Annual report pursuant to Section 13 and 15(d)

Derivative Financial Instruments

v3.10.0.1
Derivative Financial Instruments
12 Months Ended
Dec. 29, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments [Text Block]
NOTE 18 :
DERIVATIVE FINANCIAL INSTRUMENTS

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)
 
Dec 29,
2018
 
Dec 30,
2017
 
Dec 31,
2016
Foreign currency contracts
 
$
19,223

 
$
19,958

 
$
17,960

Interest rate contracts
 
22,447

 
16,823

 
14,228

Other
 
1,356

 
1,636

 
1,340

Total
 
$
43,026


$
38,417


$
33,528

During 2018, 2017, and 2016, we entered into $7.1 billion, $4.8 billion, and $4.7 billion, respectively, of interest rate swaps to hedge against changes in the fair value attributable to the benchmark interest rates related to our outstanding senior notes. These hedges were designated as fair value hedges.
FAIR VALUE OF DERIVATIVE INSTRUMENTS IN THE CONSOLIDATED BALANCE SHEETS
 
 
December 29, 2018
 
December 30, 2017
(In Millions)
 
Assets1
 
Liabilities2
 
Assets1
 
Liabilities2
Derivatives designated as hedging instruments
 
 
 
 
 
 
 
 
Foreign currency contracts3
 
$
44

 
$
244

 
$
283

 
$
32

Interest rate contracts
 
84

 
474

 
1

 
254

Total derivatives designated as hedging instruments
 
128


718


284


286

Derivatives not designated as hedging instruments
 
 
 
 
 
 
 
 
Foreign currency contracts3
 
132

 
155

 
52

 
447

Interest rate contracts
 
20

 
22

 
18

 
24

Other
 

 

 
9

 

Total derivatives not designated as hedging instruments
 
152


177


79


471

Total derivatives
 
$
280


$
895


$
363


$
757


1 
Derivative assets are recorded as other assets, current and non-current.
2 
Derivative liabilities are recorded as other liabilities, current and non-current.
3 
The majority of these instruments mature within 12 months.


AMOUNTS OFFSET IN THE CONSOLIDATED 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:
 
 
December 29, 2018
 
 
 
 
 
 
 
 
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
 
$
292

 
$

 
$
292

 
$
(220
)
 
$
(72
)
 
$

Reverse repurchase agreements
 
2,099

 

 
2,099

 

 
(1,999
)
 
100

Total assets
 
2,391




2,391


(220
)

(2,071
)

100

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Derivative liabilities subject to master netting arrangements
 
890

 

 
890

 
(220
)
 
(576
)
 
94

Total liabilities
 
$
890


$


$
890


$
(220
)

$
(576
)

$
94

 
 
December 30, 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
 
$
350

 
$

 
$
350

 
$
(206
)
 
$
(130
)
 
$
14

Reverse repurchase agreements
 
1,649

 

 
1,649

 

 
(1,649
)
 

Total assets
 
1,999




1,999


(206
)

(1,779
)

14

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Derivative liabilities subject to master netting arrangements
 
745

 

 
745

 
(206
)
 
(504
)
 
35

Total liabilities
 
$
745


$


$
745


$
(206
)

$
(504
)

$
35


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 $310 million net losses in 2018 ($605 million net gains in 2017 and $26 million net losses in 2016). Substantially all of our cash flow hedges are foreign currency contracts for all periods presented.
Hedge ineffectiveness and amounts excluded from effectiveness testing were insignificant during all periods presented.
For information on the unrealized holding gains (losses) on derivatives reclassified out of accumulated other comprehensive income into the consolidated statements of income, see "Note 17: 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:
 
 
Gains (Losses)
Recognized in Statement of Income on
Derivatives
Years Ended
(In Millions)
 
Dec 29,
2018
 
Dec 30,
2017
 
Dec 31,
2016
Interest rate contracts
 
$
(138
)
 
$
(68
)
 
$
(171
)
Hedged items
 
138

 
68

 
171

Total
 
$

 
$

 
$


There was no ineffectiveness during all periods presented in the preceding table.
The amounts recorded on the consolidated balance sheet related to cumulative basis adjustments for fair value hedges for each period were as follows:
Line Item in the Consolidated Balance Sheet in Which the Hedged Item Is Included
 
Carrying Amount of the Hedged Item Asset/(Liabilities)
 
Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount Assets/(Liabilities)
Years Ended
(In Millions)
 
Dec 29,
2018
 
Dec 30,
2017
 
Dec 29,
2018
 
Dec 30,
2017
Long-term debt
 
$
(19,622
)
 
$
(12,653
)
 
$
390

 
$
252


As of December 29, 2018 and December 30, 2017, the total notional amount of pay variable/receive fixed-interest rate swaps was $20.0 billion and $12.9 billion, respectively.
DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
The effects of derivative instruments not designated as hedging instruments on the consolidated statements of income for each period were as follows:
Years Ended
(In Millions)
 
Location of Gains (Losses)
Recognized in Income on Derivatives
 
Dec 29,
2018
 
Dec 30,
2017
 
Dec 31,
2016
Foreign currency contracts
 
Interest and other, net
 
$
372

 
$
(547
)
 
$
388

Interest rate contracts
 
Interest and other, net
 
9

 
9

 
8

Other
 
Various
 
(147
)
 
203

 
113

Total
 
$
234


$
(335
)

$
509