Quarterly report pursuant to Section 13 or 15(d)

Derivative Financial Instruments

v3.7.0.1
Derivative Financial Instruments
 3 Months Ended
Apr. 01, 2017
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments [Text Block]
Note 13: Derivative Financial Instruments
For information about our derivative policies, see “Accounting Policies" note in Part II, Item 8 of our 2016 Form 10-K.
Volume of Derivative Activity
Total gross notional amounts for outstanding derivatives (recorded at fair value) at the end of each period were as follows: 
(In Millions)
 
Apr 1,
2017
 
Dec 31,
2016
 
Apr 2,
2016
Foreign currency contracts
 
$
18,575

 
$
17,960

 
$
17,520

Interest rate contracts
 
14,815

 
14,228

 
11,540

Other
 
1,357

 
1,340

 
1,210

Total
 
$
34,747

 
$
33,528

 
$
30,270

Fair Value of Derivative Instruments in the Consolidated Condensed Balance Sheets
 
 
April 1, 2017
 
December 31, 2016
(In Millions)
 
Assets 1
 
Liabilities 2
 
Assets 1
 
Liabilities 2
Derivatives designated as hedging instruments:
 
 
 
 
 
 
 
 
Foreign currency contracts 3
 
$
173

 
$
94

 
$
21

 
$
252

Interest rate contracts
 
2

 
200

 
3

 
187

Total derivatives designated as hedging instruments
 
175

 
294

 
24

 
439

Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
 
Foreign currency contracts 4
 
167

 
200

 
374

 
114

Interest rate contracts
 
16

 
33

 
15

 
30

Other
 
10

 
—

 
9

 
—

Total derivatives not designated as hedging instruments
 
193

 
233

 
398

 
144

Total derivatives
 
$
368

 
$
527

 
$
422

 
$
583


1 
Derivative assets are recorded as other assets, current and non-current in the consolidated condensed balance sheets.
2 
Derivative liabilities are recorded as other liabilities, current and non-current in the consolidated condensed balance sheets.
3 
The substantial majority of these instruments mature within 12 months.
4 
The majority of these instruments mature within 12 months.

Amounts Offset in the Consolidated Condensed Balance Sheets
The gross amounts of our derivative instruments and reverse repurchase agreements subject to master netting arrangements with various counterparties, and cash and non-cash collateral posted under such agreements at the end of each period were as follows:
 
 
April 1, 2017
 
 
 
 
 
 
 
 
Gross Amounts Not Offset in the Balance Sheet
 
 
(In Millions)
 
Gross Amounts Recognized
 
Gross Amounts Offset in the Balance Sheet
 
Net Amounts Presented in the Balance Sheet
 
Financial Instruments
 
Cash and Non-Cash Collateral Received or Pledged
 
Net Amount
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
Derivative assets subject to master netting arrangements
 
$
357

 
$
—

 
$
357

 
$
(243
)
 
$
(82
)
 
$
32

Reverse repurchase agreements
 
1,648

 
—

 
1,648

 
—

 
(1,648
)
 
—

Total assets
 
2,005

 
—

 
2,005

 
(243
)
 
(1,730
)
 
32

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Derivative liabilities subject to master netting arrangements
 
499

 
—

 
499

 
(243
)
 
(240
)
 
16

Total liabilities
 
$
499

 
$
—

 
$
499

 
$
(243
)
 
$
(240
)
 
$
16

 
 
December 31, 2016
 
 
 
 
 
 
 
 
Gross Amounts Not Offset in the Balance Sheet
 
 
(In Millions)
 
Gross Amounts Recognized
 
Gross Amounts Offset in the Balance Sheet
 
Net Amounts Presented in the Balance Sheet
 
Financial Instruments
 
Cash and Non-Cash Collateral Received or Pledged
 
Net Amount
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
Derivative assets subject to master netting arrangements
 
$
433

 
$
—

 
$
433

 
$
(368
)
 
$
(42
)
 
$
23

Reverse repurchase agreements
 
1,018

 
—

 
1,018

 
—

 
(1,018
)
 
—

Total assets
 
1,451

 
—

 
1,451

 
(368
)
 
(1,060
)
 
23

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Derivative liabilities subject to master netting arrangements
 
588

 
—

 
588

 
(368
)
 
(201
)
 
19

Total liabilities
 
$
588

 
$
—

 
$
588

 
$
(368
)
 
$
(201
)
 
$
19


We obtain and secure available collateral from counterparties against obligations, including securities lending transactions and reverse repurchase agreements, when we deem it appropriate.

Derivatives in Cash Flow Hedging Relationships
The before-tax net gains or losses, attributed to the effective portion of cash flow hedges, recognized in other comprehensive income (loss), were $266 million net gains in the first three months of 2017 ($243 million net gains in first three months of 2016). Substantially all of our cash flow hedges are foreign currency contracts for first three months of 2017 and 2016.
During the first three months of 2017 and 2016, hedge ineffectiveness and amounts excluded from effectiveness testing were insignificant.
For information on the unrealized holding gains (losses) on derivatives reclassified out of accumulated other comprehensive income into the consolidated condensed statements of income, see "Note 12: Other Comprehensive Income (Loss)."
Derivatives in Fair Value Hedging Relationships
The effects of derivative instruments designated as fair value hedges, recognized in interest and other, net for each period were as follows:
 
 
Three Months Ended
(In Millions)
 
Apr 1,
2017
 
Apr 2,
2016
Interest rate contracts
 
$
(14
)
 
$
162

Hedged items
 
14

 
(162
)
Total
 
$
—

 
$
—


There was no ineffectiveness during all periods presented in the preceding table.
Derivatives Not Designated as Hedging Instruments
The effects of derivative instruments not designated as hedging instruments on the consolidated condensed statements of income for each period were as follows:
 
 
 
 
Three Months Ended
(In Millions)
 
Location of Gains (Losses)
Recognized in Income on Derivatives
 
Apr 1,
2017
 
Apr 2,
2016
Foreign currency contracts
 
Interest and other, net
 
$
(160
)
 
$
(238
)
Other
 
Various
 
56

 
4

Total
 
 
 
$
(104
)
 
$
(234
)