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FINANCIAL INSTRUMENTS (Tables)
 3 Months Ended
Mar. 31, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Estimated Fair Value of Assets and Liabilities
The following table provides information about assets and liabilities not carried at fair value and excludes finance leases, equity securities without readily determinable fair value and non-financial assets and liabilities. Substantially all of these assets are considered to be Level 3 and the vast majority of our liabilities’ fair value are considered Level 2.

March 31, 2019
 
December 31, 2018
(In millions)
Carrying
amount
(net)

Estimated
fair value

 
Carrying
amount
(net)

Estimated
fair value




 


Assets


 


Loans and other receivables
$
8,345

$
8,375

 
$
8,812

$
8,830

Liabilities


 


Borrowings(a)(b)(c)
107,526

109,822

 
109,930

106,221

Investment contracts(d)
2,335

2,586

 
2,388

2,630

(a)
See Note 11.
(b)
Included $1,174 million and $1,361 million of accrued interest in estimated fair value at March 31, 2019 and December 31, 2018, respectively.
(c)
Fair values exclude interest rate and currency derivatives designated as hedges of borrowings. Had they been included, the fair value of borrowings at March 31, 2019 and December 31, 2018 would be reduced by $1,533 million and $1,300 million, respectively.
(d)
See Note 12.
Fair Value of Derivative Assets
The table below provides additional information about how derivatives are reflected in our financial statements. Derivative assets and liabilities are recorded at fair value exclusive of interest earned or owed on interest rate derivatives, which is presented separately on our Statement of Financial Position. Cash collateral and securities held as collateral represent assets that have been provided by our derivative counterparties as security for amounts they owe us (derivatives that are in an asset position).
FAIR VALUE OF DERIVATIVES
March 31, 2019
 
December 31, 2018
(In millions)
Gross Notional(a)

Assets

Liabilities

 
Gross Notional(a)

Assets

Liabilities

 
 
 
 
 
 
 
 
Derivatives accounted for as hedges
 
 
 
 
 
 
 
Interest rate contracts
$
21,830

$
1,530

$
24

 
$
22,904

$
1,335

$
23

Currency exchange contracts
7,128

115

110

 
7,970

175

121

 
$
28,958

$
1,645

$
135

 
$
30,873

$
1,511

$
145

 
 
 
 
 
 
 
 
Derivatives not accounted for as hedges
 
 
 
 
 
 
 
Interest rate contracts
$
7,547

$
28

$
1

 
$
6,198

$
28

$
2

Currency exchange contracts
78,808

685

1,035

 
83,841

727

1,546

Other contracts
2,541

37

135

 
2,622

13

209

 
$
88,896

$
750

$
1,171

 
$
92,662

$
769

$
1,757

 
 
 
 
 
 
 
 
Gross derivatives recognized in statement of financial position
 
 
 
 
 
 
 
Gross derivatives
$
117,854

$
2,395

$
1,306

 
$
123,535

$
2,279

$
1,902

Gross accrued interest
 
133

10

 
 
209

6

 
 
$
2,528

$
1,315

 
 
$
2,489

$
1,908

 
 
 
 
 
 
 
 
Amounts offset in statement of financial position
 
 
 
 
 
 
 
Netting adjustments(b)
 
$
(828
)
$
(829
)
 
 
$
(963
)
$
(971
)
Cash collateral(c)
 
(1,034
)
(168
)
 
 
(1,042
)
(267
)
 
 
$
(1,862
)
$
(997
)
 
 
$
(2,005
)
$
(1,238
)
 
 
 
 
 
 
 
 
Net derivatives recognized in statement of financial position
 
 
 
 
 
 
 
Net derivatives
 
$
666

$
318

 
 
$
483

$
670

 
 
 
 
 
 
 
 
Amounts not offset in statement of financial position
 
 
 
 
 
 
 
Securities held as collateral(d)
 
$
(326
)
$
—

 
 
$
(235
)
$
—

 
 
 
 
 
 
 
 
Net amount(e)
 
$
340

$
318

 
 
$
248

$
670


Derivatives are classified in the captions "All other assets" and "All other liabilities" and the related accrued interest is classified in "Other GE Capital receivables" and "All other liabilities" in our Statement of Financial Position.
(a)
Total gross notional at March 31, 2019 comprises $75,714 million in GE Capital and $42,139 million in GE and at December 31, 2018 comprises $79,082 million in GE Capital and $44,453 million in GE. GE Capital notional relates primarily to managing interest rate and currency risk between financial assets and liabilities, and GE notional relates primarily to managing currency risk.
(b)
Netting derivative receivables and payables is permitted when a legally enforceable master netting agreement exists. Amounts include fair value adjustments related to our own and counterparty non-performance risk, which, at March 31, 2019 and December 31, 2018, was insignificant.
(c)
Excluded excess cash collateral received and posted of $41 million and $239 million at March 31, 2019, respectively, and $3 million and $439 million at December 31, 2018, respectively. Excess cash collateral posted includes initial margin for cleared trades.
(d)
Excluded excess securities collateral received of $50 million and zero at March 31, 2019 and December 31, 2018, respectively.
(e)
At March 31, 2019, our exposures to counterparties (including accrued interest), net of collateral we held, was $256 million. Counterparties' exposures to our derivative liability (including accrued interest), net of collateral posted by us, was $281 million at March 31, 2019. These exposures exclude embedded derivatives.
Fair Value of Derivative Liabilities
The table below provides additional information about how derivatives are reflected in our financial statements. Derivative assets and liabilities are recorded at fair value exclusive of interest earned or owed on interest rate derivatives, which is presented separately on our Statement of Financial Position. Cash collateral and securities held as collateral represent assets that have been provided by our derivative counterparties as security for amounts they owe us (derivatives that are in an asset position).
FAIR VALUE OF DERIVATIVES
March 31, 2019
 
December 31, 2018
(In millions)
Gross Notional(a)

Assets

Liabilities

 
Gross Notional(a)

Assets

Liabilities

 
 
 
 
 
 
 
 
Derivatives accounted for as hedges
 
 
 
 
 
 
 
Interest rate contracts
$
21,830

$
1,530

$
24

 
$
22,904

$
1,335

$
23

Currency exchange contracts
7,128

115

110

 
7,970

175

121

 
$
28,958

$
1,645

$
135

 
$
30,873

$
1,511

$
145

 
 
 
 
 
 
 
 
Derivatives not accounted for as hedges
 
 
 
 
 
 
 
Interest rate contracts
$
7,547

$
28

$
1

 
$
6,198

$
28

$
2

Currency exchange contracts
78,808

685

1,035

 
83,841

727

1,546

Other contracts
2,541

37

135

 
2,622

13

209

 
$
88,896

$
750

$
1,171

 
$
92,662

$
769

$
1,757

 
 
 
 
 
 
 
 
Gross derivatives recognized in statement of financial position
 
 
 
 
 
 
 
Gross derivatives
$
117,854

$
2,395

$
1,306

 
$
123,535

$
2,279

$
1,902

Gross accrued interest
 
133

10

 
 
209

6

 
 
$
2,528

$
1,315

 
 
$
2,489

$
1,908

 
 
 
 
 
 
 
 
Amounts offset in statement of financial position
 
 
 
 
 
 
 
Netting adjustments(b)
 
$
(828
)
$
(829
)
 
 
$
(963
)
$
(971
)
Cash collateral(c)
 
(1,034
)
(168
)
 
 
(1,042
)
(267
)
 
 
$
(1,862
)
$
(997
)
 
 
$
(2,005
)
$
(1,238
)
 
 
 
 
 
 
 
 
Net derivatives recognized in statement of financial position
 
 
 
 
 
 
 
Net derivatives
 
$
666

$
318

 
 
$
483

$
670

 
 
 
 
 
 
 
 
Amounts not offset in statement of financial position
 
 
 
 
 
 
 
Securities held as collateral(d)
 
$
(326
)
$
—

 
 
$
(235
)
$
—

 
 
 
 
 
 
 
 
Net amount(e)
 
$
340

$
318

 
 
$
248

$
670


Derivatives are classified in the captions "All other assets" and "All other liabilities" and the related accrued interest is classified in "Other GE Capital receivables" and "All other liabilities" in our Statement of Financial Position.
(a)
Total gross notional at March 31, 2019 comprises $75,714 million in GE Capital and $42,139 million in GE and at December 31, 2018 comprises $79,082 million in GE Capital and $44,453 million in GE. GE Capital notional relates primarily to managing interest rate and currency risk between financial assets and liabilities, and GE notional relates primarily to managing currency risk.
(b)
Netting derivative receivables and payables is permitted when a legally enforceable master netting agreement exists. Amounts include fair value adjustments related to our own and counterparty non-performance risk, which, at March 31, 2019 and December 31, 2018, was insignificant.
(c)
Excluded excess cash collateral received and posted of $41 million and $239 million at March 31, 2019, respectively, and $3 million and $439 million at December 31, 2018, respectively. Excess cash collateral posted includes initial margin for cleared trades.
(d)
Excluded excess securities collateral received of $50 million and zero at March 31, 2019 and December 31, 2018, respectively.
(e)
At March 31, 2019, our exposures to counterparties (including accrued interest), net of collateral we held, was $256 million. Counterparties' exposures to our derivative liability (including accrued interest), net of collateral posted by us, was $281 million at March 31, 2019. These exposures exclude embedded derivatives.
Cash Flow Hedge Activity
The table below summarizes this activity by hedging instrument.
 
Gain (loss) recognized in AOCI

Gain (loss) reclassified
from AOCI into earnings

for the three months ended March 31

for the three months ended March 31
(In millions)
2019

2018


2019

2018








Interest rate contracts
$
4

$
(4
)

$
(3
)
$
(2
)
Currency exchange contracts
43

146


3

66

Total
$
47

$
142


$
—

$
65
Effects of Derivatives on Earnings
The following table summarizes the effect of fair value and cash flow hedges on earnings and the location.
 
Three months ended March 31, 2019
 
Three months ended March 31, 2018
(In millions)
Sales
Cost of sales
Interest and other financial charges
SG&A
Revenues from financial services
 
Sales
Cost of sales
Interest and other financial charges
SG&A
Revenues from financial services
 
 
 
 
 
 
 
 
 
 
 
 
Total amounts of line items presented in the Consolidated Statement of Earnings (Loss) in which the effects are recorded
$
25,342

$
20,353

$
1,133

$
4,146

$
1,944

 
$
26,002

$
20,911

$
1,282

$
4,088

$
1,786

Cash Flow Hedges
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts
 
 
 
 
 
 
 
 
 
 
 
Gain/(loss) reclassified from AOCI into income
$
—

$
—

$
(6
)
$
—

$
3

 
 
 
$
(5
)
 
$
3

Currency exchange contracts
 
 
 
 
 
 
 
 
 
 
 
Gain/(loss) reclassified from AOCI into income
(1
)
(9
)
(4
)
(1
)
17

 
4

6

(5
)
 
61

Total effect of cash flow hedges
$
(1
)
$
(9
)
$
(10
)
$
(1
)
$
21

 
$
4

$
6

$
(10
)
 
$
64

 
 
 
 
 
 
 
 
 
 
 
 
Fair Value Hedges
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts
 
 
 
 
 
 
 
 
 
 
 
Hedged items
 
 
$
(527
)
 
 
 
 
 
 
 
$
672

Derivatives designated as hedging instruments
 
 
515

 
 
 
 
 
 
 
(697
)
Total effect of fair value hedges
 
 
$
(11
)
 
 
 
 
 
 
 
$
(26
)

The following table summarizes the effect of derivatives not designated as hedges on earnings and the location.
 
Three months ended March 31, 2019
 
Three months ended March 31, 2018
(In millions)
Revenues from financial services
Cost of sales
Interest and other financial charges
SG&A
Other Income
 
Revenues from financial services
Cost of sales
Interest and other financial charges
SG&A
Other Income
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts
$
(20
)
$
—

$
—

$
—

$
—

 
$
(14
)
$
—

$
—

$
—

$
—

Currency exchange contracts
453

8

(63
)
(45
)
3

 
653

7

(69
)
(130
)
51

Other
—

—

96

—

14

 
(5
)
 
(35
)
 
9

Total(a)
$
433

$
8

$
33

$
(45
)
$
17

 
$
634

$
7

$
(104
)
$
(130
)
$
60

(a)
Substantially all of the gain or loss recognized in earnings is offset by either the current period change in value of the item being hedged which is recorded in earnings in the current period or a future period for hedges of future exposures.