FINANCIAL INSTRUMENTS

A summary of the Company's financial instruments, risk management policies, derivative instruments and hedging activities can be found in Note 11 to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2016. If applicable, updates have been included in the respective section below.

The following table summarizes the fair value of financial instruments at March 31, 2017 and December 31, 2016:



Fair Value of Financial Instruments
	At March 31, 2017											At December 31, 2016
In millions	Cost			Gain		Loss			Fair Value			Cost			Gain		Loss			Fair Value
Marketable securities: (1)
Debt securities:
Government debt (2)	$	616		$	14	$	(11	)	$	619		$	607		$	13	$	(12	)	$	608
Corporate bonds	632			27		(4		)	655			623			27		(5		)	645
Total debt securities	$	1,248		$	41	$	(15	)	$	1,274		$	1,230		$	40	$	(17	)	$	1,253
Equity securities	665			106		(35		)	736			658			98		(50		)	706
Total marketable securities	$	1,913		$	147	$	(50	)	$	2,010		$	1,888		$	138	$	(67	)	$	1,959
Long-term debt including debt due within one year (3)	$	(21,087	)	$	31	$	(1,993	)	$	(23,049	)	$	(21,091	)	$	129	$	(1,845	)	$	(22,807	)
Derivatives relating to:
Interest rates	$	—		$	—	$	(4	)	$	(4	)	$	—		$	—	$	(5	)	$	(5	)
Commodities (4)	$	—		$	103	$	(287	)	$	(184	)	$	—		$	56	$	(213	)	$	(157	)
Foreign currency	$	—		$	50	$	(56	)	$	(6	)	$	—		$	84	$	(30	)	$	54


(1)	Included in “Other investments” in the consolidated balance sheets.


(2)	U.S. Treasury obligations, U.S. agency obligations, agency mortgage-backed securities and other municipalities’ obligations.


(3)	Cost includes fair value hedge adjustments of $17 million at March 31, 2017 and $18 million at December 31, 2016.


(4)	Presented net of cash collateral, as disclosed in Note 8.

Investments

The Company’s investments in marketable securities are primarily classified as available-for-sale. The following table provides the investing results from available-for-sale securities for the three-month periods ended March 31, 2017 and 2016:



Investing Results	Three Months Ended
In millions	Mar 31, 2017			Mar 31, 2016
Proceeds from sales of available-for-sale securities	$	116		$	121
Gross realized gains	$	14		$	6
Gross realized losses	$	(2	)	$	—

The following table summarizes the contractual maturities of the Company’s investments in debt securities:



Contractual Maturities of Debt Securities at March 31, 2017
In millions	Amortized Cost		Fair Value
Within one year	$	21	$	21
One to five years	327		335
Six to ten years	674		677
After ten years	226		241
Total	$	1,248	$	1,274

At March 31, 2017, the Company had $27 million ($261 million at December 31, 2016) of held-to-maturity securities (primarily Treasury Bills) classified as cash equivalents, as these securities had maturities of three months or less at the time of purchase. The Company’s investments in held-to-maturity securities are held at amortized cost, which approximates fair value. At March 31, 2017, the Company had investments in money market funds of $1,086 million classified as cash equivalents ($239 million at December 31, 2016).

The aggregate cost of the Company’s cost method investments totaled $120 million at March 31, 2017 ($120 million at December 31, 2016). Due to the nature of these investments, either the cost basis approximates fair market value or fair value is not readily determinable. These investments are reviewed quarterly for impairment indicators. The Company's impairment analysis resulted in no reduction in the cost basis of these investments for the three-month periods ended March 31, 2017 and 2016.

Accounting for Derivative Instruments and Hedging Activities

Fair Value Hedges

For interest rate swap instruments that are designated and qualify as fair value hedges, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in current period income and reflected as “Interest expense and amortization of debt discount” in the consolidated statements of income. The short-cut method is used when the criteria are met. At March 31, 2017, the Company had interest rate swaps with a gross notional U.S. dollar equivalent of $200 million (zero at December 31, 2016) designated as a fair value hedge of underlying fixed rate debt obligations with maturity dates extending through 2022. The fair value adjustments resulting from these swaps were a loss of less than $1 million for the three months ended March 31, 2017 (zero for the three months ended March 31, 2016).

Net Foreign Investment Hedges

For derivative instruments that are designated and qualify as net foreign investment hedges, the effective portion of the gain or loss on the derivative is included in “Cumulative Translation Adjustments” in "Accumulated other comprehensive loss" ("AOCL"). The Company had open foreign currency contracts designated as net foreign investment hedges with a gross notional U.S. dollar equivalent of $4,460 million at March 31, 2017 ($2,641 million at December 31, 2016). In addition, at March 31, 2017, the Company had outstanding foreign-currency denominated debt designated as a hedge of net foreign investment of $179 million ($172 million at December 31, 2016). The results of hedges of the Company’s net investment in foreign operations included in “Cumulative Translation Adjustments” in AOCL was a net loss of $2 million after tax at March 31, 2017 (net gain of $1 million after tax at December 31, 2016).

The following table provides the fair value and gross balance sheet classification of derivative instruments at March 31, 2017 and December 31, 2016:



Fair Value of Derivative Instruments In millions	Balance Sheet Classification	Mar 31, 2017		Dec 31, 2016
Asset Derivatives
Derivatives designated as hedges:
Commodities	Other current assets	$	25	$	42
Commodities	Deferred charges and other assets	10		10
Foreign currency	Accounts and notes receivable - Other	79		90
Total derivatives designated as hedges		$	114	$	142
Derivatives not designated as hedges:
Commodities	Other current assets	$	73	$	13
Commodities	Deferred charges and other assets	9		12
Foreign currency	Accounts and notes receivable - Other	102		103
Total derivatives not designated as hedges		$	184	$	128
Total asset derivatives		$	298	$	270
Liability Derivatives
Derivatives designated as hedges:
Interest rates	Accrued and other current liabilities	$	2	$	3
Interest rates	Other noncurrent obligations	2		2
Commodities	Accrued and other current liabilities	37		32
Commodities	Other noncurrent obligations	206		196
Foreign currency	Accrued and other current liabilities	64		55
Total derivatives designated as hedges		$	311	$	288
Derivatives not designated as hedges:
Commodities	Accrued and other current liabilities	$	71	$	4
Commodities	Other noncurrent obligations	1		2
Foreign currency	Accounts payable - Other	123		84
Total derivatives not designated as hedges		$	195	$	90
Total liability derivatives		$	506	$	378

Foreign currency derivatives not designated as hedges are used to offset foreign exchange gains or losses resulting from the underlying exposures of foreign currency denominated assets and liabilities.

The net after-tax amounts to be reclassified from AOCL to income within the next 12 months are a $2 million loss for interest rate contracts, a $3 million gain for commodity contracts and a $10 million gain for foreign currency contracts.