Financial Instruments: (Tables)

3 Months Ended

Mar. 31, 2013

Financial Instruments:

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

(Dollars in millions)
At March 31, 2013	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents(1)
Time deposits and certificates of deposit	$	—	$	4,232	$	—	$	4,232
Commercial paper	—		3,038		—		3,038
Money market funds	996		—		—		996
U.S. government securities	—		150		—		150
Other securities	—		33		—		33
Total	996		7,453		—		8,448		(6)
Debt securities - current (2)	—		1,407				1,407		(6)
Debt securities - noncurrent (3)	2		7		—		10
Available-for-sale equity investments(3)	14		0		—		14
Derivative assets (4)
Interest rate contracts	—		584		—		584
Foreign exchange contracts	—		451		—		451
Equity contracts	—		26		—		26
Total	—		1,061		—		1,061		(7)
Total assets	$	1,012	$	9,928	$	—	$	10,940	(7)
Liabilities:
Derivative liabilities (5)
Foreign exchange contracts	$	—	$	293	$	—	$	293
Equity contracts	—		3		—		3
Total liabilities	$	—	$	296	$	—	$	296	(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 March 31, 2013 are $519 million and $542 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, 2013 were $237 million and $58 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 $220 million each.

(Dollars in millions)
At December 31, 2012	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents(1)
Time deposits and certificates of deposit	$	—	$	3,694	$	—	$	3,694
Commercial paper	—		2,098		—		2,098
Money market funds	1,923		—		—		1,923
Other securities	—		30		—		30
Total	1,923		5,823		—		7,746		(6)
Debt securities - current (2)	—		717		—		717		(6)
Debt securities - noncurrent (3)	2		8		—		10
Available-for-sale equity investments(3)	34		—		—		34
Derivative assets (4)
Interest rate contracts	—		604		—		604
Foreign exchange contracts	—		305		—		305
Equity contracts	—		9		—		9
Total	—		918		—		918		(7)
Total assets	$	1,959	$	7,466	$	—	$	9,424	(7)
Liabilities:
Derivative liabilities (5)
Foreign exchange contracts	$	—	$	496	$	—	$	496
Equity contracts	—		7		—		7
Total liabilities	$	—	$	503	$	—	$	503	(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, 2012 are $333 million and $585 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, 2012 were $426 million and $78 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 $262 million each.

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, 2013:	Cost		Gains		Losses		Value
Debt securities — noncurrent(1)	$	7	$	3	$	—	$	10
Available-for-sale equity investments(1)	$	10	$	4	$	—	$	14

(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, 2012:	Cost		Gains		Losses			Value
Debt securities — noncurrent(1)	$	8	$	2	$	—		$	10
Available-for-sale equity investments(1)	$	31	$	4	$	(1	)	$	34

(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:	2013			2012
Proceeds	$	18		$	45
Gross realized gains (before taxes)	3			14
Gross realized losses (before taxes)	(4		)	(0		)

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

(Dollars in millions)
For the three months ended March 31:	2013			2012
Net unrealized gains/(losses) arising during the period	$	(1	)	$	15
Net unrealized (gains)/losses reclassified to net income*	0			(8		)

* There were no significant writedowns for the three months ended March 31, 2013 and 2012.

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

	Fair Value of Derivative Assets					Fair Value of Derivative Liabilities
	Balance Sheet					Balance Sheet
(Dollars in millions)	Classification	3/31/2013		12/31/2012		Classification	3/31/2013		12/31/2012
Designated as hedging instruments:
Interest rate contracts:	Prepaid expenses and other current assets	$	66	$	47	Other accrued expenses and liabilities	$	—	$	—
	Investments and sundry assets	518		557		Other liabilities	—		—
Foreign exchange contracts:	Prepaid expenses and other current assets	317		135		Other accrued expenses and liabilities	132		267
	Investments and sundry assets	7		5		Other liabilities	58		78
Fair value of derivative assets		$	908	$	744	Fair value of derivative liabilities	$	190	$	345
Not designated as hedging instruments:
Foreign exchange contracts:	Prepaid expenses and other current assets	$	110	$	142	Other accrued expenses and liabilities	$	103	$	152
	Investments and sundry assets	17		23		Other liabilities	—		—
Equity contracts:	Prepaid expenses and other current assets	26		9		Other accrued expenses and liabilities	3		7
Fair value of derivative assets		$	153	$	174	Fair value of derivative liabilities	$	106	$	159
Total debt designated as hedging instruments:
	Short-term debt	N/A		N/A			$	1,703	$	578
	Long-term debt	N/A		N/A			1,768		3,035
Total		$	1,061	$	918		$	3,767	$	4,116

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	2013			2012			2013		2012
Derivative instruments in fair value hedges:
Interest rate contracts	Cost of financing	$	(20	)	$	(24	)	$	46	$	57
	Interest expense	(13		)	(19		)	30		45
Derivative instruments not designated as hedging instruments(1):
Foreign exchange contracts	Other (income) and expense	(439		)	(81		)	N/A		N/A
Equity contracts	SG&A expense	85			98			N/A		N/A
Total		$	(387	)	$	(26	)	$	76	$	102

	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:	2013		2012			Earnings Line Item	2013		2012			2013			2012
Derivative instruments in cash flow hedges:
Interest rate contracts	$	—	$	—		Interest expense	$	—	$	(2	)	$	—		$	—
Foreign exchange contracts	360		51			Other (income) and expense	37		20			1			1
						Cost of sales	9		5			—			—
						SG&A expense	10		2			—			—
Instruments in net investment hedges(4):
Foreign exchange contracts	219		(37		)	Interest expense	—		—			(1		)	2
Total	$	579	$	12			$	56	$	24		$	0		$	3

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.