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 June 30, 2017 and December 31, 2016:



Fair Value of Financial Instruments
	At June 30, 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)	$	610		$	15	$	(8	)	$	617		$	607		$	13	$	(12	)	$	608
Corporate bonds	610			30		(3		)	637			623			27		(5		)	645
Total debt securities	$	1,220		$	45	$	(11	)	$	1,254		$	1,230		$	40	$	(17	)	$	1,253
Equity securities	690			84		(29		)	745			658			98		(50		)	706
Total marketable securities	$	1,910		$	129	$	(40	)	$	1,999		$	1,888		$	138	$	(67	)	$	1,959
Long-term debt including debt due within one year (3)	$	(21,027	)	$	6	$	(2,218	)	$	(23,239	)	$	(21,091	)	$	129	$	(1,845	)	$	(22,807	)
Derivatives relating to:
Interest rates	$	—		$	—	$	(5	)	$	(5	)	$	—		$	—	$	(5	)	$	(5	)
Commodities (4)	$	—		$	61	$	(269	)	$	(208	)	$	—		$	56	$	(213	)	$	(157	)
Foreign currency	$	—		$	25	$	(182	)	$	(157	)	$	—		$	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 $14 million at June 30, 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 six-month periods ended June 30, 2017 and 2016:



Investing Results	Six Months Ended
In millions	Jun 30, 2017			Jun 30, 2016
Proceeds from sales of available-for-sale securities	$	383		$	331
Gross realized gains	$	48		$	23
Gross realized losses	$	(1	)	$	(1	)

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



Contractual Maturities of Debt Securities at June 30, 2017
In millions	Amortized Cost		Fair Value
Within one year	$	10	$	10
One to five years	329		338
Six to ten years	656		663
After ten years	225		243
Total	$	1,220	$	1,254

At June 30, 2017, the Company had $309 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 June 30, 2017, the Company had investments in money market funds of $850 million classified as cash equivalents ($239 million at December 31, 2016).

The aggregate cost of the Company’s cost method investments totaled $116 million at June 30, 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. During the second quarter of 2016, a write-down of $4 million was recorded as part of the 2016 restructuring charge. The Company's impairment analysis resulted in no reduction in the cost basis of these investments for the six-month period ended June 30, 2017 and no reduction, other than the restructuring charge, for the six-month period ended June 30, 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. During the first six months of 2017, the Company entered into and subsequently terminated interest rate swaps designated as fair value hedges of underlying fixed rate debt obligations with maturity dates extending through 2022. The fair value adjustment resulting from these swaps was a gain on the derivatives of $3 million. At June 30, 2017 and December 31, 2016, the Company had no open interest rate swaps designated as fair value hedges of underlying fixed rate debt obligations.

Subsequent to June 30, 2017, the Company entered into, and subsequently terminated, interest rate swaps with gross notional U.S. dollar equivalent of $300 million designated as fair value hedges of underlying fixed rate debt obligations. The fair value adjustment resulting from these swaps was an insignificant gain, which will be recorded in the third quarter of 2017.

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 $4,670 million at June 30, 2017 ($2,641 million at December 31, 2016). In addition, at June 30, 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 after-tax of $39 million at June 30, 2017 (net gain after-tax of $1 million at December 31, 2016).

The following table provides the fair value and gross balance sheet classification of derivative instruments at June 30, 2017 and December 31, 2016:



Fair Value of Derivative Instruments In millions	Balance Sheet Classification	Jun 30, 2017		Dec 31, 2016
Asset Derivatives
Derivatives designated as hedges:
Commodities	Other current assets	$	17	$	42
Commodities	Deferred charges and other assets	11		10
Foreign currency	Accounts and notes receivable - Other	38		90
Total derivatives designated as hedges		$	66	$	142
Derivatives not designated as hedges:
Commodities	Other current assets	$	40	$	13
Commodities	Deferred charges and other assets	9		12
Foreign currency	Accounts and notes receivable - Other	137		103
Total derivatives not designated as hedges		$	186	$	128
Total asset derivatives		$	252	$	270
Liability Derivatives
Derivatives designated as hedges:
Interest rates	Accrued and other current liabilities	$	3	$	3
Interest rates	Other noncurrent obligations	2		2
Commodities	Accrued and other current liabilities	67		32
Commodities	Other noncurrent obligations	190		196
Foreign currency	Accrued and other current liabilities	106		55
Total derivatives designated as hedges		$	368	$	288
Derivatives not designated as hedges:
Commodities	Accrued and other current liabilities	$	49	$	4
Commodities	Other noncurrent obligations	1		2
Foreign currency	Accounts payable - Other	226		84
Total derivatives not designated as hedges		$	276	$	90
Total liability derivatives		$	644	$	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 $35 million loss for commodity contracts and a $14 million loss for foreign currency contracts.