Derivative Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2022

Derivative Financial Instruments

Amounts related to cumulative basis adjustments for fair value hedges


		March 31,			December 31,
(Dollars in millions)		2022			2021
Short-term debt:
Carrying amount of the hedged item		$	(225)		$	(227)
Cumulative hedging adjustments included in the carrying amount — assets/(liabilities)			0			(2)
Long-term debt:
Carrying amount of the hedged item		$	(2,480)		$	(508)
Cumulative hedging adjustments included in the carrying amount — assets/(liabilities)*			(290)			(309)

* Includes ($289) million and ($302) million of hedging adjustments on discontinued hedging relationships at March 31, 2022 and December 31, 2021, respectively.

Effect of derivative instruments in the Consolidated Income Statement


								Gains/(Losses) of
(Dollars in millions)		Total						Total Hedge Activity
For the three months ended March 31:		2022			2021			2022			2021
Cost of services		$	5,349		$	4,644		$	15		$	14
Cost of sales			1,415			1,379	*		12			(22)
Cost of financing			98			137	*		(2)			2
SG&A expense			4,597			4,688			(70)			34
Other (income) and expense			246			346			(102)			(160)
Interest expense			311			280			(6)			5

* Reclassified to conform to current year presentation.


		Gain (Loss) Recognized in Consolidated Income Statement
		Consolidated		Recognized on						Attributable to Risk
(Dollars in millions)		Income Statement		Derivatives						Being Hedged (2)
For the three months ended March 31:		Line Item		2022			2021			2022			2021
Derivative instruments in fair value hedges (1):
Interest rate contracts		Cost of financing		$	(1)		$	(1)		$	4		$	7
		Interest expense			(4)			(1)			16			18
Derivative instruments not designated as hedging instruments:
Foreign exchange contracts		Other (income) and expense			(95)			(44)			N/A			N/A
Equity contracts		SG&A expense			(76)			49			N/A			N/A
Total				$	(176)		$	3		$	20		$	25


		Gain (Loss) Recognized in Consolidated Income Statement and Other Comprehensive Income
(Dollars in millions)								Consolidated		Reclassified						Amounts Excluded from
For the three months		Recognized in OCI						Income Statement		from AOCI						Effectiveness Testing (3)
ended March 31:		2022			2021			Line Item		2022			2021			2022			2021
Derivative instruments in cash flow hedges:
Interest rate contracts		$	—		$	—		Cost of financing		$	(1)		$	(1)		$	—		$	—
								Interest expense			(3)			(3)			—			—
Foreign exchange contracts			60			187		Cost of services			15			14			—			—
								Cost of sales			12			(22)			—			—
								Cost of financing			(5)			(5)			—			—
								SG&A expense			6			(15)			—			—
								Other (income) and expense			(7)			(116)			—			—
								Interest expense			(17)			(13)			—			—
Instruments in net investment hedges (4):
Foreign exchange contracts			541			907		Cost of financing			—			—			1			2
								Interest expense			—			—			2			4
Total		$	601		$	1,094				$	1		$	(160)		$	3		$	6

(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 company’s policy is to recognize all fair value changes in amounts excluded from effectiveness testing in net income each period.

(4)	Instruments in net investment hedges include derivative and non-derivative instruments with the amounts recognized in OCI providing an offset to the translation of foreign subsidiaries.

N/A - not applicable