FINANCIAL INSTRUMENTS

6 Months Ended

Jun. 30, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

NOTE 21. FINANCIAL INSTRUMENTS. 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.


		June 30, 2023				December 31, 2022
		Carrying amount (net)		Estimated fair value		Carrying amount (net)		Estimated fair value
Assets	Loans and other receivables	$	2,329	$	2,196	$	2,557	$	2,418

Liabilities	Borrowings (Note 11)	$	21,782	$	20,805	$	24,059	$	22,849
	Investment contracts (Note 13)	1,632		1,677		1,708		1,758

Assets and liabilities that are reflected in the accompanying financial statements at fair value are not included in the above disclosures; such items include cash and equivalents, investment securities and derivative financial instruments.

DERIVATIVES AND HEDGING. Our policy requires that derivatives are used solely for managing risks and not for speculative purposes. We use derivatives to manage currency risks related to foreign exchange, and interest rate and currency risk between financial assets and liabilities, and certain equity investments and commodity prices.


FAIR VALUE OF DERIVATIVES	June 30, 2023						December 31, 2022
	Gross Notional		All other assets		All other liabilities		Gross Notional		All other assets		All other liabilities
Currency exchange contracts	$	4,784	$	147	$	129	$	5,112	$	132	$	146

Derivatives accounted for as hedges	$	4,784	$	147	$	129	$	5,112	$	132	$	146

Currency exchange contracts	$	62,266	$	1,139	$	1,056	$	51,885	$	946	$	1,082
Other contracts	700		159		15		901		197		14


Derivatives not accounted for as hedges	$	62,966	$	1,298	$	1,071	$	52,786	$	1,143	$	1,095

Gross derivatives	$	67,750	$	1,445	$	1,200	$	57,898	$	1,275	$	1,241

Netting and credit adjustments			$	(926)	$	(925)			$	(821)	$	(820)

Net derivatives recognized in statement of financial position			$	519	$	275			$	454	$	420

FAIR VALUE HEDGES. As of June 30, 2023, all fair value hedges were terminated due to exposure management actions, including debt maturities. Gains (losses) associated with the terminated hedging relationships will continue to amortize into interest expense until the hedged borrowings mature. The cumulative amount of hedging adjustments of $1,216 million (all on discontinued hedging relationships) was included in the carrying amount of the previously hedged liability of $8,956 million. At June 30, 2022, the cumulative amount of hedging adjustments of $1,801 million (all on discontinued hedging relationships) was included in the carrying amount of the previously hedged liability of $15,290 million. The cumulative amount of hedging adjustments was primarily recorded in long-term borrowings.


CASH FLOW HEDGES AND NET INVESTMENT HEDGES
Gain (loss) recognized in AOCI	Three months ended June 30				Six months ended June 30
	2023		2022		2023		2022
Cash flow hedges(a)	$	21	$	(110)	$	49	$	(157)
Net investment hedges(b)	(68)		183		(130)		294

(a) Primarily related to currency exchange contracts.

(b) The carrying value of foreign currency debt designated as net investment hedges was $4,710 million and $3,311 million as of June 30, 2023 and 2022, respectively. The total reclassified from AOCI into earnings was zero for both the three months and six months ended June 30, 2023 and 2022.

Changes in the fair value of cash flow hedges are recorded in AOCI and recorded in earnings in the period in which the hedged transaction occurs. The total amount in AOCI related to cash flow hedges of forecasted transactions was a $15 million loss as of June 30, 2023. We expect to reclassify $31 million of loss to earnings in the next 12 months contemporaneously with the earnings effects of the related forecasted transactions. As of June 30, 2023, the maximum term of derivative instruments that hedge forecasted transactions was approximately 12 years.

The table below presents the effects of hedges and resulting gains (losses) of our derivative financial instruments in the Statement of Earnings (Loss):


	Three months ended June 30, 2023								Three months ended June 30, 2022

	Revenues		Interest Expense		SG&A		Other(a)			Revenues		Interest Expense		SG&A		Other(a)
	$	16,699	$	267	$	2,358	$	13,054		$	14,127	$	368	$	1,817	$	9,298

Cash flow hedges	$	4	$	(4)	$	—	$	11		$	—	$	(7)	$	—	$	(36)



Fair value hedges												$	(7)



Non-hedging derivatives (b)	$	(1)	$	—	$	175	$	(69)		$	1	$	—	$	(349)	$	(29)


	Six months ended June 30, 2023								Six months ended June 30, 2022

	Revenues		Interest Expense		SG&A		Other(a)			Revenues		Interest Expense		SG&A		Other(a)
	$	31,185	$	536	$	4,500	$	29,864		$	26,802	$	756	$	4,543	$	19,120

Cash flow hedges	$	5	$	(6)	$	—	$	9		$	4	$	(13)	$	—	$	(68)



Fair value hedges												$	(16)



Non-hedging derivatives (b)	$	—	$	—	$	290	$	(127)		$	2	$	—	$	(454)	$	(95)

(a) Amounts are inclusive of cost of sales and other income (loss).

(b) SG&A was primarily driven by hedges of deferred incentive compensation, and hedges of remeasurement of monetary assets and liabilities.

COUNTERPARTY CREDIT RISK. Our exposures to counterparties were $391 million and $306 million at June 30, 2023 and December 31, 2022, respectively. Counterparties' exposures to our derivative liability were $216 million and $365 million at June 30, 2023 and December 31, 2022, respectively.