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Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2015

Financial assets and financial liabilities measured at fair value on a recurring basis

(Dollars in millions)
At September 30, 2015			Level 1		Level 2		Level 3		Total
Assets:
	Cash equivalents (1)
		Time deposits and certificates of deposit	$	—	$	4,626	$	—	$	4,626
		Commercial paper		—		275		—		275
		Money market funds		2,155		—		—		2,155
		U.S. government securities		—		0		—		0
		Canadian government securities		—		186		—		186
		Other securities		—		7		—		7
	Total			2,155		5,094		—		7,250	(6)
	Debt securities - current (2)			—		88		—		88	(6)
	Debt securities - noncurrent (3)			1		8		—		9
	Trading security investments (3)			54		—		—		54
	Available-for-sale equity investments (3)			160		—		—		160
	Derivative assets (4)
		Interest rate contracts		—		739		—		739
		Foreign exchange contracts		—		542		—		542
		Equity contracts		—		2		—		2
	Total			—		1,283		—		1,283	(7)
Total assets			$	2,371	$	6,473	$	—	$	8,844	(7)
Liabilities:
	Derivative liabilities (5)
		Foreign exchange contracts	$	—	$	187	$	—	$	187
		Equity contracts		—		43		—		43
		Interest rate contracts		—		0		—		0
Total liabilities			$	—	$	230	$	—	$	230	(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 September 30, 2015 were $502 million

and $781 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 September 30, 2015 were $167 million and $63

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 each would have been reduced by $180 million.

(Dollars in millions)
At December 31, 2014			Level 1		Level 2		Level 3		Total
Assets:
	Cash equivalents (1)
		Time deposits and certificates of deposit	$	—	$	3,517	$	—	$	3,517
		Commercial paper		—		764		—		764
		Money market funds		662		—		—		662
		U.S government securities		—		410		—		410
		Other securities		—		6		—		6
	Total			662		4,697		—		5,359	(5)
	Debt securities - noncurrent (2)			1		8		—		9
	Trading security investments (2)			74		—		—		74
	Available-for-sale equity investments (2)			243		—		—		243
	Derivative assets (3)
		Interest rate contracts		—		633		—		633
		Foreign exchange contracts		—		775		—		775
		Equity contracts		—		24		—		24
	Total			—		1,432		—		1,432	(6)
Total assets			$	980	$	6,138	$	—	$	7,118	(6)
Liabilities:
	Derivative liabilities (4)
		Foreign exchange contracts	$	—	$	177	$	—	$	177
		Equity contracts		—		19		—		19
Total liabilities			$	—	$	196	$	—	$	196	(6)

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

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

(3) 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, 2014 were $751 million and

$681 million, respectively.

(4) 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, 2014 were $165 million and $31

million, respectively.

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

(6) 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 each would have been reduced by $97 million.

Noncurrent debt and marketable equity securities available-for-sale and recorded at fair value

			Gross		Gross
(Dollars in millions)	Adjusted		Unrealized		Unrealized		Fair
At September 30, 2015:	Cost		Gains		Losses		Value
Debt securities – noncurrent(1)	$	6	$	3	$	—	$	9
Available-for-sale equity investments(1)	$	272	$	6	$	118	$	160

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

			Gross		Gross
(Dollars in millions)	Adjusted		Unrealized		Unrealized		Fair
At December 31, 2014:	Cost		Gains		Losses		Value
Debt securities – noncurrent(1)	$	7	$	3	$	—	$	9
Available-for-sale equity investments(1)	$	272	$	2	$	31	$	243

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

Sales of debt and available-for-sale equity investments

(Dollars in millions)
For the three months ended September 30:		2015		2014
Proceeds	$	1	$	1
Gross realized gains (before taxes)		0		0
Gross realized losses (before taxes)		0		0

(Dollars in millions)
For the nine months ended September 30:		2015		2014
Proceeds	$	7	$	16
Gross realized gains (before taxes)		1		0
Gross realized losses (before taxes)		1		5

Unrealized gains/(losses) on available-for-sale debt and equity securities


(Dollars in millions)
For the three months ended September 30:	2015		2014
Net unrealized gains/(losses) arising during the period	$	(63)	$	0
Net unrealized (gains)/losses reclassified to net income*		0		0

*There were no writedowns for the three months ended September 30, 2015 and 2014, respectively.

(Dollars in millions)
For the nine months ended September 30:	2015		2014
Net unrealized gains/(losses) arising during the period	$	(52)	$	1
Net unrealized (gains)/losses reclassified to net income*		0		3

* There were no writedowns for the nine months ended September 30, 2015 and 2014, respectively.

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 September 30, 2015 and December 31, 2014

(Dollars in millions)	Fair Value of Derivative Assets					Fair Value of Derivative Liabilities
	Balance Sheet					Balance Sheet
	Classification	9/30/2015		12/31/2014		Classification	9/30/2015		12/31/2014
Designated as hedging
instruments:
Interest rate contracts:	Prepaid expenses and					Other accrued
	other current assets	$	—	$	5	expenses and liabilities	$	—	$	0
	Investments and sundry
	assets		739		628	Other liabilities		—		—
Foreign exchange	Prepaid expenses and					Other accrued
contracts:	other current assets		299		632	expenses and liabilities		89		50
	Investments and sundry
	assets		5		17	Other liabilities		30		21

Fair value of derivative						Fair value of derivative
assets		$	1,043	$	1,281	liabilities	$	119	$	72

Not designated as
hedging instruments:
Foreign exchange	Prepaid expenses and					Other accrued
contracts:	other current assets	$	201	$	90	expenses and liabilities	$	36	$	101
	Investments and sundry
	assets		37		37	Other liabilities		33		4
Equity contracts:	Prepaid expenses and					Other accrued
	other current assets		2		24	expenses and liabilities		43		14
	Investments and sundry
	assets		—		0	Other liabilities		—		5
Fair value of derivative						Fair value of derivative
assets		$	241	$	151	liabilities	$	112	$	125

Total debt designated as
hedging instruments:
Short-term debt			N/A		N/A		$	—	$	0
Long-term debt			N/A		N/A		$	7,709	$	7,766


Total		$	1,283	$	1,432		$	7,939	$	7,963

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 September 30, 2015 and 2014

(Dollars in millions)		Gain (Loss) Recognized in Earnings
		Consolidated
		Statement of	Recognized on				Attributable to Risk
		Earnings Line Item	Derivatives(1)				Being Hedged(2)
For the three months ended September 30:				2015		2014		2015		2014
Derivative instruments in fair value hedges(4):
Interest rate contracts		Cost of financing	$	125	$	16	$	(99)	$	11
		Interest expense		112		15		(88)		10
Derivative instruments not designated as
	hedging instruments(1):
Foreign exchange contracts		Other (income)
		and expense		208		(452)		N/A		N/A
Interest rate contracts		Other (income)
		and expense		0		(3)		N/A		N/A
Equity contracts		SG&A expense		(81)		(14)		N/A		N/A
		Other (income)
		and expense		(8)		5		N/A		N/A

Total			$	357	$	(433)	$	(187)	$	21

(Dollars in millions)		Gain (Loss) Recognized in Earnings and Other Comprehensive Income
						Consolidated					(Ineffectiveness) and
		Effective Portion				Statement of	Effective Portion Reclassified				Amounts Excluded from
		Recognized in OCI				Earnings Line Item	from AOCI				Effectiveness Testing
For the three months
	ended September 30:	2015		2014			2015		2014		2015		2014
Derivative instruments
	in cash flow hedges:
Interest rate contracts		$	—	$	—	Interest expense	$	0	$	(1)	$	—	$	—
						Other (income)
Foreign exchange			36		524	and expense		185		(57)		0		(1)
	contracts					Cost of sales		46		(4)		—		—
						SG&A expense		43		3		—		—
Instruments in net
	investment hedges(3):
Foreign exchange
	contracts		73		700	Interest expense		—		—		4		0

Total		$	109	$	1,224		$	273	$	(58)	$	4	$	(1)

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.
Instruments in net investment hedges include derivative and non-derivative instruments.
For the three month periods ended September 30, 2015 and September 30, 2014, fair value hedges resulted in gains of $1 million and $2 million in ineffectiveness, respectively.

The Effect of Derivative Instruments in the Consolidated Statement of Earnings
For the nine months ended September 30, 2015 and 2014

(Dollars in millions)		Gain (Loss) Recognized in Earnings
		Consolidated
		Statement of	Recognized on				Attributable to Risk
		Earnings Line Item	Derivatives(1)				Being Hedged(2)
For the nine months ended September 30:				2015		2014		2015		2014
Derivative instruments in fair value hedges(4):
Interest rate contracts		Cost of financing	$	145	$	129	$	(63)	$	(53)
		Interest expense		121		116		(53)		(47)
Derivative instruments not designated as
	hedging instruments(1):
Foreign exchange contracts		Other (income)
		and expense		134		(533)		N/A		N/A
Interest rate contracts		Other (income)
		and expense		(2)		37		N/A		N/A
Equity contracts		SG&A expense		(63)		39		N/A		N/A
		Other (income)
		and expense		(5)		3		N/A		N/A

Total			$	330	$	(209)	$	(116)	$	(100)

		Gain (Loss) Recognized in Earnings and Other Comprehensive Income
						Consolidated					(Ineffectiveness) and
		Effective Portion				Statement of	Effective Portion Reclassified				Amounts Excluded from
		Recognized in OCI				Earnings Line Item	from AOCI				Effectiveness Testing
For the nine months
	ended September 30:	2015		2014			2015		2014		2015		2014
Derivative instruments
	in cash flow hedges:
Interest rate contracts		$	—	$	—	Interest expense	$	0	$	(1)	$	—	$	—
						Other (income)
Foreign exchange			467		596	and expense		565		(33)		4		(1)
	contracts					Cost of sales		154		(53)		—		—
						SG&A expense		124		(5)		—		—
Instruments in net
	investment hedges(3):
Foreign exchange
	contracts		592		624	Interest expense		—		—		6		(1)

Total		$	1,059	$	1,220		$	843	$	(91)	$	10	$	(2)

N/A-not applicable

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.
Instruments in net investment hedges include derivative and non-derivative instruments.
For the nine month periods ended September 30, 2015 and September 30, 2014, fair value hedges resulted in a loss of $2 million and a gain of $2 million in ineffectiveness, respectively.

- Definition

Tabular disclosure of available-for-sale securities which includes, but is not limited to, changes in the cost basis and fair value, fair value and gross unrealized gain (loss), fair values by type of security, contractual maturity and classification, amortized cost basis, contracts to acquire securities to be accounted for as available-for-sale, debt maturities, transfers to trading, change in net unrealized holding gain (loss) net of tax, continuous unrealized loss position fair value, aggregate losses qualitative disclosures, other than temporary impairment (OTTI) losses or other disclosures related to available for sale securities.

+ References + Details

- Definition

Tabular disclosure of the realized and unrealized gains and losses reported in the statement of income which have resulted from the sale and holding of marketable securities, respectively, as well as the sale or disposal of cost method investments. Such amounts would include realized gains and losses on the sale or disposal of trading, available-for-sale, and held-to-maturity securities, unrealized gains and losses on trading securities, unrealized gains and losses on available-for-sale and held-to-maturity securities transferred to the trading securities category, realized gains and losses on the sale or disposal of cost method investments, and losses recognized for other than temporary impairments (OTTI) of such investments.

+ References + Details