Quarterly report pursuant to Section 13 or 15(d)

Derivative Financial Instruments

v3.20.1
Derivative Financial Instruments
3 Months Ended
Mar. 28, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments [Text Block]
NOTE 11 :
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)
 
Mar 28,
2020
 
Dec 28,
2019
Foreign currency contracts
 
$
27,039

 
$
23,981

Interest rate contracts
 
13,859

 
14,302

Other
 
1,726

 
1,753

Total
 
$
42,624

 
$
40,036

FAIR VALUE OF DERIVATIVE INSTRUMENTS
 
 
March 28, 2020
 
December 28, 2019
(In Millions)
 
Assets1
 
Liabilities2
 
Assets1
 
Liabilities2
Derivatives designated as hedging instruments:
 
 
 
 
 
 
 
 
Foreign currency contracts3
 
$
10

 
$
465

 
$
56

 
$
159

Interest rate contracts
 
1,635

 

 
690

 
9

Total derivatives designated as hedging instruments
 
1,645

 
465

 
746

 
168

Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
 
Foreign currency contracts3
 
362

 
135

 
179

 
78

Interest rate contracts
 
4

 
120

 
11

 
54

Equity contracts
 
5

 
190

 
50

 
3

Total derivatives not designated as hedging instruments
 
371

 
445

 
240

 
135

Total derivatives
 
$
2,016

 
$
910

 
$
986

 
$
303


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 28, 2020
 
 
 
 
 
 
 
 
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
 
$
2,005

 
$

 
$
2,005

 
$
(457
)
 
$
(1,513
)
 
$
35

Reverse repurchase agreements
 
1,500

 

 
1,500

 

 
(1,418
)
 
82

Total assets
 
$
3,505

 
$

 
$
3,505

 
$
(457
)
 
$
(2,931
)
 
$
117

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Derivative liabilities subject to master netting arrangements
 
$
865

 
$

 
$
865

 
$
(457
)
 
$
(221
)
 
$
187

Total liabilities
 
$
865

 
$

 
$
865

 
$
(457
)
 
$
(221
)
 
$
187

 
 
December 28, 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
 
$
974

 
$

 
$
974

 
$
(144
)
 
$
(808
)
 
$
22

Reverse repurchase agreements
 
1,850

 

 
1,850

 

 
(1,850
)
 

Total assets
 
$
2,824

 
$

 
$
2,824

 
$
(144
)
 
$
(2,658
)
 
$
22

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Derivative liabilities subject to master netting arrangements
 
$
262

 
$

 
$
262

 
$
(144
)
 
$
(72
)
 
$
46

Total liabilities
 
$
262

 
$

 
$
262

 
$
(144
)
 
$
(72
)
 
$
46


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 cash flow hedges, recognized in other comprehensive income (loss), were $373 million net losses in the first three months of 2020 ($29 million net gains in the first three months of 2019). Substantially all of our cash flow hedges were foreign currency contracts for all periods presented.
During the first three months of 2020 and 2019, 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:
 
 
Gains (Losses) Recognized in Consolidated Condensed Statements of Income on Derivatives
Three Months Ended
(In Millions)
 
Mar 28,
2020
 
Mar 30,
2019
Interest rate contracts
 
$
954

 
$
485

Hedged items
 
(954
)
 
(485
)
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)
(In Millions)
 
Mar 28,
2020
 
Dec 28,
2019
 
Mar 28,
2020
 
Dec 28,
2019
Long-term debt
 
$
(13,632
)
 
$
(12,678
)
 
$
(1,635
)
 
$
(681
)

The total notional amount of pay variable and receive fixed interest rate swaps was $12.0 billion as of March 28, 2020 and as of December 28, 2019.
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 28,
2020
 
Mar 30,
2019
Foreign currency contracts
 
Interest and other, net
 
$
154

 
$
57

Interest rate contracts
 
Interest and other, net
 
(77
)
 
(14
)
Other
 
Various
 
(268
)
 
146

Total
 
 
 
$
(191
)
 
$
189