XML 24 R14.htm IDEA: XBRL DOCUMENT v3.22.2
Derivative Financial Instruments and Hedging Activities
 6 Months Ended
Jun. 30, 2022
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 interest rates and foreign currency exchange 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, reported in income for the periods ended June 30 were as follows (in millions):
Second QuarterFirst Half
2021202220212022
Fair value hedges
Interest rate contracts
Net interest settlements and accruals on hedging instruments$100 $25 $201 $101 
Fair value changes on hedging instruments103 (336)(538)(1,322)
Fair value changes on hedged debt (87)385 503 1,376 
Cross-currency interest rate swap contracts
Net interest settlements and accruals on hedging instruments(1)(6)(4)(9)
Fair value changes on hedging instruments11 (61)(39)(98)
Fair value changes on hedged debt(11)65 33 106 
Derivatives not designated as hedging instruments
Interest rate contracts6 89 (25)212 
Foreign currency exchange contracts (a)(44)27 8 25 
Cross-currency interest rate swap contracts49 (443)(196)(670)
Total$126 $(255)$(57)$(279)
__________
(a)Reflects forward contracts between us and an affiliated company.
NOTE 7. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

Balance Sheet Effect of Derivative Financial Instruments

Derivative assets and liabilities are reported on the balance sheets 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. Collateral represents cash received or paid under reciprocal arrangements that we have entered into with our derivative counterparties, which we do not use to offset our derivative assets and liabilities.

The fair value of our derivative instruments and the associated notional amounts were as follows (in millions):
December 31, 2021June 30, 2022
NotionalFair Value of AssetsFair Value of LiabilitiesNotionalFair Value of AssetsFair Value of Liabilities
Fair value hedges
Interest rate contracts$23,893 $544 $274 $19,711 $— $1,100 
Cross-currency interest rate swap contracts885 — 49 884 — 135 
Derivatives not designated as hedging instruments
Interest rate contracts50,060 338 126 44,788 651 259 
Foreign currency exchange contracts4,407 66 2 4,454 66 24 
Cross-currency interest rate swap contracts6,533 117 61 6,633 31 690 
Total derivative financial instruments, gross (a) (b) $85,778 $1,065 $512 $76,470 $748 $2,208 
__________
(a)At December 31, 2021 and June 30, 2022, we held collateral of $26 million and $147 million, respectively, and we posted collateral of $71 million and $115 million, respectively.
(b)At December 31, 2021 and June 30, 2022, the fair value of assets and liabilities available for counterparty netting was $415 million and $161 million, respectively. All derivatives are categorized within Level 2 of the fair value hierarchy.