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Financial Instruments: (Tables)
3 Months Ended
Mar. 31, 2014
Financial Instruments:  
Financial assets and financial liabilities measured at fair value on a recurring basis
(Dollars in millions)
At March 31, 2014Level 1Level 2Level 3Total
Assets:
Cash equivalents (1)
Time deposits and certificates of deposit $$4,619$$4,619
Commercial paper559559
Money market funds 988988
U.S. government securities599599
Canadian government securities226226
Other securities4040
Total 9886,0447,032(6)
Debt securities - current (2)295295(6)
Debt securities - noncurrent (3) 189
Trading securities investments (3)7777
Available-for-sale equity investments (3) 44
Derivative assets (4)
Interest rate contracts363363
Foreign exchange contracts297297
Equity contracts1717
Total678678(7)
Total assets$ 993$7,102$$8,095(7)
Liabilities:
Derivative liabilities (5)
Foreign exchange contracts$$427$$427
Equity contracts22
Interest rate contracts1212
Total liabilities$$441$$441(7)

(1) Included within cash and cash equivalents in the Consolidated Statement of Financial Position.

(2) Commercial paper and certificates of deposit reported as marketable securities in the Consolidated Statement of

Financial Position.

(3) Included within investments and sundry assets in the Consolidated Statement of Financial Position.

(4) The gross balances of derivative assets contained within prepaid expenses and other current assets, and investments

and sundry assets in the Consolidated Statement of Financial Position at March 31, 2014 were $202 million and

$476 million, respectively.

(5) The gross balances of derivative liabilities contained within other accrued expenses and liabilities, and other

liabilities in the Consolidated Statement of Financial Position at March 31, 2014 were $370 million and $71

million, respectively.

(6) Available-for-sale securities with carrying values that approximate fair value.

(7) If derivative exposures covered by a qualifying master netting agreement had been netted in the Consolidated

Statement of Financial Position, the total derivative asset and liability positions would have been reduced by $221

million each.

(Dollars in millions)
At December 31, 2013Level 1Level 2Level 3Total
Assets:
Cash equivalents (1)
Time deposits and certificates of deposit $$4,754$$4,754
Commercial paper 1,5071,507
Money market funds1,7281,728
Other securities88
Total1,7286,2697,997(6)
Debt securities - current (2)350350(6)
Debt securities - noncurrent (3)179
Available-for-sale equity investments (3) 1818
Derivative assets (4)
Interest rate contracts308308
Foreign exchange contracts375375
Equity contracts3636
Total719719(7)
Total assets$1,747$7,345$$9,092(7)
Liabilities:
Derivative liabilities (5)
Interest rate contracts$$13$$13
Foreign exchange contracts484484
Equity contracts44
Total liabilities$$501$$501(7)

(1) Included within cash and cash equivalents in the Consolidated Statement of Financial Position.

(2) Commercial paper and certificates of deposit reported as marketable securities in the Consolidated Statement of

Financial Position.

(3) Included within investments and sundry assets in the Consolidated Statement of Financial Position.

(4) The gross balances of derivative assets contained within prepaid expenses and other current assets, and investments

and sundry assets in the Consolidated Statement of Financial Position at December 31, 2013 were $318 million and

$401 million, respectively.

(5) The gross balances of derivative liabilities contained within other accrued expenses and liabilities, and other

liabilities in the Consolidated Statement of Financial Position at December 31, 2013 were $375 million and $126

million, respectively.

(6) Available-for-sale securities with carrying values that approximate fair value.

(7) If derivative exposures covered by a qualifying master netting agreement had been netted in the Consolidated

Statement of Financial Position, the total derivative asset and liability positions would have been reduced by $251

million each.

There were no transfers between Levels 1 and 2 for the three months ended March 31, 2014 and the year ended December 31, 2013.

Noncurrent debt and marketable equity securities available-for-sale and recorded at fair value
GrossGross
(Dollars in millions)Adjusted UnrealizedUnrealizedFair
At March 31, 2014:CostGainsLossesValue
Debt securities – noncurrent(1)$8$2$$9
Available-for-sale equity investments(1) $2$2$0$4
(1) Included within investments and sundry assets in the Consolidated Statement of Financial Position.
GrossGross
(Dollars in millions)Adjusted UnrealizedUnrealizedFair
At December 31, 2013:CostGainsLossesValue
Debt securities – noncurrent(1)$7$1$$9
Available-for-sale equity investments(1) $20$2$4$18
(1) Included within investments and sundry assets in the Consolidated Statement of Financial Position.
Sales of debt and available-for-sale equity investments

Sales of debt and available-for-sale equity investments during the period were as follows:

(Dollars in millions)
For the three months ended March 31:20142013
Proceeds$14$18
Gross realized gains (before taxes)3
Gross realized losses (before taxes)44
Unrealized gains/(losses) on available-for-sale debt and equity securities
(Dollars in millions)
For the three months ended March 31:20142013
Net unrealized gains/(losses) arising during the period$0$$ (1)
Net unrealized (gains)/losses reclassified to net income*30
* There were no writedowns for the three months ended March 31, 2014 and 2013.
Fair Value of Derivative Instruments in the Consolidated Statement of Financial Position
Fair Values of Derivative Instruments in the Consolidated Statement of Financial Position
As of March 31, 2014 and December 31, 2013
(Dollars in millions) Fair Value of Derivative AssetsFair Value of Derivative Liabilities
Balance SheetBalance Sheet
Classification3/31/201412/31/2013Classification3/31/201412/31/2013
Designated as hedging
instruments:
Interest rate contracts:Prepaid expenses and Other accrued
other current assets$$expenses and liabilities$$0
Investments and sundry
assets363308Other liabilities 12 13
Foreign exchangePrepaid expenses and Other accrued
contracts:other current assets110187expenses and liabilities270331
Investments and sundry
assets 54 26Other liabilities55112
Fair value of derivative Fair value of derivative
assets$528$522 liabilities$337$456
Not designated as
hedging instruments:
Foreign exchange Prepaid expenses andOther accrued
contracts:other current assets$74$94expenses and liabilities$98$40
Investments and sundry
assets5967Other liabilities41
Equity contracts:Prepaid expenses andOther accrued
other current assets1736expenses and liabilities24
Fair value of derivativeFair value of derivative
assets$151$197 liabilities$104$45
Total debt designated as
hedging instruments:
Short-term debtN/AN/A$$190
Long-term debtN/AN/A6,1166,111
Total$678$719$6,557$6,802
N/A-not applicable
Effect of Derivative Instruments in the Consolidated Statement of Earnings
The Effect of Derivative Instruments in the Consolidated Statement of Earnings
For the three months ended March 31, 2014 and 2013
(Dollars in millions)Gain (Loss) Recognized in Earnings
Consolidated
Statement ofRecognized onAttributable to Risk
Earnings Line ItemDerivatives(1)Being Hedged(2)
For the three months ended March 31:2014201320142013
Derivative instruments in fair value hedges:
Interest rate contractsCost of financing$48$(20)$(23)$46
Interest expense33(13)(15)30
Derivative instruments not designated as
hedging instruments(1):
Foreign exchange contractsOther (income)
and expense(34)(439)N/AN/A
Equity contractsSG&A expense2185N/AN/A
Total$68$(387)$(38)$76
Gain (Loss) Recognized in Earnings and Other Comprehensive Income
Consolidated(Ineffectiveness) and
Effective PortionStatement ofEffective Portion ReclassifiedAmounts Excluded from
Recognized in OCIEarnings Line Itemfrom AOCI Effectiveness Testing(3)
For the three months
ended March 31:201420132014201320142013
Derivative instruments
in cash flow hedges:
Interest rate contracts$$Interest expense$$$$
Other (income)
Foreign exchange 88360and expense29 37(0)1
contractsCost of sales(26) 9
SG&A expense(2) 10
Instruments in net
investment hedges(4):
Foreign exchange
contracts(26)219Interest expense0 (1)
Total$62$579$1$ 56$(0)$0

N/A-not applicable

Note: OCI represents Other comprehensive income/(loss) in the Consolidated Statement of Comprehensive Income and AOCI represents Accumulated other comprehensive income/(loss) in the Consolidated Statement of Changes in Equity.

  • The amount includes changes in clean fair values of the derivative instruments in fair value hedging relationships and the periodic accrual for coupon payments required under these derivative contracts.
  • The amount includes basis adjustments to the carrying value of the hedged item recorded during the period and amortization of basis adjustments recorded on de-designated hedging relationships during the period.
  • The amount of gain (loss) recognized in income represents ineffectiveness on hedge relationships.
  • Instruments in net investment hedges include derivative and non-derivative instruments.