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DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
 9 Months Ended
Sep. 30, 2025
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 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 September 30 were as follows (in millions):
Third QuarterFirst Nine Months
2024202520242025
Fair value hedges
Interest rate contracts
Net interest settlements and accruals on hedging instruments$(92)$(45)$(294)$(137)
Fair value changes on hedging instruments585 34 316 598 
Fair value changes on hedged debt (553)(33)(316)(576)
Cross-currency interest rate swap contracts
Net interest settlements and accruals on hedging instruments(33)(23)(97)(66)
Fair value changes on hedging instruments266 (14)155 490 
Fair value changes on hedged debt(261)(1)(159)(476)
Derivatives not designated as hedging instruments
Interest rate contracts(153)— (102)(63)
Foreign currency exchange contracts (a)(5)6 132 (129)
Cross-currency interest rate swap contracts210 (49)14 299 
Total$(36)$(125)$(351)$(60)
__________
(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, 2024September 30, 2025
NotionalFair Value of AssetsFair Value of LiabilitiesNotionalFair Value of AssetsFair Value of Liabilities
Fair value hedges
Interest rate contracts$16,194 $66 $645 $20,218 $391 $258 
Cross-currency interest rate swaps3,802 9 139 4,158 374 6 
Derivatives not designated as hedging instruments
Interest rate contracts76,977 305 845 85,911 374 675 
Foreign currency exchange contracts (a)9,716 271 117 7,386 104 109 
Cross-currency interest rate swap contracts5,455 133 246 7,109 354 24 
Total derivative financial instruments, gross (b) (c) $112,144 $784 $1,992 $124,782 $1,597 $1,072 
__________
(a)Includes forward contracts between us and an affiliated company, including offsetting forward contracts with our consolidated entities, totaling $5.3 billion and $3.5 billion in notional amounts and $115 million and $31 million in both assets and liabilities at December 31, 2024 and September 30, 2025, respectively.
(b)At December 31, 2024 and September 30, 2025, we held collateral of $27 million and $28 million, respectively, and we posted collateral of $127 million and $114 million, respectively.
(c)At December 31, 2024 and September 30, 2025, the fair value of assets and liabilities available for counterparty netting was $450 million and $722 million, respectively. All derivatives are categorized within Level 2 of the fair value hierarchy.