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Financial Instruments (Tables)
 12 Months Ended
Dec. 31, 2018
Financial Instruments  
Financial assets and financial liabilities measured at fair value on a recurring basis

 

($ in millions)

 

At December 31, 2018:

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

Cash equivalents (1)

 

 

 

 

 

 

 

 

 

Time deposits and certificates of deposit

 

$

—

 

$
7,679

 

$

—

 

$
7,679

(6)

Money market funds

 
25

 

—

 

—

 
25

 

 

 

 

 

 

 

 

 

 

 

Total

 
25

 
7,679

 

—

 
7,704

 

 

 

 

 

 

 

 

 

 

 

Equity investments (2)

 
0

 

—

 

—

 
0

 

Debt securities — current (3)

 

—

 
618

 

—

 
618

(6)

Derivative assets (4)

 
1

 
731

 

—

 
731

(7)

 

 

 

 

 

 

 

 

 

 

Total assets

 

$
26

 

$
9,028

 

$

—

 

$
9,053

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities (5)

 

$
40

 

$
343

 

$

—

 

$
383

(7)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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)

Included within marketable securities 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, 2018 were $385 million and $347 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, 2018 were $177 million and $206 million, respectively.

(6)

Available-for-sale debt 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 $267 million.

 

($ in millions)

 

At December 31, 2017:

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

Cash equivalents (1)

 

 

 

 

 

 

 

 

 

Time deposits and certificates of deposit

 

$

—

 

$
8,066

 

$

—

 

$
8,066

 

Commercial paper

 

—

 
96

 

—

 
96

 

Money market funds

 
26

 

—

 

—

 
26

 

Canadian government securities

 

—

 
398

 

—

 
398

 

 

 

 

 

 

 

 

 

 

 

Total

 
26

 
8,560

 

—

 
8,586

(6)

 

 

 

 

 

 

 

 

 

 

Equity investments (2)

 
4

 

—

 

—

 
4

 

Debt securities — current (3)

 

—

 
608

 

—

 
608

(6)

Debt securities — noncurrent (2)

 
4

 
7

 

—

 
11

 

Derivative assets (4)

 

—

 
942

 

—

 
942

(7)

 

 

 

 

 

 

 

 

 

 

Total assets

 

$
33

 

$
10,117

 

$

—

 

$
10,151

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities (5)

 

$

—

 

$
415

 

$

—

 

$
415

(7)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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)

U.S. Government securities reported as marketable securities 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, 2017 were $185 million and $757 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, 2017 were $377 million and $38 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 $255 million.
Sales of debt and available-for-sale equity investments

 

($ in millions)

 

For the year ended December 31:

 

2018

 

2017

 

2016

 

Proceeds

 

$
0

 

$
7

 

$
151

 

Gross realized gains (before taxes)

 

—

 
3

 
3

 

Gross realized losses (before taxes)

 

—

 
2

 
37

 

 

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

 

2018

 

2017

 

Classification

 

2018

 

2017

 

Designated as hedging instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts

 

Prepaid expenses and other current assets

 

$
9

 

$
2

 

Other accrued expenses and liabilities

 

$
4

 

$

—

 

 

 

Investments and sundry assets

 
212

 
459

 

Other liabilities

 
76

 
34

 

Foreign exchange contracts

 

Prepaid expenses and other current assets

 
348

 
111

 

Other accrued expenses and liabilities

 
110

 
318

 

 

 

Investments and sundry assets

 
135

 
298

 

Other liabilities

 
129

 
3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value of derivative assets

 

$
704

 

$
870

 

Fair value of derivative liabilities

 

$
320

 

$
355

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Not designated as hedging instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange contracts

 

Prepaid expenses and other current assets

 

$
26

 

$
61

 

Other accrued expenses and liabilities

 

$
13

 

$
57

 

Equity contracts

 

Prepaid expenses and other current assets

 
2

 
12

 

Other accrued expenses and liabilities

 
51

 
3

 

 

 

Fair value of derivative assets

 

$
28

 

$
72

 

Fair value of derivative liabilities

 

$
63

 

$
60

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total derivatives

 

 

 

$
731

 

$
942

 

 

 

$
383

 

$
415

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total debt designated as hedging instruments (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term debt

 

 

 

N/A

 

N/A

 

 

 

$

—

 

$

—

 

Long-term debt

 

 

 

N/A

 

N/A

 

 

 
6,261

 
6,471

 

 

 

 

 

N/A

 

N/A

 

 

 

$
6,261

 

$
6,471

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

$
731

 

$
942

 

 

 

$
6,644

 

$
6,886

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Debt designated as hedging instruments are reported at carrying value.

N/A — Not applicable

Amounts related to cumulative basis adjustments for fair value hedges

 

At December 31, 2018, the following amounts were recorded in the Consolidated Statement of Financial Position related to cumulative basis adjustments for fair value hedges:

 

($ in millions)

 

 

 

 

 

Cumulative Amount

 

 

 

 

 

of Fair Value Hedging

 

 

 

Carrying Amount

 

Adjustment Included

 

Line Item in the Consolidated Statement of Financial Position

 

of the Hedged Item

 

in the Carrying Amount

 

in which the Hedged Item is Included

 

Assets/(Liabilities)

 

of Assets/(Liabilities)

 

Short-term debt

 

$
(1,878

)

$
(4

)(1)

Long-term debt

 

$
(6,004

)

$
(333

)(2)

 

 

(1) Includes ($6) million of hedging adjustments on discontinued hedging relationships.

(2) Includes ($213) million of hedging adjustments on discontinued hedging relationships.

Effect of Derivative Instruments in the Consolidated Statement of Earnings

 

($ in millions)

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

Cost of

 

Cost of

 

Cost of

 

SG&A

 

(Income) and

 

Interest

 

For the year ended December 31, 2018

 

Services

 

Sales

 

Financing

 

Expense

 

Expense

 

Expense

 

Total

 

$
34,059

 

$
7,464

 

$
1,132

 

$
19,366

 

$
1,152

 

$
723

 

Gains/(losses) of total hedge activity

 
30

 
8

 
(6

)
(116

)
(434

)
(6

)

 

($ in millions)

 

 

 

Gain/(Loss) Recognized in Earnings

 

 

 

Consolidated

 

 

 

 

 

 

 

Attributable to Risk

 

 

 

Statement of

 

Recognized on Derivatives

 

Being Hedged (2)

 

For the year ended December 31:

 

Earnings Line Item

 

2018

 

2017

 

2016

 

2018

 

2017

 

2016

 

Derivative instruments in fair value hedges (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts

 

Cost of financing

 

$
(61

)

$
1

 

$
28

 

$
97

 

$
74

 

$
58

 

 

 

Interest expense

 
(58

)
1

 
31

 
92

 
69

 
63

 

Derivative instruments not designated as hedging instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts

 

Other (income) and expense

 

—

 

—

 
0

 

N/A

 

N/A

 

N/A

 

Foreign exchange contracts

 

Other (income) and expense

 
(93

)
16

 
(189

)

N/A

 

N/A

 

N/A

 

Equity contracts

 

SG&A expense

 
(116

)
135

 
112

 

N/A

 

N/A

 

N/A

 

 

 

Other (income) and expense

 

—

 

—

 
(1

)

N/A

 

N/A

 

N/A

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

$
(327

)

$
153

 

$
(18

)

$
189

 

$
144

 

$
121

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in millions)

 

 

 

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

 

 

 

 

 

 

 

 

 

Consolidated

 

 

 

 

 

 

 

Amounts Excluded from

 

For the year ended

 

Recognized in OCI

 

Statement of

 

Reclassified from AOCI

 

Effectiveness Testing (3)

 

December 31:

 

2018

 

2017

 

2016

 

Earnings Line Item

 

2018

 

2017

 

2016

 

2018

 

2017

 

2016

 

Derivative instruments in cash flow hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts

 

$
(35

)

$

—

 

$

—

 

Cost of financing

 

$

—

 

$

—

 

$

—

 

$

—

 

$

—

 

$

—

 

 

 

 

 

 

 

 

 

Interest expense

 

—

 

—

 

—

 

—

 

—

 

—

 

Foreign exchange contracts

 
(101

)
(58

)
243

 

Cost of services

 
30

 
70

 
(8

)

—

 

—

 

—

 

 

 

 

 

 

 

 

 

Cost of sales

 
8

 
3

 
(5

)

—

 

—

 

—

 

 

 

 

 

 

 

 

 

Cost of financing*

 
(75

)
(23

)
(12

)

—

 

—

 

—

 

 

 

 

 

 

 

 

 

SG&A expense

 
0

 
11

 
4

 

—

 

—

 

—

 

 

 

 

 

 

 

 

 

Other (income)
and expense

 
(341

)
324

 
(68

)

—

 
1

 
(3

)

 

 

 

 

 

 

 

 

Interest expense*

 
(71

)
(22

)
(13

)

—

 

—

 

—

 

Instruments in net investment hedges (4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange contracts

 
686

 
(1,607

)
311

 

Cost of financing*

 

—

 

—

 

—

 
33

 
23

 
37

 

 

 

 

 

 

 

 

 

Interest expense*

 

—

 

—

 

—

 
31

 
21

 
40

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$
549

 

$
(1,665

)

$
555

 

 

 

$
(449

)

$
363

 

$
(102

)

$
64

 

$
45

 

$
74

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

* Reclassified to conform to 2018 presentation.

 

Prior period gain or loss amounts and presentation are not conformed to the new hedge accounting guidance that the company adopted in 2018.

 

Refer to note B, “Accounting Changes,” for further information.

 

(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 company’s policy is to recognize all fair value changes in amounts excluded from effectiveness testing in net income each period.

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

N/A — Not applicable