Financial Instruments

12 Months Ended

Sep. 30, 2019

General Discussion of Derivative Instruments and Hedging Activities [Abstract]

Financial Instruments

FINANCIAL INSTRUMENTS

Hedging Activities

As of September 30, 2019, the notional amount of foreign currency hedge positions was approximately $2.3 billion, while commodity hedge contracts totaled approximately $117 (primarily 48 million pounds of copper and aluminum). All derivatives receiving hedge accounting are cash flow hedges. The majority of hedging gains and losses deferred as of September 30, 2019 are expected to be recognized over the next 12 months as the underlying forecasted transactions occur. Gains and losses on foreign currency derivatives reported in Other deductions, net reflect hedges of balance sheet exposures that do not receive hedge accounting.

Amounts included in earnings and other comprehensive income follow:

		Gain (Loss) to Earnings							Gain (Loss) to OCI
		2017			2018		2019		2017	2018		2019
	Location
Commodity	Cost of sales	$	10		13		(11	)	25	(7	)	(10	)
Foreign currency	Sales, cost of sales	(15		)	2		13		30	9		6
Foreign currency	Other deductions, net	(39		)	(15	)	66
Total		$	(44	)	—		68		55	2		(4	)

Regardless of whether derivatives receive hedge accounting, the Company expects hedging gains or losses to be essentially offset by losses or gains on the related underlying exposures. The amounts ultimately recognized will

differ from those presented above for open positions, which remain subject to ongoing market price fluctuations until settlement. Derivatives receiving hedge accounting are highly effective and no amounts were excluded from the assessment of hedge effectiveness, including for the net investment hedge described below. Hedge ineffectiveness was immaterial in all years shown.

Net Investment Hedge

In January 2019, the Company issued €500 of 1.25% notes due October 2025 and €500 of 2.0% notes due October 2029. In May 2019, the Company issued €500 of 0.375% notes due May 2024. The net proceeds from the sale of the notes were used to repay commercial paper borrowings and for general corporate purposes. The euro notes reduce foreign currency risk associated with the Company's international subsidiaries that use the euro as their functional currency and have been designated as a hedge of a portion of the investment in these operations. A pretax gain of $70 ($54 after-tax) was recognized in other comprehensive income (loss) related to the net investment hedge during 2019. Amounts deferred in accumulated other comprehensive income (loss) will remain until the hedged investment is sold or substantially liquidated.     

Fair Value Measurement

The estimated fair value of long-term debt was $5.3 billion and $4.0 billion, respectively, as of September 30, 2019 and 2018, which exceeded the carrying value by $469 and $135, respectively. The fair values of commodity and foreign currency contracts were reported in Other current assets and Accrued expenses as summarized below:

	2018				2019
	Assets			Liabilities	Assets	Liabilities
Commodity		$	1	10	—	8
Foreign currency		$	35	11	29	12