3M 2010 Annual Report Download - page 100

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94
Derivatives Not Designated as Hedging Instruments:
Derivatives not designated as hedging instruments include dedesignated foreign currency forward and option
contracts that formerly were designated in cash flow hedging relationships (as referenced in the Cash Flow Hedges
section above). In addition, 3M enters into foreign currency forward contracts and commodity price swaps to offset, in
part, the impacts of certain intercompany activities (primarily associated with intercompany licensing arrangements)
and fluctuations in costs associated with the use of certain precious metals, respectively. These derivative
instruments are not designated in hedging relationships; therefore, fair value gains and losses on these contracts are
recorded in earnings. The dollar equivalent gross notional amount of these forward, option and swap contracts not
designated as hedging instruments totaled $883 million as of December 31, 2010. The Company does not hold or
issue derivative financial instruments for trading purposes.
The location in the consolidated statements of income and amounts of gains and losses related to derivative
instruments not designated as hedging instruments are as follows:
Year ended December 31, 2010
Year ended December 31, 2009
Gain (Loss) on Derivative
Gain (Loss) on Derivative
(Millions)
Recognized in Income
Recognized in Income
Derivatives Not Designated as Hedging Instruments
Location
Amount
Location
Amount
Foreign currency forward/option contracts ...........................
Cost of sales
$
(24
)
Cost of sales
$
(41
)
Foreign currency forward contracts ......................................
Interest expense
(19
)
Interest expense
20
Commodity price swap contracts .........................................
Cost of sales
1
Cost of sales
1
Total ................................................................................
$
(42
)
$
(20
)
Location and Fair Value Amount of Derivative Instruments
The following table summarizes the fair value of 3M’s derivative instruments, excluding nonderivative instruments
used as hedging instruments, and their location in the consolidated balance sheet.
December 31, 2010
(Millions)
Assets
Liabilities
Fair Value of Derivative Instruments
Location
Amount
Location
Amount
Derivatives designated as hedging instruments
Foreign currency forward/option contracts ....................
Other current assets
$
26
Other current liabilities
$
48
Commodity price swap contracts ..................................
Other current assets
—
Other current liabilities
5
Interest rate swap contracts..........................................
Other assets
39
Other liabilities
—
Total derivatives designated as hedging
instruments ........................................................
$
65
$
53
Derivatives not designated as hedging instruments
Foreign currency forward/option contracts ....................
Other current assets
$
12
Other current liabilities
$
34
Total derivatives not designated as hedging
instruments ........................................................
$
12
$
34
Total derivative instruments ..........................................
$
77
$
87
December 31, 2009
(Millions)
Assets
Liabilities
Fair Value of Derivative Instruments
Location
Amount
Location
Amount
Derivatives designated as hedging instruments
Foreign currency forward/option contracts ...................
Other current assets
$
17
Other current liabilities
$
41
Commodity price swap contracts .................................
Other current assets
1
Other current liabilities
1
Interest rate swap contracts .........................................
Other assets
54
Other liabilities
—
Total derivatives designated as hedging
instruments .......................................................
$
72
$
42
Derivatives not designated as hedging instruments
Foreign currency forward/option contracts ...................
Other current assets
$
6
Other current liabilities
$
52
Commodity price swap contracts .................................
Other current assets
1
Other current liabilities
—
Total derivatives not designated as hedging
instruments .......................................................
$
7
$
52
Total derivative instruments .........................................
$
79
$
94
Additional information with respect to the fair value of derivative instruments is included in Note 13.