Derivative Financial Instruments

3 Months Ended

Mar. 31, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

Derivative Financial Instruments

Risk Management Objective of Using Derivatives

We are exposed to certain risks arising from both our business operations and economic conditions and principally manage our exposures to these risks through management of our core business activities. Certain of our foreign operations expose us to fluctuations of foreign interest rates and exchange rates that may impact revenues, expenses, cash receipts and payments. We enter into derivative financial instruments to protect the value or fix the amount of certain cash flows in terms of the functional currency of the business unit with that exposure.

Cash Flow Hedges of Foreign Exchange Risk

We are exposed to fluctuations in various foreign currencies against our functional currencies. We use foreign currency derivatives including currency forward agreements to manage our exposure to fluctuations in the various exchange rates. Currency forward agreements involve fixing the foreign currency exchange rate for delivery of a specified amount of foreign currency on a specified date.

Certain business units within our segments with exposure to foreign currency exchange risks have designated certain currency forward agreements as cash flow hedges of forecasted intercompany inventory purchases and sales.

Listed in the table below are the outstanding foreign currency derivatives that were used to hedge foreign exchange risks as of March 31, 2014.

(in millions; except number of instruments)
Foreign Currency Derivative	Number of Instruments	Total Notional Sold	Sell Notional Currency	Total Notional Purchased	Buy Notional Currency
Buy HUF/Sell EUR forward	8	8	Euro (EUR)	2,410	Hungarian Forint (HUF)
Buy PLN/ Sell EUR forward	16	19	Euro (EUR)	78	Polish Zloty (PLN)
Buy SEK/Sell EUR forward	8	100	Euro (EUR)	903	Swedish Krona (SEK)
Sell AUD/Buy EUR Forward	16	20	Australian Dollar (AUD)	13	Euro (EUR)
Sell AUD/Buy USD Forward	7	6	Australian Dollar (AUD)	6	United States Dollar (USD)
Sell GBP/Buy EUR forward	21	33	British Pound Sterling (GBP)	40	Euro (EUR)
Sell USD/Buy EUR Forward	36	105	United States Dollar (USD)	76	Euro (EUR)

The table below presents the effect of our derivative financial instruments on the Condensed Consolidated Income Statements and Statements of Comprehensive Income.

	Three Months Ended
	March 31,
(in millions)	2014			2013
Derivatives in Cash Flow Hedges
Foreign Exchange Contracts
Amount of gain (loss) recognized in Other Comprehensive Income (a)	$	(1	)	$	(2	)
Amount of (gain) loss reclassified from Other Comprehensive Income into revenue (a)	(1		)	(1		)
Amount of (gain) loss reclassified from Other Comprehensive Income into cost of revenue (a)	1			—

(a) Effective portion

As of March 31, 2014, $1 million of the net unrealized gains on cash flow hedges is expected to be reclassified into earnings in the next 12 months. The ineffective portion of the change in fair value of a cash flow hedge is excluded from effectiveness testing and is recognized immediately in selling, general and administrative expenses in the Condensed Consolidated Income Statements. For the three months ended March 31,2014 and 2013, the amounts were not material.

The fair values of our foreign exchange contracts currently included in our hedging program were as follows:

(in millions)	March 31, 2014			December 31, 2013
Derivatives designated as hedging instruments
Assets
Other current assets	$	1		$	1
Liabilities
Other current liabilities	(1		)	—