Quarterly report pursuant to Section 13 or 15(d)

Derivative Financial Instruments

v3.20.2
Derivative Financial Instruments
6 Months Ended
Jun. 27, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments [Text Block]
NOTE 12 : 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)
Jun 27, 2020 Dec 28, 2019
Foreign currency contracts
$ 29,129    $ 23,981   
Interest rate contracts
14,349    14,302   
Other
1,787    1,753   
Total
$ 45,265    $ 40,036   
FAIR VALUE OF DERIVATIVE INSTRUMENTS
 
Jun 27, 2020 Dec 28, 2019
(In Millions)
Assets1
Liabilities2
Assets1
Liabilities2
Derivatives designated as hedging instruments:
Foreign currency contracts3
$ 76    $ 81    $ 56    $ 159   
Interest rate contracts
1,713    —    690     
Total derivatives designated as hedging instruments
1,789    81    746    168   
Derivatives not designated as hedging instruments:
Foreign currency contracts3
171    224    179    78   
Interest rate contracts
  149    11    54   
Equity contracts
30    48    50     
Total derivatives not designated as hedging instruments
205    421    240    135   
Total derivatives
$ 1,994    $ 502    $ 986    $ 303   
1Derivative assets are recorded as other assets, current and non-current.
2Derivative liabilities are recorded as other liabilities, current and non-current.
3The 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:
Jun 27, 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 $ 1,985    $ —    $ 1,985    $ (318)   $ (1,641)   $ 26   
Reverse repurchase agreements
1,500    —    1,500    —    (1,489)   11   
Total assets
$ 3,485    $ —    $ 3,485    $ (318)   $ (3,130)   $ 37   
Liabilities:
Derivative liabilities subject to master netting arrangements $ 397    $ —    $ 397    $ (318)   $ (79)   $ —   
Total liabilities
$ 397    $ —    $ 397    $ (318)   $ (79)   $ —   
Dec 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 $392 million net gains in the second quarter of 2020 and $19 million net gains in the first six months of 2020 ($122 million net gains in the second quarter of 2019 and $151 million net gains in the first six months of 2019). Substantially all of our cash flow hedges were foreign currency contracts for all periods presented.
During the first six 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 Six Months Ended
(In Millions)
Jun 27, 2020 Jun 29, 2019 Jun 27, 2020 Jun 29, 2019
Interest rate contracts
$ 78    $ 554    $ 1,032    $ 1,039   
Hedged items
(78)   (554)   (1,032)   (1,039)  
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)
Jun 27, 2020 Dec 28, 2019 Jun 27, 2020 Dec 28, 2019
Long-term debt $ (13,710)   $ (12,678)   $ (1,713)   $ (681)  
The total notional amount of pay-variable and receive-fixed interest rate swaps was $12.0 billion as of June 27, 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 Six Months Ended
(In Millions)
Location of Gains (Losses)
Recognized in Income on Derivatives
Jun 27, 2020 Jun 29, 2019 Jun 27, 2020 Jun 29, 2019
Foreign currency contracts
Interest and other, net
$ (216)   $ (20)   $ (62)   $ 37   
Interest rate contracts
Interest and other, net
(14)   (25)   (91)   (39)  
Other
Various
225    35    (43)   181   
Total
$ (5)   $ (10)   $ (196)   $ 179