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Derivative Financial Instruments and Hedging Activities (Notes)
 3 Months Ended
Mar. 31, 2016
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

In the normal course of business, our operations are exposed to global market risks, including the effect of changes in foreign currency exchange rates, certain commodity prices, and interest rates. To manage these risks, we enter into highly effective derivative contracts. We have elected to apply hedge accounting to certain derivatives. Derivatives that are designated in hedging relationships are evaluated for effectiveness using regression analysis at the time they are designated and throughout the hedge period. Some derivatives do not qualify for hedge accounting; for others, we elect not to apply hedge accounting.

Income Effect of Derivative Financial Instruments

The gains/(losses), by hedge designation, recorded in income for the periods ended March 31 were as follows (in millions):
 
First Quarter
 
2016
 
2015
Automotive Sector
 
 
 
Cash flow hedges (a)
 
 
 
Reclassified from AOCI to net income
$
87

 
$
(46
)
Derivatives not designated as hedging instruments
 
 
 
Foreign currency exchange contracts
(172
)
 
261

Commodity contracts
(5
)
 
(10
)
Total
$
(90
)
 
$
205

 
 
 
 
Financial Services Sector
 
 
 
Fair value hedges
 
 
 
Interest rate contracts
 
 
 
Net interest settlements and accruals excluded from the assessment of hedge effectiveness
$
99

 
$
88

Ineffectiveness (b)
17

 
6

Derivatives not designated as hedging instruments
 
 
 
Interest rate contracts
(48
)
 
(43
)
Foreign currency exchange contracts
33

 
65

Cross-currency interest rate swap contracts
195

 
89

Total
$
296

 
$
205

__________
(a)
For the first quarter of 2016 and 2015, a $363 million gain and a $150 million loss, respectively, were recorded in Other comprehensive income.
(b)
For the first quarter of 2016 and 2015, hedge ineffectiveness reflects the net change in fair value on derivatives of $610 million gain and $221 million gain, respectively, and a change in value on hedged debt attributable to the change in benchmark interest rates of $593 million loss and $215 million loss, respectively.
NOTE 10. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

Balance Sheet Effect of Derivative Financial Instruments

Derivative assets and liabilities are recorded on the balance sheet at fair value and are presented on a gross basis. The notional amounts of the derivative instruments do not necessarily represent amounts exchanged by the parties and are not a direct measure of our financial exposure. We also enter into master agreements with counterparties that may allow for netting of exposures in the event of default or breach of the counterparty agreement.

The fair value of our derivative instruments and the associated notional amounts, presented gross, were as follows (in millions):
 
March 31, 2016
 
December 31, 2015
 
Notional
 
Fair Value of
Assets
 
Fair Value of
Liabilities
 
Notional
 
Fair Value of
Assets
 
Fair Value of
Liabilities
Automotive Sector
 
 
 
 
 
 
 
 
 
 
 
Cash flow hedges
 
 
 
 
 
 
 
 
 
 
 
Foreign currency exchange and commodity contracts
$
16,076

 
$
666

 
$
235

 
$
12,593

 
$
522

 
$
366

 
 
 
 
 
 
 
 
 
 
 
 
Derivatives not designated as hedging instruments
 
 
 
 
 
 
 
 
 
 
Foreign currency exchange contracts
18,152

 
280

 
331

 
19,395

 
404

 
238

Commodity contracts
643

 
4

 
17

 
643

 
2

 
26

Total derivative financial instruments, gross (a)
$
34,871

 
950

 
583

 
$
32,631

 
928

 
630

Counterparty netting and collateral (b)


 
(552
)
 
(552
)
 


 
(567
)
 
(567
)
Total derivative financial instruments, net
 
$
398

 
$
31

 


 
$
361

 
$
63

 
 
 
 
 
 
 
 
 
 
 
 
Financial Services Sector
 

 
 

 
 

 
 
 
 
 
 
Fair value hedges
 

 
 

 
 

 
 
 
 
 
 
Interest rate contracts
$
32,843

 
$
1,184

 
$
—

 
$
28,964

 
$
670

 
$
16

 
 
 
 
 
 
 
 
 
 
 
 
Derivatives not designated as hedging instruments
 
 
 
 
 
 
 
 
 
 
Interest rate contracts
65,538

 
182

 
159

 
62,638

 
159

 
112

Foreign currency exchange contracts
2,138

 
49

 
8

 
1,713

 
22

 
4

Cross-currency interest rate swap contracts
3,701

 
195

 
37

 
3,137

 
73

 
111

Total derivative financial instruments, gross (a)
$
104,220

 
1,610

 
204

 
$
96,452

 
924

 
243

Counterparty netting and collateral (b)
 
 
(155
)
 
(155
)
 
 
 
(166
)
 
(166
)
Total derivative financial instruments, net
 
$
1,455

 
$
49




 
$
758

 
$
77


__________
(a)
All derivatives are categorized within Level 2 of the fair value hierarchy.
(b)
At March 31, 2016 and December 31, 2015, we did not receive or pledge any cash collateral.