Financial Instruments: (Tables)

9 Months Ended

Sep. 30, 2012

Financial Instruments:

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

(Dollars in millions)
At September 30, 2012	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents(1)
Time deposits and certificates of deposit	$	—	$	2,487	$	—	$	2,487
Commercial paper	—		3,574		—		3,574
Money market funds	1,313		—		—		1,313
U.S. government securities	—		1,450		—		1,450
Canada government securities	—		254		—		254
Other securities	—		57		—		57
Total	1,313		7,822		—		9,135		(6)
Debt securities - current (2)	—		345				345		(6)
Debt securities - noncurrent (3)	2		7		—		9
Available-for-sale equity investments(3)	53		0		—		53
Derivative assets (4)
Interest rate contracts	—		826		—		826
Foreign exchange contracts	—		391		—		391
Equity contracts	—		11		—		11
Total	—		1,228		—		1,228		(7)
Total assets	$	1,368	$	9,402	$	—	$	10,770	(7)
Liabilities:
Derivative liabilities (5)
Foreign exchange contracts	$	—	$	388	$	—	$	388
Equity contracts	—		11		—		11
Total liabilities	$	—	$	399	$	—	$	399	(7)

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

(2)Commercial paper 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, 2012 are $418 million and $810 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, 2012 are $324 million and $75 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 $245 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 September 30, 2012:	Cost		Gains		Losses			Value
Debt securities — noncurrent(1)	$	8	$	1	$	—		$	9
Available-for-sale equity investments(1)	$	48	$	7	$	(2	)	$	53

(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 available-for-sale equity investments

(Dollars in millions)
For the three months ended September 30:	2012		2011
Proceeds	$	36	$	—
Gross realized gains (before taxes)	27		—
Gross realized losses (before taxes)	—		—

(Dollars in millions)
For the nine months ended September 30:	2012			2011
Proceeds	$	87		$	402
Gross realized gains (before taxes)	43			232
Gross realized losses (before taxes)	(0		)	(0		)

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

(Dollars in millions)
For the three months ended September 30:	2012			2011
Net unrealized gains/(losses) arising during the period	$	2		$	(9	)
Net unrealized (gains)/losses reclassified to net income*	(17		)	0

*There were no significant writedowns for the three months ended September 30, 2012 and 2011, respectively.

(Dollars in millions)
For the nine months ended September 30:	2012			2011**
Net unrealized gains/(losses) arising during the period	$	20		$	(10	)
Net unrealized (gains)/losses reclassified to net income*	(26		)	(143		)

* There were no significant writedowns for the nine months ended September 30, 2012 and 2011, respectively.

** Reclassified to conform with 2012 presentation.

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, 2012 and December 31, 2011

	Fair Value of Derivative Assets					Fair Value of Derivative Liabilities
	Balance Sheet					Balance Sheet
(Dollars in millions)	Classification	9/30/2012		12/31/2011		Classification	9/30/2012		12/31/2011
Designated as hedging instruments:
Interest rate contracts:	Prepaid expenses and other current assets	$	51	$	50	Other accrued expenses and liabilities	$	—	$	—
	Investments and sundry assets	775		733		Other liabilities	—		—
Foreign exchange contracts:	Prepaid expenses and other current assets	184		407		Other accrued expenses and liabilities	275		273
	Investments and sundry assets	17		—		Other liabilities	65		155
Fair value of derivative assets		$	1,027	$	1,190	Fair value of derivative liabilities	$	340	$	428
Not designated as hedging instruments:
Foreign exchange contracts:	Prepaid expenses and other current assets	$	172	$	82	Other accrued expenses and liabilities	$	38	$	84
	Investments and sundry assets	18		21		Other liabilities	10		11
Equity contracts:	Prepaid expenses and other current assets	11		7		Other accrued expenses and liabilities	11		8
Fair value of derivative assets		$	201	$	110	Fair value of derivative liabilities	$	59	$	103
Total debt designated as hedging instruments:
	Short-term debt	N/A		N/A			$	643	$	—
	Long-term debt	N/A		N/A			1,729		1,884
Total		$	1,228	$	1,300		$	2,771	$	2,415

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, 2012 and 2011

	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 September 30:	Earnings Line Item	2012		2011			2012		2011
Derivative instruments in fair value hedges:
Interest rate contracts	Cost of financing	$	13	$	204		$	19	$	(166	)
	Interest expense	11		141			16		(115		)
Derivative instruments not designated as hedging instruments(1):
Foreign exchange contracts	Other (income) and expense	148		183			N/A		N/A
Equity contracts	SG&A expense	54		(100		)	N/A		N/A
Warrants	Other (income) and expense	—		10			N/A		N/A
Total		$	226	$	438		$	35	$	(281	)

	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 September 30:	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	(54		)	295		Other (income) and expense	102			(86		)	0		(2		)
						Cost of sales	6			(60		)	—		—
						SG&A expense	5			(19		)	—		—
Instruments in net investment hedges(4):
Foreign exchange contracts	(136		)	237		Interest expense	—			—			6		(4		)
Total	$	(190	)	$	532		$	112		$	(167	)	$	6	$	(6	)

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.

The Effect of Derivative Instruments in the Consolidated Statement of Earnings

For the nine months ended September 30, 2012 and 2011

	Gain (Loss) Recognized in Earnings
	Consolidated	Recognized on						Attributable to Risk
(Dollars in millions)	Statement of	Derivatives(1)						Being Hedged(2)
For the nine months ended September 30:	Earnings Line Item	2012			2011			2012		2011
Derivative instruments in fair value hedges:
Interest rate contracts	Cost of financing	$	68		$	263		$	27	$	(142	)
	Interest expense	58			183			23		(99		)
Derivative instruments not designated as hedging instruments(1):
Foreign exchange contracts	Other (income) and expense	(56		)	388			N/A		N/A
Equity contracts	SG&A expense	116			(28		)	N/A		N/A
Warrants	Other (income) and expense	—			10			N/A		N/A
Total		$	186		$	816		$	50	$	(241	)

	Gain (Loss) Recognized in Earnings and Other Comprehensive Income
														(Ineffectiveness) and
	Effective Portion						Consolidated	Effective Portion Reclassified						Amounts Excluded from
For the nine months	Recognized in OCI						Statement of	from AOCI						Effectiveness Testing(3)
ended September 30:	2012			2011			Earnings Line Item	2012			2011			2012		2011
Derivative instruments in cash flow hedges:
Interest rate contracts	$	—		$	—		Interest expense	$	(6	)	$	(6	)	$	—	$	—
Foreign exchange contracts	65			(159		)	Other (income) and expense	209			(256		)	3		(2		)
							Cost of sales	22			(163		)	—		—
							SG&A expense	21			(70		)	—		—
Instruments in net investment hedges(4):
Foreign exchange contracts	(23		)	(15		)	Interest expense	—			—			9		(10		)
Total	$	42		$	(174	)		$	246		$	(494	)	$	12	$	(12	)

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.