Derivative Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2021


	March 31,		December 31,
(Dollars in millions)	2021		2020
Short-term debt:
Carrying amount of the hedged item	$	—	$	(1,302)
Cumulative hedging adjustments included in the carrying amount — assets/(liabilities)		—		(2)
Long-term debt:
Carrying amount of the hedged item	$	(781)	$	(2,097)
Cumulative hedging adjustments included in the carrying amount — assets/(liabilities)*		(357)		(424)

* Includes ($340) million and ($353) million of hedging adjustments on discontinued hedging relationships at March 31, 2021 and December 31, 2020, respectively.

Effect of derivative instruments in the consolidated income statement


					Gains/(Losses) of
(Dollars in millions)	Total				Total Hedge Activity
For the three months ended March 31:	2021		2020		2021		2020
Cost of services	$	7,775	$	7,843	$	14	$	10
Cost of sales		1,585		1,624		(22)		9
Cost of financing		165		181		2		3
SG&A expense		5,174		5,955		34		(191)
Other (income) and expense		362		182		(160)		(101)
Interest expense		280		326		5		10


	Gain (Loss) Recognized in Consolidated Income Statement
	Consolidated	Recognized on				Attributable to Risk
(Dollars in millions)	Income Statement	Derivatives				Being Hedged (2)
For the three months ended March 31:	Line Item	2021		2020		2021		2020
Derivative instruments in fair value hedges (1):
Interest rate contracts	Cost of financing	$	(1)	$	18	$	7	$	(13)
	Interest expense		(1)		49		18		(37)
Derivative instruments not designated as hedging instruments:
Foreign exchange contracts	Other (income) and expense		(44)		(11)		N/A		N/A
Equity contracts	SG&A expense		49		(201)		N/A		N/A
Total		$	3	$	(146)	$	25	$	(50)


	Gain (Loss) Recognized in Consolidated Income Statement and Other Comprehensive Income
(Dollars in millions)					Consolidated	Reclassified				Amounts Excluded from
For the three months	Recognized in OCI				Income Statement	from AOCI				Effectiveness Testing (3)
ended March 31:	2021		2020		Line Item	2021		2020		2021		2020
Derivative instruments in cash flow hedges:
Interest rate contracts	$	—	$	—	Cost of financing	$	(1)	$	(1)	$	—	$	—
					Interest expense		(3)		(3)		—		—
Foreign exchange contracts		187		(180)	Cost of services		14		10		—		—
					Cost of sales		(22)		9		—		—
					Cost of financing		(5)		(7)		—		—
					SG&A expense		(15)		10		—		—
					Other (income) and expense		(116)		(89)		—		—
					Interest expense		(13)		(18)		—		—
Instruments in net investment hedges (4):
Foreign exchange contracts		907		485	Cost of financing		—		—		2		7
					Interest expense		—		—		4		20
Total	$	1,094	$	304		$	(160)	$	(91)	$	6	$	27

(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 with the amounts recognized in OCI providing an offset to the translation of foreign subsidiaries.

N/A - not applicable