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Notes to Consolidated Financial Statements
(in millions, except per-share data and where otherwise noted)
88
Summary of Derivative Instruments Fair Value: The following table provides a summary of the fair value amounts of our derivative instruments:
December 31,
Designation of Derivatives Balance Sheet Location 2012 2011
Derivatives Designated as Hedging Instruments
Foreign exchange contracts – forwards Other current assets $ 3 $ 37
Other current liabilities (51) (11)
Net Designated (Liability) Asset $ (48) $ 26
Derivatives NOT Designated as Hedging Instruments
Foreign exchange contracts – forwards Other current assets $ 8 $ 21
Other current liabilities (31) (20)
Net Undesignated (Liability) Asset $ (23) $ 1
Summary of Derivatives Total Derivative Assets $ 11 $ 58
Total Derivative Liabilities (82) (31)
Net Derivative (Liability) Asset $ (71) $ 27
Summary of Derivative Instruments Gains (Losses)
Derivative gains and (losses) affect the income statement based on whether such derivatives are designated as hedges of underlying exposures.
The following is a summary of derivative gains and (losses).
Designated Derivative Instruments Gains (Losses): The following tables provide a summary of gains (losses) on derivative instruments:
Year Ended December 31,
Derivative Gain (Loss) Hedged Item Gain (Loss)
Location of Gain (Loss) Recognized in Income Recognized in Income
Derivatives in Fair Value Relationships Recognized in Income 2012 2011 2010 2012 2011 2010
Interest rate contracts Interest expense $ – $ 15 $ 99 $ – $ (15) $ (99)
Year Ended December 31,
Location of Derivative
Derivative Gain (Loss) Recognized Gain (Loss) Reclassified Gain (Loss) Reclassified from AOCI
Derivatives in Cash Flow in OCI (Effective Portion) from AOCI into Income to Income (Effective Portion)
Hedging Relationships 2012 2011 2010 (Effective Portion) 2012 2011 2010
Foreign exchange contracts – forwards $ (50) $ 30 $ 46 Cost of sales $ 37 $ 14 $ 28
No amount of ineffectiveness was recorded in the Consolidated
Statements of Income for these designated cash flow hedges and
all components of each derivative’s gain or (loss) were included in
the assessment of hedge effectiveness. In addition, no amount was
recorded for an underlying exposure that did not occur or was not
expected to occur.
At December 31, 2012, net after-tax losses of $37 were recorded in
accumulated other comprehensive loss associated with our cash flow
hedging activity. The entire balance is expected to be reclassified
into net income within the next 12 months, providing an offsetting
economic impact against the underlying anticipated transactions.
Non-Designated Derivative Instruments Gains (Losses): Non-
designated derivative instruments are primarily instruments used to
hedge foreign currency-denominated assets and liabilities. They are
not designated as hedges since there is a natural offset for the re-
measurement of the underlying foreign currency-denominated asset
or liability.