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Derivative Financial Instruments and Risk Management (Tables)
 9 Months Ended
Sep. 30, 2013
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Location and fair value of derivative instruments reported in the Consolidated Statement of Financial Position
The location and fair value of derivative instruments reported in the Consolidated Statement of Financial Position are as follows:
 
(Millions of dollars)
 
 
 
 
 
 
Consolidated Statement of Financial
 
Asset (Liability) Fair Value
 
Position Location
 
September 30, 2013
 
December 31, 2012
Designated derivatives
 
 
 
 
 
Foreign exchange contracts
 
 
 

 
 

Machinery and Power Systems
Receivables – trade and other
 
$
49

 
$
28

Machinery and Power Systems
Long-term receivables – trade and other
 
1

 
—

Machinery and Power Systems
Accrued expenses
 
(24
)
 
(66
)
Interest rate contracts
 
 
 
 
 

Financial Products
Receivables – trade and other
 
12

 
17

Financial Products
Long-term receivables – trade and other
 
130

 
209

Financial Products
Accrued expenses
 
(6
)
 
(8
)
 
 
 
$
162

 
$
180

Undesignated derivatives
 
 
 

 
 

Foreign exchange contracts
 
 
 

 
 

Machinery and Power Systems
Receivables – trade and other
 
$
42

 
$
31

Machinery and Power Systems
Accrued expenses
 
(31
)
 
(63
)
Financial Products
Receivables – trade and other
 
13

 
10

Financial Products
Long-term receivables – trade and other
 
8

 
—

Financial Products
Accrued expenses
 
(7
)
 
(6
)
Interest rate contracts
 
 
 
 
 

Financial Products
Receivables – trade and other
 
—

 
2

Financial Products
Accrued expenses
 
—

 
(1
)
Commodity contracts
 
 
 
 
 

Machinery and Power Systems
Receivables – trade and other
 
—

 
1

Machinery and Power Systems
Accrued expenses
 
(1
)
 
—

 
 
 
$
24

 
$
(26
)
 
 
 
 
 
 
Effect of derivatives designated as hedging instruments on Consolidated Statement of Results of Operations
The effect of derivatives designated as hedging instruments on the Consolidated Statement of Results of Operations is as follows: 

Fair Value Hedges
(Millions of dollars)
 
 
 
 
 
 
 
 
Three Months Ended
September 30, 2013
 
Three Months Ended
September 30, 2012
 
Classification
 
Gains (Losses) 
on Derivatives
 
Gains (Losses) 
on Borrowings
 
Gains (Losses) 
on Derivatives
 
Gains (Losses) 
on Borrowings
Interest rate contracts
 
 
 
 
 
 
 
 
 

Financial Products
Other income (expense)
 
$
(9
)
 
$
12

 
$
7

 
$
(3
)
 
 
 
$
(9
)
 
$
12

 
$
7

 
$
(3
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended
September 30, 2013
 
Nine Months Ended
September 30, 2012
 
Classification
 
Gains (Losses) 
on Derivatives
 
Gains (Losses) 
on Borrowings
 
Gains (Losses) 
on Derivatives
 
Gains (Losses) 
on Borrowings
Interest rate contracts
 
 
 
 
 
 
 
 
 
Financial Products
Other income (expense)
 
$
(87
)
 
$
92

 
$
4

 
$
7

 
 
 
$
(87
)
 
$
92

 
$
4

 
$
7

 
 
 
 
 
 
 
 
 
 

Cash Flow Hedges
(Millions of dollars)
 
 
 
 
 
 
 
 
 
Three Months Ended September 30, 2013
 
 
 
 
Recognized in Earnings
 
 
Amount of Gains
(Losses) Recognized 
in AOCI
(Effective Portion)
 
Classification of 
Gains (Losses)
 
Amount of
Gains (Losses)
Reclassified 
from AOCI to
Earnings
 
Recognized
in Earnings 
(Ineffective
Portion)
 
Foreign exchange contracts
 

 
 
 
 

 
 

 
Machinery and Power Systems
$
44

 
Other income (expense)
 
$
(12
)

$
—

 
Interest rate contracts
 
 
 
 
 
 
 
 
Machinery and Power Systems
—

 
Other income (expense)
 
(1
)
 
—

 
Financial Products
(3
)
 
Interest expense of Financial Products
 
(1
)
 
—


 
$
41

 
 
 
$
(14
)
 
$
—

 

 
Three Months Ended September 30, 2012
 
 
 
 
Recognized in Earnings
 
 
Amount of Gains
(Losses) Recognized 
in AOCI
(Effective Portion)
 
Classification of 
Gains (Losses)
 
Amount of
Gains (Losses)
Reclassified 
from AOCI to
Earnings
 
Recognized
in Earnings 
(Ineffective
Portion)
 
Foreign exchange contracts
 
 
 
 
 
 
 
 
Machinery and Power Systems
$
(6
)
 
Other income (expense)
 
$
(14
)
 
$
—

 
Interest rate contracts
 

 
 
 
 

 
 

 
Machinery and Power Systems
—

 
Other income (expense)
 
1

 
—

 
Financial Products
(6
)
 
Interest expense of Financial Products
 
(1
)
 
—


 
$
(12
)
 
 
 
$
(14
)
 
$
—

 
 
Nine Months Ended September 30, 2013
 
 
 
 
Recognized in Earnings
 
 
Amount of Gains
(Losses) Recognized 
in AOCI
(Effective Portion)
 
Classification of 
Gains (Losses)
 
Amount of
Gains (Losses)
Reclassified 
from AOCI to
Earnings
 
Recognized
in Earnings 
(Ineffective
Portion)
 
Foreign exchange contracts
 
 
 
 
 
 
 
 
Machinery and Power Systems
$
4

 
Other income (expense)
 
$
(60
)
2 
$
—

 
Interest rate contracts
 
 
 
 
 

 
 

 
Machinery and Power Systems
—

 
Other income (expense)
 
(2
)
 
—

 
Financial Products
—

 
Interest expense of Financial Products
 
(4
)
 
—


 
$
4

 
 
 
$
(66
)
 
$
—

 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2012
 
 
 
 
Recognized in Earnings
 
 
Amount of Gains
(Losses) Recognized 
in AOCI
(Effective Portion)
 
Classification of 
Gains (Losses)
 
Amount of
Gains (Losses)
Reclassified 
from AOCI to
Earnings
 
Recognized
in Earnings 
(Ineffective
Portion)
 
Foreign exchange contracts
 
 
 
 
 
 
 
 
Machinery and Power Systems
$
(48
)
 
Other income (expense)
 
$
(13
)
 
$
—

 
Interest rate contracts
 

 
 
 
 

 
 

 
Financial Products
(8
)
 
Interest expense of Financial Products
 
(3
)
 
(1
)
1 
 
$
(56
)
 
 
 
$
(16
)
 
$
(1
)
 
 
 
 
 
 
 
 
 
 
1 
The ineffective portion recognized in earnings is included in Other income (expense).
2 
Includes $3 million loss reclassified from AOCI to Other income (expense) in 2013 as certain derivatives were dedesignated as the related transactions are no longer probable to occur.
 
 
 
 
 
Effect of derivatives not designated as hedging instruments on the Consolidated Statement of Results of Operations
The effect of derivatives not designated as hedging instruments on the Consolidated Statement of Results of Operations is as follows: 
 
(Millions of dollars)
 
 
 

 
 
 
Classification of Gains (Losses)
 
Three Months Ended
September 30, 2013
 
Three Months Ended
September 30, 2012
Foreign exchange contracts
 
 
 
 
 
Machinery and Power Systems
Other income (expense)
 
$
15

 
$
(9
)
Financial Products
Other income (expense)
 
3

 
5

Interest rate contracts
 
 
 

 
 
Financial Products
Other income (expense)
 
(1
)
 
—

Commodity contracts
 
 
 

 
 
Machinery and Power Systems
Other income (expense)
 
2

 
3

 
 
 
$
19

 
$
(1
)
 
 
 
 
 
 
 
Classification of Gains (Losses)
 
Nine Months Ended
September 30, 2013
 
Nine Months Ended
September 30, 2012
Foreign exchange contracts
 
 
 
 
 
Machinery and Power Systems
Other income (expense)
 
$
7

 
$
21

Financial Products
Other income (expense)
 
4

 
7

Interest rate contracts
 
 
 
 
 
Financial Products
Other income (expense)
 
(1
)
 
—

Commodity contracts
 
 
 
 
 
Machinery and Power Systems
Other income (expense)
 
(2
)
 
3

 
 
 
$
8

 
$
31

 
 
 
 
 
 
Effect of net settlement provisions of the master netting agreements on derivative assets
December 31, 2012
 
 
 
 
 
 
 
Gross Amounts Not Offset in the Statement of Financial Position
 
 
(Millions of dollars)
 
Gross Amount of Recognized Assets
 
Gross Amounts Offset in the Statement of Financial Position
 
Net Amount of Assets Presented in the Statement of Financial Position
 
Financial Instruments
 
Cash Collateral Received
 
Net Amount of Assets
Derivatives
 
 
 
 
 
 
 
 
 
 
 
 
Machinery & Power Systems
 
$
60

 
$
—

 
$
60

 
$
(59
)
 
$
—

 
$
1

Financial Products
 
238

 
—

 
238

 
(12
)
 
—

 
226

 Total
 
$
298

 
$
—

 
$
298

 
$
(71
)
 
$
—

 
$
227

The effect of the net settlement provisions of the master netting agreements on our derivative balances upon an event of default or termination event is as follows:
September 30, 2013
 
 
 
 
 
 
 
Gross Amounts Not Offset in the Statement of Financial Position
 
 
(Millions of dollars)
 
Gross Amount of Recognized Assets
 
Gross Amounts Offset in the Statement of Financial Position
 
Net Amount of Assets Presented in the Statement of Financial Position
 
Financial Instruments
 
Cash Collateral Received
 
Net Amount of Assets
Derivatives
 
 
 
 
 
 
 
 
 
 
 
 
Machinery & Power Systems
 
$
92

 
$
—

 
$
92

 
$
(52
)
 
$
—

 
$
40

Financial Products
 
163

 
—

 
163

 
(9
)
 
—

 
154

 Total
 
$
255

 
$
—

 
$
255

 
$
(61
)
 
$
—

 
$
194
Effect of net settlement provisions of the master netting agreements on derivative liabilities
September 30, 2013
 
 
 
 
 
 
 
Gross Amounts Not Offset in the Statement of Financial Position
 
 
(Millions of dollars)
 
Gross Amount of Recognized Liabilities
 
Gross Amounts Offset in the Statement of Financial Position
 
Net Amount of Liabilities Presented in the Statement of Financial Position
 
Financial Instruments
 
Cash Collateral Pledged
 
Net Amount of Liabilities
Derivatives
 
 
 
 
 
 
 
 
 
 
 
 
Machinery & Power Systems
 
$
(56
)
 
$
—

 
$
(56
)
 
$
52

 
$
—

 
$
(4
)
Financial Products
 
(13
)
 
—

 
(13
)
 
9

 
—

 
(4
)
 Total
 
$
(69
)
 
$
—

 
$
(69
)
 
$
61

 
$
—

 
$
(8
)
December 31, 2012
 
 
 
 
 
 
 
Gross Amounts Not Offset in the Statement of Financial Position
 
 
(Millions of dollars)
 
Gross Amount of Recognized Liabilities
 
Gross Amounts Offset in the Statement of Financial Position
 
Net Amount of Liabilities Presented in the Statement of Financial Position
 
Financial Instruments
 
Cash Collateral Pledged
 
Net Amount of Liabilities
Derivatives
 
 
 
 
 
 
 
 
 
 
 
 
Machinery & Power Systems
 
$
(129
)
 
$
—

 
$
(129
)
 
$
59

 
$
—

 
$
(70
)
Financial Products
 
(15
)
 
—

 
(15
)
 
12

 
—

 
(3
)
 Total
 
$
(144
)
 
$
—

 
$
(144
)
 
$
71

 
$
—

 
$
(73
)