
	March 31, 2020														December 31, 2019
	Level 1		Level 2		Level 3		Net Balance		Level 1		Level 2		Level 3		Net Balance
Assets
Derivatives	$	—	$	61	$	—	$	61	$	—	$	58	$	—	$	58
Investment securities	2		—		187		189		24		—		259		283
Total assets	2		61		187		250		24		58		259		341

Liabilities
Derivatives	—		(36)		—		(36)		—		(27)		—		(27)
Total liabilities	$	—	$	(36)	$	—	$	(36)	$	—	$	(27)	$	—	$	(27)


	2020		2019
Balance at January 1	$	259	$	288
Purchases	—		6
Proceeds at maturity	(69)		(6)
Unrealized gains (losses) recognized in accumulated other comprehensive income (loss)	(2)		2
Balance at March 31	$	187	$	290

The most significant unobservable input used in the valuation of our Level 3 instruments is the discount rate. Discount rates are determined based on inputs that market participants would use when pricing investments, including credit and liquidity risk. An increase in the discount rate would result in a decrease in the fair value of our investment securities. There are no unrealized gains or losses recognized in the condensed consolidated statement of income (loss) on account of any Level 3 instrument still held at the reporting date. At March 31, 2020 and December 31, 2019, we held $50 million and $111 million, respectively, of these investment securities on behalf of GE.


	March 31, 2020														December 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Investment securities
Non-U.S. debt securities ⁽¹⁾	$	187	$	—	$	—	$	187	$	257	$	2	$	—	$	259
Equity securities ⁽²⁾	2		—		—		2		24		—		—		24
Total	$	189	$	—	$	—	$	189	$	281	$	2	$	—	$	283

Our financial instruments include cash, cash equivalents, current receivables, certain investments, accounts payable, short and long-term debt, and derivative financial instruments. Except for long-term debt, the estimated fair value of these financial instruments at March 31, 2020 and December 31, 2019 approximates their carrying value as reflected in our condensed consolidated financial statements. For further information on the fair value of our debt, see "Note 9. Borrowings."

We use derivatives to manage our risks and do not use derivatives for speculation. The table below summarizes the fair value of all derivatives, including hedging instruments and embedded derivatives.


	March 31, 2020						December 31, 2019
	Assets		(Liabilities)		Assets		(Liabilities)
Derivatives accounted for as hedges
Currency exchange contracts	$	1	$	(1)	$	11	$	—

Derivatives not accounted for as hedges
Currency exchange contracts and other	60		(35)		47		(27)


Total derivatives	$	61	$	(36)	$	58	$	(27)

Derivatives are classified in the captions "All other current assets," "All other assets," "All other current liabilities," and "All other liabilities" depending on their respective maturity date.

As of March 31, 2020 and December 31, 2019, $60 million and $52 million of derivative assets are recorded in "All other current assets" and $1 million and $6 million are recorded in "All other assets" of the condensed consolidated statements of financial position, respectively. As of March 31, 2020 and December 31, 2019, $34 million and $24 million of derivative liabilities are recorded in "All other current liabilities" and $2 million and $3 million are recorded in "All other liabilities" of the condensed consolidated statements of financial position, respectively.

We use cash flow hedging primarily to reduce or eliminate the effects of foreign exchange rate changes on purchase and sale contracts. Accordingly, the vast majority of our derivative activity in this category consists of currency exchange contracts. We also use commodity derivatives to reduce or eliminate price risk on raw materials purchased for use in manufacturing.

Changes in the fair value of cash flow hedges are recorded in a separate component of equity (referred to below as Accumulated Other Comprehensive Income, or AOCI) and are recorded in earnings in the period in which the hedged transaction occurs. The table below summarizes this activity by hedging instrument.

We expect to transfer $2 million to earnings as a gain in the next 12 months contemporaneously with the earnings effects of the related forecast transactions. Both at March 31, 2020 and December 31, 2019, the maximum term of derivative instruments that hedge forecast transactions was one year.

These derivatives are not designated as hedges from an accounting standpoint (and therefore we do not apply hedge accounting to the relationship) but otherwise serve the same economic purpose as other hedging arrangements. Economic hedges are marked to fair value through earnings each period.


Derivatives not designated as hedging instruments	Condensed consolidated statement of income caption	Three Months Ended March 31,
						2020	2019
Currency exchange contracts ⁽¹⁾	Cost of goods sold	$	(8)	$	3
Currency exchange contracts	Selling, general and administrative	65		(1)
Commodity derivatives	Cost of goods sold	(2)		2
Other derivatives	Other non-operating income, net	8		(1)
Total ⁽²⁾		$	63	$	3

⁽¹⁾Excludes gains of $7 million and losses of $2 million on embedded derivatives for the three months ended March 31, 2020 and 2019, respectively, as embedded derivatives are not considered to be hedging instruments in our economic hedges.

⁽²⁾The effect on earnings of derivatives not designated as hedges is substantially offset by the change in fair value of the economically hedged items in the current and future periods.

The notional amount of a derivative is the number of units of the underlying (for example, the notional principal amount of the debt in an interest rate swap). A substantial majority of the outstanding notional amount of $5.5 billion and $5.7 billion at March 31, 2020 and December 31, 2019, respectively, is related to hedges of anticipated sales and purchases in foreign currency, commodity purchases, and contractual terms in contracts that are considered embedded derivatives and for intercompany borrowings in foreign currencies. We generally disclose derivative notional amounts on a gross basis to indicate the total counterparty risk. Where we have gross purchase and sale derivative contracts for a particular currency, we look to execute these contracts with the same counterparty to reduce our exposure. The corresponding net notional amounts were $1.2 billion and $1.8 billion at March 31, 2020 and December 31, 2019, respectively.

Fair values of our derivatives can change significantly from period to period based on, among other factors, market movements and changes in our positions. We manage counterparty credit risk (the risk that counterparties will default and not make payments to us according to the terms of our agreements) on an individual counterparty basis.

As required under U.S. GAAP, we have discontinued applying the equity method on our investment in BJ Services as previous losses have reduced our investment to zero, and we have no requirements to advance any additional funds. We will resume application of the equity method only after our share of unrecognized net income equals our share of net loss not recognized during the period the equity method was suspended.