3M 2015 Annual Report Download - page 97

TableofContents
CreditRiskandOffsettingofAssetsandLiabilitiesofDerivativeInstruments:
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TheCompanyisexposedtocreditlossintheeventofnonperformancebycounterpartiesininterestrateswaps,currencyswaps,
commoditypriceswaps,andforwardandoptioncontracts.However,theCompany’sriskislimitedtothefairvalueofthe
instruments.TheCompanyactivelymonitorsitsexposuretocreditriskthroughtheuseofcreditapprovalsandcreditlimits,andby
selectingmajorinternationalbanksandfinancialinstitutionsascounterparties.3Mentersintomasternettingarrangementswith
counterpartieswhenpossibletomitigatecreditriskinderivativetransactions.Amasternettingarrangementmayalloweach
counterpartytonetsettleamountsowedbetweena3Mentityandthecounterpartyasaresultofmultiple,separatederivative
transactions.AsofDecember31,2015,3MhasInternationalSwapsandDerivativesAssociation(ISDA)agreementswith16
applicablebanksandfinancialinstitutionswhichcontainnettingprovisions.Inadditiontoamasteragreementwith3Msupportedby
aprimarycounterparty’sparentguarantee,3Malsohasassociatedcreditsupportagreementsinplacewith15ofitsprimary
derivativecounterpartieswhich,amongotherthings,providethecircumstancesunderwhicheitherpartyisrequiredtoposteligible
collateral(whenthemarketvalueoftransactionscoveredbytheseagreementsexceedsspecifiedthresholdsorifacounterparty’s
creditratinghasbeendowngradedtoapredeterminedrating).TheCompanydoesnotanticipatenonperformancebyanyofthese
counterparties.
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3MhaselectedtopresentthefairvalueofderivativeassetsandliabilitieswithintheCompany’sconsolidatedbalancesheetona
grossbasisevenwhenderivativetransactionsaresubjecttomasternettingarrangementsandmayotherwisequalifyfornet
presentation.However,thefollowingtablesprovideinformationasiftheCompanyhadelectedtooffsettheassetandliability
balancesofderivativeinstruments,nettedinaccordancewithvariouscriteriaintheeventofdefaultorterminationasstipulatedby
thetermsofnettingarrangementswitheachofthecounterparties.Foreachcounterparty,ifnetted,theCompanywouldoffsetthe
assetandliabilitybalancesofallderivativesattheendofthereportingperiodbasedonthe3Mentitythatisapartytothe
transactions.Derivativesnotsubjecttomasternettingagreementsarenoteligiblefornetpresentation.Asoftheapplicabledates
presentedbelow,nocashcollateralhadbeenreceivedorpledgedrelatedtothesederivativeinstruments.
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OffsettingofFinancialAssetsunderMasterNettingAgreementswithDerivativeCounterparties
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December31,2015     GrossAmountsnotOffsetinthe    
    ConsolidatedBalanceSheetthatareSubject    
GrossAmountof toMasterNettingAgreements    
 DerivativeAssets  GrossAmountof       
Presentedinthe EligibleOffsetting       
Consolidated Recognized CashCollateral NetAmountof 
(Millions) BalanceSheet DerivativeLiabilities Received DerivativeAssets 
Derivativessubjecttomasternetting
agreements $ 296 $ 37 $ — $ 259 
Derivativesnotsubjecttomasternetting
agreements  —       — 
Total $ 296      $ 259 
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December31,2014     GrossAmountsnotOffsetinthe    
    ConsolidatedBalanceSheetthatareSubject    
GrossAmountof toMasterNettingAgreements    
 DerivativeAssets  GrossAmountof       
Presentedinthe EligibleOffsetting       
Consolidated Recognized CashCollateral NetAmountof 
(Millions) BalanceSheet DerivativeLiabilities Received DerivativeAssets 
Derivativessubjecttomasternetting
agreements $ 256 $ 20 $ — $ 236 
Derivativesnotsubjecttomasternetting
agreements  —       — 
Total $ 256      $ 236 
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