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Derivative Financial Instruments and Risk Management (Tables)
 3 Months Ended
Mar. 31, 2019
Derivative  
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
 
March 31, 2019
 
December 31, 2018
Designated derivatives
 
 
 
 
 
Foreign exchange contracts
 
 
 

 
 

Machinery, Energy & Transportation
Receivables – trade and other
 
$
19

 
$
16

Machinery, Energy & Transportation
Accrued expenses
 
(16
)
 
(26
)
Machinery, Energy & Transportation
Other liabilities
 
(3
)
 
(9
)
Financial Products
Receivables – trade and other
 
44

 
53

Financial Products
Long-term receivables – trade and other
 
44

 
35

Financial Products
Accrued expenses
 
(5
)
 
(9
)
Interest rate contracts
 
 
 
 
 

Financial Products
Receivables – trade and other
 
—

 
1

Financial Products
Long-term receivables – trade and other
 
3

 
3

Financial Products
Accrued expenses
 
(58
)
 
(40
)
 
 
 
$
28

 
$
24

Undesignated derivatives
 
 
 

 
 

Foreign exchange contracts
 
 
 

 
 

Machinery, Energy & Transportation
Receivables – trade and other
 
$
2

 
$
2

Machinery, Energy & Transportation
Accrued expenses
 
(5
)
 
(21
)
Financial Products
Receivables – trade and other
 
9

 
15

Financial Products
Long-term receivables – trade and other
 
6

 
5

Financial Products
Accrued expenses
 
(13
)
 
(14
)
Commodity contracts
 
 
 
 
 

Machinery, Energy & Transportation
Receivables – trade and other
 
6

 
1

Machinery, Energy & Transportation
Accrued expenses
 
(8
)
 
(31
)
 
 
 
$
(3
)
 
$
(43
)
 
 
 
 
 
 
Total notional amounts of derivative instruments
The total notional amounts of the derivative instruments are as follows:

 
 
 
 
 
(Millions of dollars)
 
March 31, 2019
 
December 31, 2018
 
 
 
 
 
Machinery, Energy & Transportation
 
$
2,003

 
$
1,834

Financial Products
 
$
9,001

 
$
10,210

 
 
 
 
 
Cumulative basis adjustments for fair value hedges
 
 
 
 
 
 
 
 
 
 
Effect of derivatives designated as hedging instruments on Consolidated Statement of Results of Operations
is as follows:

 
 
 
 
 
 
 
 
Cash Flow Hedges
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2019
 
 
 
Recognized in Earnings
 (Millions of dollars)
Amount of Gains
(Losses) Recognized 
in AOCI
 
Classification of
Gains (Losses)
 
Amount of Gains
(Losses) Reclassified
from AOCI
 
Amount of the line items in the Consolidated Statement of Results of Operations containing hedging gains (losses)
Foreign exchange contracts
 

 
 
 
 

 
 

Machinery, Energy & Transportation
$
17

 
 
 
 
 
 
 


 
Sales of Machinery, Energy & Transportation
 
$
1

 
$
12,724

 
 
 
Cost of goods sold
 
(3
)
 
$
9,003

Financial Products
22

 
 
 
 
 
 
 


 
Interest expense of Financial Products
 
7

 
$
190

 
 
 
Other income (expense)
 
6

 
$
160

Interest rate contracts
 
 
 
 
 
 
 
Machinery, Energy & Transportation
—

 
Interest expense excluding Financial Products
 
(1
)
 
$
103

Financial Products
(26
)
 
Interest expense of Financial Products
 
1

 
$
190

 
$
13

 
 
 
$
11

 


 
Three Months Ended March 31, 2018
 
 
 
Recognized in Earnings
 
Amount of Gains
(Losses) Recognized
in AOCI
(Effective Portion)
 
Classification of
Gains (Losses)
 
Amount of Gains
(Losses) Reclassified
from AOCI
 
Recognized in Earnings (Ineffective Portion)
Foreign exchange contracts
 
 
 
 
 
 
 
Machinery, Energy & Transportation
$
39

 
Other income (expense)
 
$
1

 
$
—

Financial Products
(33
)
 
Other income (expense)
 
(29
)
 
—

Financial Products


 
Interest expense of Financial Products
 
3

 
—

Interest rate contracts
 

 
 
 
 

 
 
Financial Products
—

 
Interest expense of Financial Products
 
1

 
—

 
$
6

 
 
 
$
(24
)
 
$
—

 
 
 
 
 
 
 
 
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 March 31, 2019
 
Three Months Ended March 31, 2018
Foreign exchange contracts
 
 
 
 
 
Machinery, Energy & Transportation
Other income (expense)
 
$
6

 
$
16

Financial Products
Other income (expense)
 
(29
)
 
(7
)
Commodity contracts
 
 
 

 
 
Machinery, Energy & Transportation
Other income (expense)
 
23

 
(9
)
 
 
 
$
—

 
$
—

 
 
 
 
 
 
Effect of net settlement provisions of the master netting agreements on derivative assets
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:

 
 
 
 
 
 
 
 
 
 
 
 
 
March 31, 2019
 
 
 
 
 
 
 
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, Energy & Transportation
 
$
27

 
$
—

 
$
27

 
$
(19
)
 
$
—

 
$
8

Financial Products
 
106

 
—

 
106

 
(22
)
 
—

 
84

 Total
 
$
133

 
$
—

 
$
133

 
$
(41
)
 
$
—

 
$
92

December 31, 2018
 
 
 
 
 
 
 
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, Energy & Transportation
 
$
19

 
$
—

 
$
19

 
$
(19
)
 
$
—

 
$
—

Financial Products
 
112

 
—

 
112

 
(34
)
 
—

 
78

 Total
 
$
131

 
$
—

 
$
131

 
$
(53
)
 
$
—

 
$
78
Effect of net settlement provisions of the master netting agreements on derivative liabilities
December 31, 2018
 
 
 
 
 
 
 
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, Energy & Transportation
 
$
(87
)
 
$
—

 
$
(87
)
 
$
19

 
$
—

 
$
(68
)
Financial Products
 
(63
)
 
—

 
(63
)
 
34

 
—

 
(29
)
 Total
 
$
(150
)
 
$
—

 
$
(150
)
 
$
53

 
$
—

 
$
(97
)
 
 
 
 
 
 
 
 
 
 
 
 
 
March 31, 2019
 
 
 
 
 
 
 
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, Energy & Transportation
 
$
(32
)
 
$
—

 
$
(32
)
 
$
19

 
$
—

 
$
(13
)
Financial Products
 
(76
)
 
—

 
(76
)
 
22

 
—

 
(54
)
 Total
 
$
(108
)
 
$
—

 
$
(108
)
 
$
41

 
$
—

 
$
(67
)