Financial Instruments

Cash Equivalents and Available-for-Sale Investments

Cash equivalents and available-for-sale investments were as follows:



	As of July 31, 2018									As of October 31, 2017
	Cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value		Cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value
	In millions
Cash Equivalents:
Time deposits	$	954	$	—	$	—		$	954	$	1,159	$	—	$	—		$	1,159
Money market funds	2,461		—		—			2,461		5,592		—		—			5,592
Total cash equivalents	3,415		—		—			3,415		6,751		—		—			6,751
Available-for-Sale Investments:
Foreign bonds	116		21		—			137		183		40		—			223
Other debt securities	27		—		(2		)	25		37		—		(11		)	26
Total available-for-sale investments	143		21		(2		)	162		220		40		(11		)	249
Total cash equivalents and available-for-sale investments	$	3,558	$	21	$	(2	)	$	3,577	$	6,971	$	40	$	(11	)	$	7,000

As of July 31, 2018 and October 31, 2017, the carrying amount of cash equivalents approximated fair value due to the short period of time to maturity. Time deposits were primarily issued by institutions outside the U.S. as of July 31, 2018 and October 31, 2017. The estimated fair value of the available-for-sale investments may not be representative of values that will be realized in the future.

Contractual maturities of investments in available-for-sale debt securities were as follows:



	July 31, 2018
	Amortized Cost		Fair Value
	In millions
Due in more than five years	$	143	$	162

Equity securities in privately held companies that are accounted for as cost method investments are included in Long-term financing receivables and other assets in the Condensed Consolidated Balance Sheets. These investments amounted to $165 million and $149 million at July 31, 2018 and October 31, 2017, respectively.

Investments in equity securities that are accounted for using the equity method are included in Investments in equity interests in the Condensed Consolidated Balance Sheets. These investments amounted to $2.5 billion at July 31, 2018 and October 31, 2017.

Fair Value of Derivative Instruments in the Condensed Consolidated Balance Sheets

The gross notional and fair value of derivative instruments in the Condensed Consolidated Balance Sheets were as follows:



	As of July 31, 2018										As of October 31, 2017
			Fair Value										Fair Value
	Outstanding Gross Notional		Other Current Assets		Long-Term Financing Receivables and Other Assets		Other Accrued Liabilities		Long-Term Other Liabilities		Outstanding Gross Notional		Other Current Assets		Long-Term Financing Receivables and Other Assets		Other Accrued Liabilities		Long-Term Other Liabilities
	In millions
Derivatives designated as hedging instruments
Fair value hedges:
Interest rate contracts	$	7,900	$	—	$	—	$	3	$	333	$	9,500	$	—	$	—	$	16	$	126
Cash flow hedges:
Foreign currency contracts	8,298		179		62		39		49		7,202		105		45		101		70
Net investment hedges:
Foreign currency contracts	1,817		25		29		22		13		1,944		35		10		36		41
Total derivatives designated as hedging instruments	18,015		204		91		64		395		18,646		140		55		153		237
Derivatives not designated as hedging instruments
Foreign currency contracts	7,568		25		7		34		8		9,552		61		3		79		8
Other derivatives	107		2		—		—		—		96		1		—		—		—
Total derivatives not designated as hedging instruments	7,675		27		7		34		8		9,648		62		3		79		8
Total derivatives	$	25,690	$	231	$	98	$	98	$	403	$	28,294	$	202	$	58	$	232	$	245

Offsetting of Derivative Instruments

The Company recognizes all derivative instruments on a gross basis in the Condensed Consolidated Balance Sheets. The Company's derivative instruments are subject to master netting arrangements and collateral security arrangements. The Company does not offset the fair value of its derivative instruments against the fair value of cash collateral posted under collateral security agreements. As of July 31, 2018 and October 31, 2017, information related to the potential effect of the Company's use of the master netting agreements and collateral security agreements was as follows:



	As of July 31, 2018
	In the Condensed Consolidated Balance Sheets
	(i)		(ii)		(iii) = (i)–(ii)		(iv)		(v)			(vi) = (iii)–(iv)–(v)
							Gross Amounts Not Offset
	Gross Amount Recognized		Gross Amount Offset		Net Amount Presented		Derivatives		Financial Collateral			Net Amount
	In millions
Derivative assets	$	329	$	—	$	329	$	160	$	104	⁽¹⁾	$	65
Derivative liabilities	$	501	$	—	$	501	$	160	$	254	⁽²⁾	$	87



	As of October 31, 2017
	In the Condensed Consolidated Balance Sheets
	(i)		(ii)		(iii) = (i)–(ii)		(iv)		(v)			(vi) = (iii)–(iv)–(v)
							Gross Amounts Not Offset
	Gross Amount Recognized		Gross Amount Offset		Net Amount Presented		Derivatives		Financial Collateral			Net Amount
	In millions
Derivative assets	$	260	$	—	$	260	$	209	$	34	⁽¹⁾	$	17
Derivative liabilities	$	477	$	—	$	477	$	209	$	242	⁽³⁾	$	26


(1)	Represents the cash collateral posted by counterparties as of the respective reporting date for the Company's asset position, net of derivative amounts that could be offset, as of, generally, two business days prior to the respective reporting date.

(2)

Represents the collateral posted by the Company in cash or through the re-use of counterparty cash collateral as of the respective reporting date for the Company's liability position, net of derivative amounts that could be offset, as of, generally, two business days prior to the respective reporting date. Of the $254 million of collateral posted, $205 million was in cash and, $49 million was through re-use of counterparty collateral.

(3)

Represents the collateral posted by the Company in cash or through the re-use of counterparty cash collateral as of the respective reporting date for the Company's liability position, net of derivative amounts that could be offset, as of, generally, two business days prior to the respective reporting date. Of the $242 million of collateral posted, $220 million was in cash and, $22 million was through re-use of counterparty collateral.

Effect of Derivative Instruments on the Condensed Consolidated Statements of Earnings

The pre-tax effect of derivative instruments and related hedged items in a fair value hedging relationship for the three and nine months ended July 31, 2018 and 2017 were as follows:



	Gains (Losses) Recognized in Earnings on Derivative and Related Hedged Item
Derivative Instrument	Location	Three months ended July 31, 2018		Nine months ended July 31, 2018			Hedged Item	Location	Three months ended July 31, 2018			Nine months ended July 31, 2018
		In millions							In millions
Interest rate contracts	Interest and other, net	$	16	$	(194	)	Fixed-rate debt	Interest and other, net	$	(16	)	$	194



	Gains (Losses) Recognized in Earnings on Derivative and Related Hedged Item
Derivative Instrument	Location	Three months ended July 31, 2017		Nine months ended July 31, 2017			Hedged Item	Location	Three months ended July 31, 2017			Nine months ended July 31, 2017
		In millions							In millions
Interest rate contracts	Interest and other, net	$	23	$	(202	)	Fixed-rate debt	Interest and other, net	$	(23	)	$	202

The pre-tax effect of derivative instruments in cash flow and net investment hedging relationships for the three and nine months ended July 31, 2018 were as follows:



	Gains (Losses) Recognized in Other Comprehensive Income ("OCI") on Derivatives (Effective Portion)					Gains (Losses) Reclassified from Accumulated OCI Into Earnings (Effective Portion)
	Three months ended July 31, 2018		Nine months ended July 31, 2018			Location	Three months ended July 31, 2018		Nine months ended July 31, 2018
	In millions						In millions
Cash flow hedges:
Foreign currency contracts	$	121	$	59		Net revenue	$	29	$	(82	)
Foreign currency contracts	28		(9		)	Interest and other, net	14		4
Total cash flow hedges	$	149	$	50		Net earnings from continuing operations	$	43	$	(78	)
Net investment hedges:
Foreign currency contracts	$	57	$	31		Interest and other, net	$	—	$	—

The pre-tax effect of derivative instruments in cash flow and net investment hedging relationships for the three and nine months ended July 31, 2017 was as follows:



	Gains (Losses) Recognized in Other Comprehensive Income ("OCI") on Derivatives (Effective Portion)						Gains (Losses) Reclassified from Accumulated OCI Into Earnings (Effective Portion)
	Three months ended July 31, 2017			Nine months ended July 31, 2017			Location	Three months ended July 31, 2017			Nine months ended July 31, 2017
	In millions							In millions
Cash flow hedges:
Foreign currency contracts	$	(160	)	$	(163	)	Net revenue	$	(45	)	$	9
Foreign currency contracts	—			(1		)	Cost of products	—			—
Foreign currency contracts	28			170			Interest and other, net	29			178
Subtotal	(132		)	6			Net earnings from continuing operations	(16		)	187
Foreign currency contracts	(1		)	1			Net loss from discontinued operations	1			44
Total cash flow hedges	$	(133	)	$	7		Net earnings (loss)	$	(15	)	$	231
Net investment hedges:
Foreign currency contracts	$	(97	)	$	(107	)	Interest and other, net	$	—		$	—

As of July 31, 2018 and 2017, no portion of the hedging instruments' gain or loss was excluded from the assessment of effectiveness for fair value, cash flow or net investment hedges. Hedge ineffectiveness for fair value, cash flow, and net investment hedges was not material for the three and nine months ended July 31, 2018 and 2017.

As of July 31, 2018, the Company expects to reclassify an estimated net Accumulated other comprehensive gain of approximately $71 million, net of taxes, to earnings in the next twelve months, along with the earnings effects of the related forecasted transactions associated with cash flow hedges.

The pre-tax effect of derivative instruments not designated as hedging instruments on the Condensed Consolidated Statements of Earnings for the three and nine months ended July 31, 2018 and 2017 was as follows:



		Gains (Losses) Recognized in Earnings on Derivatives
	Location	Three months ended July 31, 2018		Three months ended July 31, 2017			Nine months ended July 31, 2018		Nine months ended July 31, 2017
		In millions
Foreign currency contracts	Interest and other, net	$	233	$	(279	)	$	104	$	(525	)
Other derivatives	Interest and other, net	—		—			—		4
Total		$	233	$	(279	)	$	104	$	(521	)