v2.4.0.6
Financial Instruments: (Tables)
 9 Months Ended
Sep. 30, 2012
Financial Instruments:  
Financial assets and financial liabilities measured at fair value on a recurring basis

(Dollars in millions)

 

 

 

 

 

 

 

 

 

At September 30, 2012

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

Cash equivalents(1)

 

 

 

 

 

 

 

 

 

Time deposits and certificates of deposit

 

$

—

 

$

2,487

 

$

—

 

$

2,487

 

Commercial paper

 

—

 

3,574

 

—

 

3,574

 

Money market funds

 

1,313

 

—

 

—

 

1,313

 

U.S. government securities

 

—

 

1,450

 

—

 

1,450

 

Canada government securities

 

—

 

254

 

—

 

254

 

Other securities

 

—

 

57

 

—

 

57

 

Total

 

1,313

 

7,822

 

—

 

9,135

(6)

Debt securities - current (2)

 

—

 

345

 

 

 

345

(6)

Debt securities - noncurrent (3)

 

2

 

7

 

—

 

9

 

Available-for-sale equity investments(3) 

 

53

 

0

 

—

 

53

 

Derivative assets (4)

 

 

 

 

 

 

 

 

 

Interest rate contracts

 

—

 

826

 

—

 

826

 

Foreign exchange contracts

 

—

 

391

 

—

 

391

 

Equity contracts

 

—

 

11

 

—

 

11

 

Total

 

—

 

1,228

 

—

 

1,228

(7)

Total assets

 

$

1,368

 

$

9,402

 

$

—

 

$

10,770

(7)

Liabilities:

 

 

 

 

 

 

 

 

 

Derivative liabilities (5)

 

 

 

 

 

 

 

 

 

Foreign exchange contracts

 

$

—

 

$

388

 

$

—

 

$

388

 

Equity contracts

 

—

 

11

 

—

 

11

 

Total liabilities

 

$

—

 

$

399

 

$

—

 

$

399

(7)

 

 

(1)         Included within cash and cash equivalents in the Consolidated Statement of Financial Position.

(2)         Commercial paper reported as marketable securities in the Consolidated Statement of Financial Position.

(3)         Included within investments and sundry assets in the Consolidated Statement of Financial Position.

(4)         The gross balances of derivative assets contained within prepaid expenses and other current assets, and investments and sundry assets in the Consolidated Statement of Financial Position at September 30, 2012 are $418 million and $810 million, respectively.

(5)         The gross balances of derivative liabilities contained within other accrued expenses and liabilities, and other liabilities in the Consolidated Statement of Financial Position at September 30, 2012 are $324 million and $75 million, respectively.

(6)         Available-for-sale securities with carrying values that approximate fair value.

(7)         If derivative exposures covered by a qualifying master netting agreement had been netted in the Consolidated Statement of Financial Position, the total derivative asset and liability positions would have been reduced by $245 million each.

 

(Dollars in millions)

 

 

 

 

 

 

 

 

 

At December 31, 2011

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

Cash equivalents(1)

 

 

 

 

 

 

 

 

 

Time deposits and certificates of deposit

 

$

—

 

$

2,082

 

$

—

 

$

2,082

 

Commercial paper *

 

—

 

777

 

—

 

777

 

Money market funds

 

1,886

 

—

 

—

 

1,886

 

U.S. government securities

 

—

 

2,750

 

—

 

2,750

 

Canada government securities *

 

—

 

983

 

—

 

983

 

Other securities

 

—

 

8

 

—

 

8

 

Total

 

1,886

 

6,600

 

—

 

8,486

(5)

Debt securities - noncurrent (2)

 

1

 

7

 

—

 

8

 

Available-for-sale equity investments(2) 

 

69

 

14

 

—

 

83

 

Derivative assets (3)

 

 

 

 

 

 

 

 

 

Interest rate contracts

 

—

 

783

 

—

 

783

 

Foreign exchange contracts

 

—

 

510

 

—

 

510

 

Equity contracts

 

—

 

7

 

—

 

7

 

Total

 

—

 

1,300

 

—

 

1,300

(6)

Total assets

 

$

1,956

 

$

7,921

 

$

—

 

$

9,877

(6)

Liabilities:

 

 

 

 

 

 

 

 

 

Derivative liabilities (4)

 

 

 

 

 

 

 

 

 

Foreign exchange contracts

 

$

—

 

$

523

 

$

—

 

$

523

 

Equity contracts

 

—

 

8

 

—

 

8

 

Total liabilities

 

$

—

 

$

531

 

$

—

 

$

531

(6)

 

 

* Reclassified to conform with 2012 presentation.

 

(1)         Included within cash and cash equivalents in the Consolidated Statement of Financial Position.

(2)         Included within investments and sundry assets in the Consolidated Statement of Financial Position.

(3)         The gross balances of derivative assets contained within prepaid expenses and other current assets, and investments and sundry assets in the Consolidated Statement of Financial Position at December 31, 2011 are $546 million and $754 million, respectively.

(4)         The gross balances of derivative liabilities contained within other accrued expenses and liabilities, and other liabilities in the Consolidated Statement of Financial Position at December 31, 2011 are $365 million and $166 million, respectively.

(5)         Available-for-sale securities with carrying values that approximate fair value.

(6)         If derivative exposures covered by a qualifying master netting agreement had been netted in the Consolidated Statement of Financial Position, the total derivative asset and liability positions would have been reduced by $324 million each.
Debt and marketable equity securities available-for-sale and recorded at fair value

 

 

 

 

 

Gross

 

Gross

 

 

 

(Dollars in millions)

 

Adjusted

 

Unrealized

 

Unrealized

 

Fair

 

At September 30, 2012:

 

Cost

 

Gains

 

Losses

 

Value

 

Debt securities — noncurrent(1)

 

$

8

 

$

1

 

$

—

 

$

9

 

Available-for-sale equity investments(1) 

 

$

48

 

$

7

 

$

(2

)

$

53

 

 

 

(1)         Included within investments and sundry assets in the Consolidated Statement of Financial Position.

 

 

 

 

 

Gross

 

Gross

 

 

 

(Dollars in millions)

 

Adjusted

 

Unrealized

 

Unrealized

 

Fair

 

At December 31, 2011:

 

Cost

 

Gains

 

Losses

 

Value

 

Debt securities — noncurrent(1)

 

$

7

 

$

1

 

$

—

 

$

8

 

Available-for-sale equity investments(1) 

 

$

58

 

$

27

 

$

(2

)

$

83

 

 

 

(1)         Included within investments and sundry assets in the Consolidated Statement of Financial Position.
Sales of debt and available-for-sale equity investments

 

(Dollars in millions)

 

 

 

 

 

For the three months ended September 30:

 

2012

 

2011

 

Proceeds

 

$

36

 

$

—

 

Gross realized gains (before taxes)

 

27

 

—

 

Gross realized losses (before taxes)

 

—

 

—

 

 

(Dollars in millions)

 

 

 

 

 

For the nine months ended September 30:

 

2012

 

2011

 

Proceeds

 

$

87

 

$

402

 

Gross realized gains (before taxes)

 

43

 

232

 

Gross realized losses (before taxes)

 

(0

)

(0

)
Unrealized holding gains/(losses) on available-for-sale debt and equity securities

 

(Dollars in millions)

 

 

 

 

 

For the three months ended September 30:

 

2012

 

2011

 

Net unrealized gains/(losses) arising during the period

 

$

2

 

$

(9

)

Net unrealized (gains)/losses reclassified to net income*

 

(17

)

0

 

 

 

*There were no significant writedowns for the three months ended September 30, 2012 and 2011, respectively.

 

(Dollars in millions)

 

 

 

 

 

For the nine months ended September 30:

 

2012

 

2011**

 

Net unrealized gains/(losses) arising during the period

 

$

20

 

$

(10

)

Net unrealized (gains)/losses reclassified to net income*

 

(26

)

(143

)

 

 

* There were no significant writedowns for the nine months ended September 30, 2012 and 2011, respectively.

** Reclassified to conform with 2012 presentation.
Fair Value of Derivative Instruments in the Consolidated Statement of Financial Position

Fair Values of Derivative Instruments in the Consolidated Statement of Financial Position

As of September 30, 2012 and December 31, 2011

 

 

 

Fair Value of Derivative Assets

 

Fair Value of Derivative Liabilities

 

 

 

Balance Sheet

 

 

 

 

 

Balance Sheet

 

 

 

 

 

(Dollars in millions)  

 

Classification

 

9/30/2012

 

12/31/2011

 

Classification

 

9/30/2012

 

12/31/2011

 

Designated as hedging instruments:

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts:

 

Prepaid expenses and other current assets

 

$

51

 

$

50

 

Other accrued expenses and liabilities

 

$

—

 

$

—

 

 

 

Investments and sundry assets

 

775

 

733

 

Other liabilities

 

—

 

—

 

Foreign exchange contracts:

 

Prepaid expenses and other current assets

 

184

 

407

 

Other accrued expenses and liabilities

 

275

 

273

 

 

 

Investments and sundry assets

 

17

 

—

 

Other liabilities

 

65

 

155

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value of derivative assets

 

 

 

$

1,027

 

$

1,190

 

Fair value of derivative liabilities

 

$

340

 

$

428

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Not designated as hedging instruments:

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange contracts:

 

Prepaid expenses and other current assets

 

$

172

 

$

82

 

Other accrued expenses and liabilities

 

$

38

 

$

84

 

 

 

Investments and sundry assets

 

18

 

21

 

Other liabilities

 

10

 

11

 

Equity contracts:

 

Prepaid expenses and other current assets

 

11

 

7

 

Other accrued expenses and liabilities

 

11

 

8

 

Fair value of derivative assets

 

 

 

$

201

 

$

110

 

Fair value of derivative liabilities

 

$

59

 

$

103

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total debt designated as hedging instruments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term debt

 

N/A

 

N/A

 

 

 

$

643

 

$

—

 

 

 

Long-term debt

 

N/A

 

N/A

 

 

 

1,729

 

1,884

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

$

1,228

 

$

1,300

 

 

 

$

2,771

 

$

2,415

 

 

N/A—not applicable

 
Effect of Derivative Instruments in the Consolidated Statement of Earnings

The Effect of Derivative Instruments in the Consolidated Statement of Earnings

For the three months ended September 30, 2012 and 2011

 

 

 

Gain (Loss) Recognized in Earnings

 

 

 

Consolidated

 

Recognized on

 

Attributable to Risk

 

(Dollars in millions)  

 

Statement of

 

Derivatives(1)

 

Being Hedged(2)

 

For the three months ended September 30:

 

Earnings Line Item

 

2012

 

2011

 

2012

 

2011

 

Derivative instruments in fair value hedges:

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts

 

Cost of financing

 

$

13

 

$

204

 

$

19

 

$

(166

)

 

 

Interest expense

 

11

 

141

 

16

 

(115

)

Derivative instruments not designated as hedging instruments(1):

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange contracts

 

Other (income) and expense

 

148

 

183

 

N/A

 

N/A

 

Equity contracts

 

SG&A expense

 

54

 

(100

)

N/A

 

N/A

 

Warrants

 

Other (income) and expense

 

—

 

10

 

N/A

 

N/A

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

$

226

 

$

438

 

$

35

 

$

(281

)

 

 

 

Gain (Loss) Recognized in Earnings and Other Comprehensive Income

 

 

 

 

 

 

 

 

 

(Ineffectiveness) and

 

 

 

Effective Portion

 

Consolidated

 

Effective Portion Reclassified

 

Amounts Excluded from

 

For the three months

 

Recognized in OCI

 

Statement of

 

from AOCI

 

Effectiveness Testing(3)

 

ended September 30:

 

2012

 

2011

 

Earnings Line Item

 

2012

 

2011

 

2012

 

2011

 

Derivative instruments In cash flow hedges:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts

 

$

—

 

$

—

 

Interest expense

 

$

(2

)

$

(2

)

$

—

 

$

—

 

Foreign exchange contracts

 

(54

)

295

 

Other (income) and expense

 

102

 

(86

)

0

 

(2

)

 

 

 

 

 

 

Cost of sales

 

6

 

(60

)

—

 

—

 

 

 

 

 

 

 

SG&A expense

 

5

 

(19

)

—

 

—

 

Instruments in net investment hedges(4):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange contracts

 

(136

)

237

 

Interest expense

 

—

 

—

 

6

 

(4

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

(190

)

$

532

 

 

 

$

112

 

$

(167

)

$

6

 

$

(6

)

 

 

N/A-not applicable

 

Note: AOCI represents Accumulated other comprehensive income/(loss) in the Consolidated Statement of Changes in Equity.

 

(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 amount of gain (loss) recognized in income represents ineffectiveness on hedge relationships.

(4)

Instruments in net investment hedges include derivative and non-derivative instruments.

 

The Effect of Derivative Instruments in the Consolidated Statement of Earnings

For the nine months ended September 30, 2012 and 2011

 

 

 

Gain (Loss) Recognized in Earnings

 

 

 

Consolidated

 

Recognized on

 

Attributable to Risk

 

(Dollars in millions) 

 

Statement of

 

Derivatives(1)

 

Being Hedged(2)

 

For the nine months ended September 30:

 

Earnings Line Item

 

2012

 

2011

 

2012

 

2011

 

Derivative instruments in fair value hedges:

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts

 

Cost of financing

 

$

68

 

$

263

 

$

27

 

$

(142

)

 

 

Interest expense

 

58

 

183

 

23

 

(99

)

Derivative instruments not designated as hedging instruments(1):

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange contracts

 

Other (income) and expense

 

(56

)

388

 

N/A

 

N/A

 

Equity contracts

 

SG&A expense

 

116

 

(28

)

N/A

 

N/A

 

Warrants

 

Other (income) and expense

 

—

 

10

 

N/A

 

N/A

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

$

186

 

$

816

 

$

50

 

$

(241

)

 

 

 

Gain (Loss) Recognized in Earnings and Other Comprehensive Income

 

 

 

 

 

 

 

 

 

 

 

 

 

(Ineffectiveness) and

 

 

 

Effective Portion

 

Consolidated

 

Effective Portion Reclassified

 

Amounts Excluded from

 

For the nine months

 

Recognized in OCI

 

Statement of

 

from AOCI

 

Effectiveness Testing(3)

 

ended September 30:

 

2012

 

2011

 

Earnings Line Item

 

2012

 

2011

 

2012

 

2011

 

Derivative instruments in cash flow hedges:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts

 

$

—

 

$

—

 

Interest expense

 

$

(6

)

$

(6

)

$

—

 

$

—

 

Foreign exchange contracts

 

65

 

(159

)

Other (income) and expense

 

209

 

(256

)

3

 

(2

)

 

 

 

 

 

 

Cost of sales

 

22

 

(163

)

—

 

—

 

 

 

 

 

 

 

SG&A expense

 

21

 

(70

)

—

 

—

 

Instruments in net investment hedges(4):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange contracts

 

(23

)

(15

)

Interest expense

 

—

 

—

 

9

 

(10

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

42

 

$

(174

)

 

 

$

246

 

$

(494

)

$

12

 

$

(12

)

 

 

N/A-not applicable

 

Note: AOCI represents Accumulated other comprehensive income/(loss) in the Consolidated Statement of Changes in Equity.

 

(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 amount of gain (loss) recognized in income represents ineffectiveness on hedge relationships.

(4)

Instruments in net investment hedges include derivative and non-derivative instruments.