Financial Instruments: (Tables)

3 Months Ended

Mar. 31, 2012

Financial Instruments:

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

(Dollars in millions)
At March 31, 2012	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents(1)
Time deposits and certificates of deposit	$	—	$	1,604	$	—	$	1,604
Commercial paper	—		1,016		—		1,016
Money market funds	1,171		—		—		1,171
U.S. government securities	—		3,200		—		3,200
Canada government securities	—		1,454		—		1,454
Other securities	—		1		—		1
Total	1,171		7,275		—		8,446		(6)
Debt securities - current (2)	—		500				500		(6)
Debt securities - noncurrent (3)	1		7		—		8
Available-for-sale equity investments(3)	27		32		—		59
Derivative assets (4)
Interest rate contracts	—		756		—		756
Foreign exchange contracts	—		393		—		393
Equity contracts	—		30		—		30
Total	—		1,179		—		1,179		(7)
Total assets	$	1,199	$	8,993	$	—	$	10,192	(7)
Liabilities:
Derivative liabilities (5)
Foreign exchange contracts	$	—	$	315	$	—	$	315
Equity contracts	—		4		—		4
Total liabilities	$	—	$	319	$	—	$	319	(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 March 31, 2012 are $451 million and $728 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, 2012 are $223 million and $96 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 $230 million each.

(Dollars in millions)
At December 31, 2011	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents(1)
Time deposits and certificates of deposit	$	—	$	2,082	$	—	$	2,082
Commercial paper*	—		777		—		777
Money market funds	1,886		—		—		1,886
U.S. government securities	—		2,750		—		2,750
Canada government securities*	—		983		—		983
Other securities	—		8		—		8
Total	1,886		6,600		—		8,486		(5)
Debt securities - noncurrent (2)	1		7		—		8
Available-for-sale equity investments(2)	69		14		—		83
Derivative assets (3)
Interest rate contracts	—		783		—		783
Foreign exchange contracts	—		510		—		510
Equity contracts	—		7		—		7
Total	—		1,300		—		1,300		(6)
Total assets	$	1,956	$	7,921	$	—	$	9,877	(6)
Liabilities:
Derivative liabilities (4)
Foreign exchange contracts	$	—	$	523	$	—	$	523
Equity contracts	—		8		—		8
Total liabilities	$	—	$	531	$	—	$	531	(6)

* Reclassified to conform with 2012 presentation.

(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, 2011 are $546 million and $754 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, 2011 are $365 million and $166 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 would have been reduced by $324 million each.

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, 2012:	Cost		Gains		Losses			Value
Debt securities — noncurrent(1)	$	7	$	1	$	—		$	8
Available-for-sale equity investments(1)	$	27	$	34	$	(2	)	$	59

(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, 2011:	Cost		Gains		Losses			Value
Debt securities — noncurrent(1)	$	7	$	1	$	—		$	8
Available-for-sale equity investments(1)	$	58	$	27	$	(2	)	$	83

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

Sales of debt and marketable equity securities

(Dollars in millions)
For the three months ended March 31:	2012			2011
Proceeds	$	45		$	315
Gross realized gains (before taxes)	14			203
Gross realized losses (before taxes)	(0		)	(0		)

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

(Dollars in millions)
For the three months ended March 31:	2012			2011
Net unrealized gains/(losses) arising during the period	$	15		$	1
Net unrealized (gains)/losses reclassified to net income*	(8		)	(124		)

* There were no significant writedowns for the three months ended March 31, 2012 and 2011.

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, 2012 and December 31, 2011

	Fair Value of Derivative Assets					Fair Value of Derivative Liabilities
	Balance Sheet					Balance Sheet
(Dollars in millions)	Classification	3/31/2012		12/31/2011		Classification	3/31/2012		12/31/2011
Designated as hedging instruments:
Interest rate contracts:	Prepaid expenses and other current assets	$	56	$	50	Other accrued expenses and liabilities	$	—	$	—
	Investments and sundry assets	700		733		Other liabilities	—		—
Foreign exchange contracts:	Prepaid expenses and other current assets	238		407		Other accrued expenses and liabilities	194		273
	Investments and sundry assets	1		—		Other liabilities	85		155
Fair value of derivative assets		$	996	$	1,190	Fair value of derivative liabilities	$	280	$	428
Not designated as hedging instruments:
Foreign exchange contracts:	Prepaid expenses and other current assets	$	128	$	82	Other accrued expenses and liabilities	$	25	$	84
	Investments and sundry assets	26		21		Other liabilities	11		11
Equity contracts:	Prepaid expenses and other current assets	29		7		Other accrued expenses and liabilities	4		8
Fair value of derivative assets		$	183	$	110	Fair value of derivative liabilities	$	39	$	103
Total debt designated as hedging instruments:
	Short-term debt	N/A		N/A			$	—	$	—
	Long-term debt	N/A		N/A			2,350		1,884
Total		$	1,179	$	1,300		$	2,668	$	2,415

N/A–not applicable

Effect of Derivative Instruments in the Consolidated Statement of Earnings

	Gain (Loss) Recognized in Earnings
	Consolidated	Recognized on						Attributable to Risk
(Dollars in millions)	Statement of	Derivatives(1)						Being Hedged(2)
For the three months ended March 31:	Earnings Line Item	2012			2011			2012		2011
Derivative instruments in fair value hedges:
Interest rate contracts	Cost of financing	$	(24	)	$	(9	)	$	57	$	52
	Interest expense	(19		)	(6		)	45		34
Derivative instruments not designated as hedging instruments:(1)
Foreign exchange contracts	Other (income) and expense	(81		)	87			N/A		N/A
Equity contracts	SG&A expense	98			59			N/A		N/A
Total		$	(26	)	$	131		$	102	$	86

	Gain (Loss) Recognized in Earnings and Other Comprehensive Income
														(Ineffectiveness) and
	Effective Portion						Consolidated	Effective Portion Reclassified						Amounts Excluded from
For the three months	Recognized in OCI						Statement of	from AOCI						Effectiveness Testing(3)
ended March 31:	2012			2011			Earnings Line Item	2012			2011			2012		2011
Derivative instruments in cash flow hedges:
Interest rate contracts	$	—		$	—		Interest expense	$	(2	)	$	(2	)	$	—	$	—
Foreign exchange contracts	51			(237		)	Other (income) and expense	20			(47		)	1		0
							Cost of sales	5			(34		)	—		—
							SG&A expense	2			(17		)	—		—
Instruments in net investment hedges(4):
Foreign exchange contracts	(37		)	(151		)	Interest expense	—			0			2		(1		)
Total	$	12		$	(388	)		$	24		$	(101	)	$	3	$	(1	)

N/A–not applicable

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

(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.