Quarterly report pursuant to Section 13 or 15(d)

Derivative Financial Instruments

v3.19.1
Derivative Financial Instruments
3 Months Ended
Mar. 30, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments [Text Block]
NOTE 9 :
DERIVATIVE FINANCIAL INSTRUMENTS
For further information on our derivative policies, see "Note 2: Accounting Policies" in our 2018 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)
 
Mar 30,
2019
 
Dec 29,
2018
Foreign currency contracts
 
$
20,951

 
$
19,223

Interest rate contracts
 
21,873

 
22,447

Other
 
1,595

 
1,356

Total
 
$
44,419

 
$
43,026

FAIR VALUE OF DERIVATIVE INSTRUMENTS
 
 
March 30, 2019
 
December 29, 2018
(In Millions)
 
Assets1
 
Liabilities2
 
Assets1
 
Liabilities2
Derivatives designated as hedging instruments:
 
 
 
 
 
 
 
 
Foreign currency contracts3
 
$
62

 
$
170

 
$
44

 
$
244

Interest rate contracts
 
306

 
211

 
84

 
474

Total derivatives designated as hedging instruments
 
368

 
381

 
128

 
718

Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
 
Foreign currency contracts3
 
141

 
121

 
132

 
155

Interest rate contracts
 
10

 
27

 
20

 
22

Total derivatives not designated as hedging instruments
 
151

 
148

 
152

 
177

Total derivatives
 
$
519

 
$
529

 
$
280

 
$
895


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 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:
 
 
March 30, 2019
 
 
 
 
 
 
 
 
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
 
$
526

 
$

 
$
526

 
$
(351
)
 
$
(175
)
 
$

Reverse repurchase agreements
 
1,949

 

 
1,949

 

 
(1,949
)
 

Total assets
 
2,475

 

 
2,475

 
(351
)
 
(2,124
)
 

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Derivative liabilities subject to master netting arrangements
 
513

 

 
513

 
(351
)
 
(141
)
 
21

Total liabilities
 
$
513

 
$

 
$
513

 
$
(351
)
 
$
(141
)
 
$
21

 
 
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


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 $29 million net gains in the first three months of 2019 ($203 million net gains in the first three months of 2018). Substantially all of our cash flow hedges were foreign currency contracts for all periods presented.
During the first three months of 2019 and 2018, the amounts excluded from effectiveness testing were insignificant.
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)
 
Mar 30,
2019
 
Mar 31,
2018
Interest rate contracts
 
$
485

 
$
(258
)
Hedged items
 
(485
)
 
258

Total
 
$

 
$


The amounts recorded on the consolidated condensed balance sheets related to cumulative basis adjustments for fair value hedges for each period were as follows:
Line Item in the Consolidated Condensed 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)
 
Mar 30,
2019
 
Dec 29,
2018
 
Mar 30,
2019
 
Dec 29,
2018
Long-term debt
 
$
(20,107
)
 
$
(19,622
)
 
$
(95
)
 
$
390


As of March 30, 2019 and December 29, 2018, the total notional amount of pay variable/receive fixed-interest rate swaps was $20.0 billion.
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
 
Mar 30,
2019
 
Mar 31,
2018
Foreign currency contracts
 
Interest and other, net
 
$
57

 
$
(170
)
Interest rate contracts
 
Interest and other, net
 
(14
)
 
14

Other
 
Various
 
146

 
(31
)
Total
 
 
 
$
189

 
$
(187
)