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Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2016

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

(Dollars in millions)
At March 31, 2016			Level 1		Level 2		Level 3		Total
Assets:
	Cash equivalents (1)
		Time deposits and certificates of deposit	$	—	$	5,784	$	—	$	5,784
		Commercial paper		—		325		—		325
		Money market funds		3,076		—		—		3,076
		U.S. government securities		—		1,300		—		1,300
		Canadian government securities		—		463		—		463
		Other securities		—		162		—		162
	Total			3,076		8,034		—		11,109	(6)
	Debt securities - current (2)			—		514		—		514	(6)
	Debt securities - noncurrent (3)			1		7		—		8
	Available-for-sale equity investments (3)			9		—		—		9
	Derivative assets (4)
		Interest rate contracts		—		876		—		876
		Foreign exchange contracts		—		206		—		206
		Equity contracts		—		48		—		48
	Total			—		1,129		—		1,129	(7)
Total assets			$	3,086	$	9,685	$	—	$	12,770	(7)
Liabilities:
	Derivative liabilities (5)
		Foreign exchange contracts	$	—	$	460	$	—	$	460
		Equity contracts		—		1		—		1
		Interest rate contracts		—		0		—		0
Total liabilities			$	—	$	461	$	—	$	461	(7)

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

(2) U.S. government securities, time deposits 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, 2016 were $165 million

and $964 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, 2016 were $443 million and $18

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 $270 million.

(Dollars in millions)
At December 31, 2015			Level 1		Level 2		Level 3		Total
Assets:
	Cash equivalents (1)
		Time deposits and certificates of deposit	$	—	$	2,856	$	—	$	2,856
		Money market funds		2,069		—		—		2,069
		Other securities		—		18		—		18
	Total			2,069		2,874		—		4,943	(6)
	Debt securities - current (2)			—		506		—		506	(6)
	Debt securities - noncurrent (3)			1		6		—		8
	Trading security investments (3)			28		—		—		28
	Available-for-sale equity investments (3)			192		—		—		192
	Derivative assets (4)
		Interest rate contracts		—		656		—		656
		Foreign exchange contracts		—		332		—		332
		Equity contracts		—		6		—		6
	Total			—		994		—		994	(7)
Total assets			$	2,290	$	4,381	$	—	$	6,671	(7)
Liabilities:
	Derivative liabilities (5)
		Foreign exchange contracts	$	—	$	164	$	—	$	164
		Equity contracts		—		19		—		19
		Interest rate contracts		—		3		—		3
Total liabilities			$	—	$	186	$	—	$	186	(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, 2015 were $292 million and

$702 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, 2015 were $164 million and $22

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 $139 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 March 31, 2016:	Cost		Gains		Losses		Value
Debt securities – noncurrent(1)	$	5	$	3	$	—	$	8
Available-for-sale equity investments(1)	$	1	$	8	$	0	$	9

(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, 2015:	Cost		Gains		Losses		Value
Debt securities – noncurrent(1)	$	5	$	3	$	—	$	8
Available-for-sale equity investments(1)	$	186	$	6	$	0	$	192

(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 March 31:		2016		2015
Proceeds	$	148	$	4
Gross realized gains (before taxes)		—		0
Gross realized losses (before taxes)		37		0

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

The after-tax net unrealized holding gains/(losses) on available-for-sale debt and marketable equity securities that have
been included in other comprehensive income/(loss) for the period and the after-tax net (gains)/losses reclassified from
accumulated other comprehensive income/(loss) to net income were as follows:

(Dollars in millions)
For the three months ended March 31:		2016		2015
Net unrealized gains/(losses) arising during the period	$	(22)	$	20
Net unrealized (gains)/losses reclassified to net income*		23		0

* There were no writedowns for the three months ended March 31, 2016 and 2015, 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 March 31, 2016 and December 31, 2015

(Dollars in millions)	Fair Value of Derivative Assets					Fair Value of Derivative Liabilities
	Balance Sheet					Balance Sheet
	Classification	3/31/2016		12/31/2015		Classification	3/31/2016		12/31/2015
Designated as hedging
instruments:
Interest rate contracts:	Prepaid expenses and					Other accrued
	other current assets	$	—	$	—	expenses and liabilities	$	—	$	—
	Investments and sundry
	assets		876		656	Other liabilities		—		3
Foreign exchange	Prepaid expenses and					Other accrued
contracts:	other current assets		37		197	expenses and liabilities		363		70
	Investments and sundry
	assets		47		5	Other liabilities		11		19

Fair value of derivative						Fair value of derivative
assets		$	960	$	858	liabilities	$	374	$	92

Not designated as
hedging instruments:
Foreign exchange	Prepaid expenses and					Other accrued
contracts:	other current assets	$	81	$	90	expenses and liabilities	$	79	$	75
	Investments and sundry
	assets		41		40	Other liabilities		7		—
Equity contracts:	Prepaid expenses and					Other accrued
	other current assets		48		6	expenses and liabilities		1		19
	Investments and sundry
	assets		—		—	Other liabilities		—		—
Fair value of derivative						Fair value of derivative
assets		$	170	$	136	liabilities	$	87	$	94

Total debt designated as
hedging instruments:
Short-term debt			N/A		N/A		$	386	$	—
Long-term debt			N/A		N/A		$	8,947	$	7,945


Total		$	1,129	$	994		$	9,794	$	8,131

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, 2016 and 2015

(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 March 31:				2016		2015		2016		2015
Derivative instruments in fair value hedges(5):
Interest rate contracts		Cost of financing	$	137	$	97	$	(112)	$	(66)
		Interest expense		147		74		(120)		(51)
Derivative instruments not designated as
	hedging instruments(1):
Foreign exchange contracts		Other (income)
		and expense		121		17		N/A		N/A
Interest rate contracts		Other (income)
		and expense		0		(1)		N/A		N/A
Equity contracts		SG&A expense		21		24		N/A		N/A
		Other (income)
		and expense		(1)		0		N/A		N/A

Total			$	426	$	211	$	(233)	$	(118)

(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(3)
For the three months
	ended March 31:	2016		2015			2016		2015		2016		2015
Derivative instruments
	in cash flow hedges:
Interest rate contracts		$	—	$	—	Interest expense	$	(2)	$	0	$	—	$	—
						Other (income)
Foreign exchange			(265)		619	and expense		87		160		1		0
	contracts					Cost of sales		3		50		—		—
						SG&A expense		3		40		—		—
Instruments in net
	investment hedges(4):
Foreign exchange
	contracts		(693)		694	Interest expense		—		—		10		0

Total		$	(959)	$	1,313		$	91	$	249	$	11	$	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.
The amount of gain/(loss) recognized in income represents ineffectiveness on hedge relationships.
Instruments in net investment hedges include derivative and non-derivative instruments.
For the three month periods ended March 31, 2016 and March 31, 2015, fair value hedges resulted in gains of $2 million in ineffectiveness for both periods.

- 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.

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- 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.

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