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FINANCIAL INSTRUMENTS (Tables)
12 Months Ended
Dec. 31, 2016
FINANCIAL INSTRUMENTS  
Financial assets and financial liabilities measured at fair value on a recurring basis

 

($ in millions)

 

At December 31, 2016:

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

Cash equivalents (1)

 

 

 

 

 

 

 

 

 

Time deposits and certificates of deposit

 

$

 

$

3,629 

 

$

 

$

3,629 

 

Money market funds

 

1,204 

 

 

 

1,204 

 

 

 

 

 

 

 

 

 

 

 

Total

 

1,204 

 

3,629 

 

 

4,832 

(6)

 

 

 

 

 

 

 

 

 

 

Debt securities—current (2)

 

 

699 

 

 

699 

(6)

Debt securities—noncurrent (3)

 

 

 

 

 

Available-for-sale equity investments (3)

 

 

 

 

 

Derivative assets (4)

 

 

 

 

 

 

 

 

 

Interest rate contracts

 

 

555 

 

 

555 

 

Foreign exchange contracts

 

 

560 

 

 

560 

 

Equity contracts

 

 

11 

 

 

11 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

1,126 

 

 

1,126 

(7)

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

1,212 

 

$

5,460 

 

$

 

$

6,672 

(7)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

Derivative liabilities (5)

 

 

 

 

 

 

 

 

 

Foreign exchange contracts

 

$

 

$

188 

 

$

 

$

188 

 

Equity contracts

 

 

10 

 

 

10 

 

Interest rate contracts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

$

 

$

206 

 

$

 

$

206 

(7)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Included within cash and cash equivalents in the Consolidated Statement of Financial Position

(2)

U.S. government securities 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, 2016 were $532 million and $594 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, 2016 were $145 million and $61 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 $116 million.

 

($ 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)

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 would have been reduced by $139 million each.

 

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

 

($ in millions)

 

 

 

 

 

Gross

 

Gross

 

 

 

 

 

Adjusted

 

Unrealized

 

Unrealized

 

Fair

 

At December 31, 2016:

 

Cost

 

Gains

 

Losses

 

Value

 

Debt securities—noncurrent (1)

 

$

 

$

 

$

 

$

 

Available-for-sale equity investments (1)

 

$

 

$

 

$

 

$

 

 

(1)

Included within investments and sundry assets in the Consolidated Statement of Financial Position

 

($ in millions)

 

 

 

 

 

Gross

 

Gross

 

 

 

 

 

Adjusted

 

Unrealized

 

Unrealized

 

Fair

 

At December 31, 2015:

 

Cost

 

Gains

 

Losses

 

Value

 

Debt securities—noncurrent (1)

 

$

 

$

 

$

 

$

 

Available-for-sale equity investments (1)

 

$

186 

 

$

 

$

 

$

192 

 

 

(1)

Included within investments and sundry assets in the Consolidated Statement of Financial Position

 

Sales of debt and available-for-sale equity investments

($ in millions)

 

For the year ended

 

 

 

 

 

 

 

December 31:

 

2016

 

2015

 

2014

 

Proceeds

 

$

151 

 

$

 

$

21 

 

Gross realized gains (before taxes)

 

 

 

 

Gross realized losses (before taxes)

 

37 

 

 

 

 

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

 

($ in millions)

 

For the year ended December 31:

 

2016

 

2015

 

Net unrealized gains/(losses) arising during the period

 

$

(23

)

$

(33

)

Net unrealized (gains)/losses reclassified to net income*

 

21

 

53

 

 

*

Includes pre-tax writedowns of $86 million in 2015. There were no writedowns in 2016.

 

Fair Values of Derivative Instruments in the Consolidated Statement of Financial Position

 

Fair Values of Derivative Instruments in the Consolidated Statement of Financial Position

 

($ in millions)

 

 

 

Fair Value of Derivative Assets

 

Fair Value of Derivative Liabilities

 

 

 

Balance Sheet

 

 

 

 

 

Balance Sheet

 

 

 

 

 

At December 31:

 

Classification

 

2016

 

2015

 

Classification

 

2016

 

2015

 

Designated as hedging instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts

 

Prepaid expenses and other current assets

 

$

 

$

 

Other accrued expenses and liabilities

 

$

 

$

 

 

 

Investments and sundry assets

 

555 

 

656 

 

Other liabilities

 

 

 

Foreign exchange contracts

 

Prepaid expenses and other current assets

 

421 

 

197 

 

Other accrued expenses and liabilities

 

46 

 

70 

 

 

 

Investments and sundry assets

 

17 

 

 

Other liabilities

 

35 

 

19 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value of derivative assets

 

$

993 

 

$

858 

 

Fair value of derivative liabilities

 

$

89 

 

$

92 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Not designated as hedging instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange contracts

 

Prepaid expenses and other current assets

 

$

100 

 

$

90 

 

Other accrued expenses and liabilities

 

$

89 

 

$

75 

 

 

 

Investments and sundry assets

 

22 

 

40 

 

Other liabilities

 

18 

 

 

Equity contracts

 

Prepaid expenses and other current assets

 

11 

 

 

Other accrued expenses and liabilities

 

10 

 

19 

 

 

 

Investments and sundry assets

 

 

 

Other liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value of derivative assets

 

$

133 

 

$

136 

 

Fair value of derivative liabilities

 

$

117 

 

$

94 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total debt designated as hedging instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term debt

 

 

 

N/A

 

N/A

 

 

 

$

1,125 

 

$

 

Long-term debt

 

 

 

N/A

 

N/A

 

 

 

$

7,844 

 

$

7,945 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

$

1,126 

 

$

994 

 

 

 

$

9,175 

 

$

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

 

($ in millions)

 

 

 

Gain/(Loss) Recognized in Earnings

 

 

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

Statement of

 

 

 

Attributable to Risk

 

 

 

Earnings Line

 

Recognized on Derivatives

 

Being Hedged (2)

 

For the year ended December 31:

 

Item

 

2016

 

2015

 

2014

 

2016

 

2015

 

2014

 

Derivative instruments in fair value hedges (1) (5)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts

 

Cost of financing

 

$

28

 

$

108

 

$

231

 

$

58

 

$

(1

)

$

(127

)

 

 

Interest expense

 

31

 

94

 

206

 

63

 

(1

)

(114

)

Derivative instruments not designated as hedging instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange contracts

 

Other (income) and expense

 

(189

)

127

 

(776

)

N/A

 

N/A

 

N/A

 

Interest rate contracts

 

Other (income) and expense

 

0

 

(1

)

34

 

N/A

 

N/A

 

N/A

 

Equity contracts

 

SG&A expense

 

112

 

(27

)

51

 

N/A

 

N/A

 

N/A

 

 

 

Other (income) and expense

 

(1

)

(9

)

(9

)

N/A

 

N/A

 

N/A

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

$

(18

)

$

291

 

$

(263

)

$

121

 

$

(1

)

$

(241

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in millions)

 

 

 

Gain/(Loss) Recognized in Earnings and Other Comprehensive Income

 

 

 

 

 

Consolidated

 

 

 

Ineffectiveness and

 

 

 

Effective Portion

 

Statement of

 

Effective Portion

 

Amounts Excluded from

 

For the year ended

 

Recognized in OCI

 

Earnings Line

 

Reclassified from AOCI

 

Effectiveness Testing (3)

 

December 31:

 

2016

 

2015

 

2014

 

Item

 

2016

 

2015

 

2014

 

2016

 

2015

 

2014

 

Derivative instruments in cash flow hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts

 

$

 

$

 

$

 

Interest expense

 

$

(24

)

$

0

 

$

(1

)

$

 

$

 

$

 

Foreign exchange contracts

 

243

 

618

 

958

 

Other (income) and expense

 

(68

)

731

 

98

 

(3

)

5

 

(1

)

 

 

 

 

 

 

 

 

Cost

 

(13

)

192

 

(15

)

 

 

 

 

 

 

 

 

 

 

 

SG&A expense

 

4

 

149

 

15

 

 

 

 

Instruments in net investment hedges (4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange contracts

 

311

 

889

 

1,136

 

Interest expense

 

 

 

 

77

 

13

 

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

555

 

$

1,507

 

$

2,095

 

 

 

$

(102

)

$

1,072

 

$

97

 

$

74

 

$

18

 

$

(1

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

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.

(2)

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.

(3)

The amount of gain/(loss) recognized in income represents ineffectiveness on hedge relationships.

(4)

Instruments in net investment hedges include derivative and non-derivative instruments.

(5)

For the years ended December 31, 2016, 2015 and 2014, fair value hedges resulted in a loss of $4 million, a loss of $2 million and a gain of $4 million in ineffectiveness, respectively.

 

N/A—Not applicable