799

Floating to Fixed Interest Rate Swaps
$
778

 
$
778

 
 
 
 
 
 
Investment market price hedges:
 
 
 
 
 
Marketable Securities
EUR
390

 
EUR
496

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,
2016
 
December 31,
2015
 
September 30,
2016
 
December 31,
2015
Derivatives designated as hedges:
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
Other current assets
 
Level 2
 
$
174

 
$
408

 
$
173

 
$
408

Foreign exchange contracts
Other non-current assets
 
Level 2
 
37

 
92

 
31

 
92

Interest rate contracts
Other non-current assets
 
Level 2
 
254

 
204

 
238

 
185

Derivatives not designated as hedges:
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
Other current assets
 
Level 2
 
1

 
2

 
1

 
—

Investment market price contracts
Other current assets
 
Level 2
 
153

 
5

 
153

 
—

Interest rate contracts
Other non-current assets
 
Level 2
 
67

 
57

 
59

 
53

Total Asset Derivatives
 
 
 
 
$
686

 
$
768

 
$
655

 
$
738

 
 
 
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,
2016
 
December 31,
2015
 
September 30,
2016
 
December 31,
2015
Derivatives designated as hedges:
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
Other current liabilities
 
Level 2
 
$
2

 
$
—

 
$
1

 
$
—

Foreign exchange contracts
Other non-current liabilities
 
Level 2
 
19

 
—

 
13

 
—

Interest rate contracts
Other non-current liabilities
 
Level 2
 
16

 
19

 
—

 
—

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

 
12

 
2

 
10

Investment market price contracts
Other current liabilities
 
Level 2
 
—

 
9

 
—

 
4

Interest rate contracts
Other non-current liabilities
 
Level 2
 
30

 
13

 
22

 
9

Total Liability Derivatives
 
 
 
 
$
69

 
$
53

 
$
38

 
$
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 for the three and nine months ended September 30, 2016 and 2015 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)
 
2016
 
2015
Interest rate contracts
 
—

 
$
(1
)
Foreign exchange contracts
 
(27
)
 
44

Total
 
$
(27
)
 
$
43

 
 
 
 
 
Nine Months Ended September 30:
 
 
 
 
Derivative Instruments in Cash Flow Hedging Relationships
 
Amount of Gain (Loss) Recognized in AOCI on Derivative (Effective Portion)
 
2016
 
2015
Interest rate contracts
 
$
(3
)
 
$
(1
)
Foreign exchange contracts
 
(36
)
 
191

Total
 
$
(39
)
 
$
190

The following table indicates the amount of gains and losses that have been recognized in AOCI within foreign currency translation adjustment for the three and nine months ended September 30, 2016 and 2015 for those instruments designated as net investment hedges (in millions):
Three Months Ended September 30:
 
 
 
 
Non-derivative Instruments in Net Investment Hedging Relationships
 
Amount of Gain (Loss) Recognized in AOCI on Debt (Effective Portion)
 
2016
 
2015
Foreign denominated debt
 
$
(7
)
 
$
—

Total
 
$
(7
)
 
$
—

 
 
 
 
 
Nine Months Ended September 30:
 
 
 
 
Non-derivative Instruments in Net Investment Hedging Relationships
 
Amount of Gain (Loss) Recognized in AOCI on Debt (Effective Portion)
 
2016
 
2015
Foreign denominated debt
 
$
(30
)
 
—

Total
 
$
(30
)
 
$
—

Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance
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, 2016 and 2015 (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
 
2016
 
2015
 
 
 
2016
 
2015
Three Months Ended September 30:
 
 
 
 
 
 
 
Interest rate contracts
Interest Expense
 
$
(59
)
 
$
80

 
Fixed-Rate
Debt
 
Interest
Expense
 
$
59

 
$
(80
)
Nine Months Ended September 30:
 
 
 
 
 
 
 
 
 
 
Interest rate contracts
Interest
Expense
 
$
56

 
$
71

 
Fixed-Rate
Debt
 
Interest
Expense
 
$
(56
)
 
$
(71
)
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, 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
Three Months Ended September 30:
 
 
 
 
 
Interest rate contracts
Interest expense
 
$
(2
)
 
$
(2
)
Foreign exchange contracts
Other Operating Expenses
 
—

 
2

Foreign exchange contracts
Investment income and other
 
(11
)
 
14

Foreign exchange contracts
Interest expense
 
—

 
(30
)
Investment market price contracts
Investment income and other
 
(28
)
 
(27
)
 
 
 
$
(41
)
 
$
(43
)
Nine Months Ended September 30:
 
 
 
 
 
Interest rate contracts
Interest expense
 
$
(6
)
 
$
(5
)
Foreign exchange contracts
Other Operating Expenses
 
—

 
18

Foreign exchange contracts
Investment income and other
 
(117
)
 
49

Foreign exchange contracts
Interest expense
 
—

 
6

Investment market price contracts
Investment income and other
 
152

 
(36
)
 
 
 
$
29

 
$
32