DERIVATIVE INSTRUMENTS

Foreign Currency Hedges

We use operational and economic hedges, foreign currency exchange forward contracts, net investment hedges (both derivative and non-derivative financial instruments) and interest rate derivative instruments to manage the impact of currency exchange and interest rate fluctuations on earnings and cash flow. We do not enter into derivative instruments for speculative purposes. We have not changed our hedging strategies, accounting practices or objectives from those disclosed in our Annual Report on Form 10-K for 2018.



March 2019	Designated			Non-Designated			Total
Gross notional amount	$	844		$	4,529		$	5,373
Maximum term in days							586
Fair value:
Other current assets	$	8		$	100		$	108
Other noncurrent assets	—			16			16
Other current liabilities	(12		)	(5		)	(17		)
Other noncurrent liabilities	(1		)	—			(1		)
Total fair value	$	(5	)	$	111		$	106



December 2018	Designated			Non-Designated			Total
Gross notional amount	$	870		$	5,466		$	6,336
Maximum term in days							586
Fair value:
Other current assets	$	15		$	28		$	43
Other noncurrent assets	1			33			34
Other current liabilities	(5		)	(15		)	(20		)
Other noncurrent liabilities	—			—			—
Total fair value	$	11		$	46		$	57

On March 31, 2019 the total after tax amount in AOCI related to our designated net investment hedges was $11. We evaluate the effectiveness of our net investment hedges quarterly. We have not recognized any ineffectiveness in 2019.

We are exposed to credit loss in the event of nonperformance by our counterparties on our outstanding derivative instruments but do not anticipate nonperformance by any of our counterparties. Should a counterparty default, our maximum loss exposure is the asset balance of the instrument.

Net Currency Exchange Rate Gains (Losses)



	Three Months
Recorded in:	2019			2018
Cost of sales	$	2		$	1
Other income (expense), net	(2		)	(2		)
Total	$	—		$	(1	)

Pretax gains (losses) on derivatives designated as hedges recorded in AOCI that are expected to be reclassified to earnings within 12 months of the balance sheet date are ($3) and $13 on March 31, 2019 and December 31, 2018. This reclassification is primarily due to the sale of inventory that includes previously hedged purchases. There were de minimis ineffective portions of derivatives, which are included in the table above.

Interest Rate Risk

On March 31, 2019 there are no open cash flow or fair value interest rate hedges.