v3.25.4
Derivatives
 12 Months Ended
Dec. 31, 2025
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives
Note 15. Derivatives
The Company uses interest rate swaps, cross-currency swaps, and forward and option contracts to manage risks generally associated with foreign exchange rate and interest rate fluctuations. The information that follows explains the various types of derivatives and financial instruments used by 3M, how and why 3M uses such instruments, how such instruments are accounted for, and how such instruments impact 3M’s financial position and performance.
Additional information with respect to derivatives is included elsewhere as follows:
•Impact on other comprehensive income of non-derivative hedging and derivative instruments is included in Note 8.
•Fair value of derivative instruments is included in Note 16.
•Derivatives and/or hedging instruments associated with the Company’s long-term debt are also described in Note 12.
Cash Flow Hedges: For derivative instruments that are designated and qualify as cash flow hedges, the gain or loss on the derivative is reported as a component of other comprehensive income and reclassified into earnings in the same period during which the hedged transaction affects earnings. Gains and losses on the derivative representing hedge components excluded from the assessment of effectiveness are recognized in current earnings.
Cash Flow Hedging - Foreign Currency Forward and Option Contracts: The Company may enter into foreign exchange forward and option contracts to hedge against the effect of exchange rate fluctuations on cash flows denominated in foreign currencies. These transactions are designated as cash flow hedges. The settlement of these derivatives will result in reclassifications (from accumulated other comprehensive income) to earnings in the period during which the hedged transactions affect earnings. The maximum length of time over which 3M hedges its exposure to the variability in future cash flows of the forecasted transactions is 36 months.
Cash Flow Hedging — Interest Rate Contracts: The Company may use forward starting interest rate contracts and treasury rate lock contracts to hedge exposure to variability in cash flows from interest payments on forecasted debt issuances. The amortization of gains and losses on forward starting interest rate swaps is included in the table further below as part of the amounts reclassified from accumulated other comprehensive income into income.
The amount of pre-tax gain (loss) recognized in other comprehensive income (loss) related to derivative instruments designated as cash flow hedges is follows:
Pretax gain (loss) recognized in other comprehensive income (loss) on derivatives
(Millions)202520242023
Foreign currency forward/option contracts $(77)$128 $81 
Fair Value Hedges: For derivative instruments that are designated and qualify as fair value hedges, the gain or loss on the derivatives as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in current earnings.
Fair Value Hedging - Interest Rate Swaps: The Company manages interest expense using a mix of fixed and floating rate debt. To help manage borrowing costs, the Company may enter into interest rate swaps. Under these arrangements, the Company agrees to exchange, at specified intervals, the difference between fixed and floating interest amounts calculated by reference to an agreed-upon notional principal amount. The mark-to-market of these fair value hedges is recorded as gains or losses in interest expense and is offset by the gain or loss of the underlying debt instrument, which also is recorded in interest expense.
As further discussed in Note 12, during 2025, 3M terminated fixed-to-floating interest rate swaps that were entered into in 2021, returning $800 million of notes due in 2049 and 2050 to fixed-rate debt.
The following amounts were recorded on the consolidated balance sheet related to cumulative basis adjustments for active fair value hedges, as well as remaining amounts for discontinued fair value hedges:
Carrying value of the hedged (and formerly hedged) liabilitiesCumulative amount of fair value hedging adjustment included in carrying value of hedged liabilities for
Location on the consolidated balance sheet (millions)Active hedgesDiscontinued hedges
December 31, 2025December 31, 2024December 31, 2025December 31, 2024December 31, 2025December 31, 2024
Long-term debt$959$924$—$(81)$(44)$2
Net Investment Hedges: The Company may use derivative and non-derivative (foreign currency denominated debt) instruments to hedge portions of the Company’s investment in foreign subsidiaries and manage foreign exchange risk. For instruments that are designated and qualify as hedges of net investments in foreign operations and that meet the effectiveness requirements, the net gains or losses attributable to changes in spot exchange rates are recorded in cumulative translation within other comprehensive income. The remainder of the change in value of such instruments is recorded in earnings. Recognition in earnings of amounts previously recorded in cumulative translation is limited to circumstances such as complete or substantially complete liquidation of the net investment in the hedged foreign operation. To the extent foreign currency denominated debt is not designated in or is de-designated from a net investment hedge relationship, changes in value of that portion of foreign currency denominated debt due to exchange rate changes are recorded in earnings through their maturity date.
During 2025, 3M entered into foreign currency forward contracts, collared foreign currency forward contracts and cross-currency swaps with a gross notional value at inception of $3.7 billion designated in hedges of portions of its net investment in international subsidiaries.
at December 31, 2025, 3M had a principal amount of long-term debt instruments designated in net investment hedges totaling €1.8 billion.
The amount of gain (loss) excluded from effectiveness testing and recognized in income for instruments designated in net investment hedge relationships was not significant in each of 2025, 2024, and 2023. The amount of pre-tax gain (loss) recognized in other comprehensive income (loss) related to derivative and non-derivative instruments designated as net investment hedges are as follows.
Pretax gain (loss) recognized as cumulative translation within other comprehensive income (loss)
(Millions)202520242023
Foreign currency denominated debt $(233)$108 $(86)
Foreign currency forward/option contracts and cross-currency swaps(144)(1)(5)
Total $(377)$107 $(91)
Derivatives Not Designated as Hedging Instruments: Derivatives not designated as hedging instruments include de-designated foreign currency forward and option contracts that formerly were designated in cash flow hedging relationships. 3M may de-designate a cash flow hedge before the forecasted transaction occurs if the forecasted transaction is no longer probable, if the hedge is no longer expected to be highly effective in offsetting changes in the cash flows of the forecasted transaction, or in certain other circumstances. In addition, 3M enters into foreign currency contracts that are not designated in hedging relationships to offset changes in the value of various non-functional currency denominated items including certain intercompany financing balances. These derivative instruments are not designated in hedging relationships; therefore, fair value gains and losses on these contracts are recorded in earnings. The Company does not hold or issue derivative financial instruments for trading purposes.
Location on Statement of Income and Impact of Cash Flow and Fair Value Derivative Instruments and Derivatives Not Designated as Hedging Instruments:
Location and amount of gain (loss) recognized in income
Cost of salesOther expense (income), net
(Millions)202520242023202520242023
Total consolidated financial statement line item amount$14,991$14,447$14,983$416$3$582
Pre-tax amounts recognized in income related to derivative instruments
Information regarding cash flow and fair value hedging relationships:
(Gain) or loss on cash flow hedging relationships:
Foreign currency forward/option contracts:
Amount of (gain) or loss reclassified from accumulated other comprehensive income (loss) into income(a)
(36)(87)(152)———
Interest rate contracts:
Amount of (gain) or loss reclassified from accumulated other comprehensive income (loss) into income— — — 8 9 9 
(Gain) or loss on fair value hedging relationships:
Interest rate swaps:
Hedged items— — — 81 6 15 
Derivatives designated as hedging instruments— — — (81)(6)(15)
Information regarding derivatives not designated as hedging instruments:
(Gain) or loss on derivatives not designated as hedging instruments:
Foreign currency forward/option contracts (46)9 9 (94)22 (21)
(a)     For periods prior to the April 1, 2024 separation of Solventum, these include certain insignificant amounts attributable to discontinued operations.
Location, Fair Value, and Gross Notional Amounts of Derivative Instruments: The following tables summarize the fair value of 3M’s derivative instruments, excluding non-derivative instruments used as hedging instruments, and their location in the consolidated balance sheet. Notional amounts below are presented at period end foreign exchange rates, except for certain interest rate swaps and foreign currency forward/option contracts, which are presented using the foreign exchange rate at inception.
Gross notional Amount
AssetsLiabilities
 (Millions)Location
Fair value amount
Location
Fair value amount
December 31,
December 31,
December 31,
202520242025202420252024
Derivatives designated as hedging instruments
Foreign currency forward/option contracts and cross-currency swaps
$1,842 $1,382 Other current assets$23 $61 Other current liabilities$35 $6 
Foreign currency forward/option contracts and cross-currency swaps8,194 4,746 Other assets161 78 Other liabilities289 65 
Interest rate contracts — 800 Other assets— — Other liabilities— 81 
Total derivatives designated as hedging instruments 184 139 324 152 
Derivatives not designated as hedging instruments
Foreign currency forward/option contracts 2,188 2,217 Other current assets8 3 Other current liabilities6 13 
Total derivative instruments$192 $142 $330 $165 
Credit Risk and Offsetting of Assets and Liabilities of Derivative Instruments: The Company is exposed to credit loss in the event of nonperformance by counterparties in derivative 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. The Company does not anticipate nonperformance by any of these counterparties.
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 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. For the periods presented, 3M has not received cash collateral from derivative counterparties.
Offsetting of Financial Assets under Master Netting Agreements with Derivative Counterparties
(Millions)Gross Amount of Derivative Assets Presented in the Consolidated Balance SheetGross Amount of Eligible Offsetting Recognized Derivative LiabilitiesNet Amount of Derivative Assets
December 31,
December 31,
December 31,
202520242025202420252024
Derivatives subject to master netting agreements192142175641778
Offsetting of Financial Liabilities under Master Netting Agreements with Derivative Counterparties
(Millions)Gross Amount of Derivative Liabilities Presented in the Consolidated Balance SheetGross Amount of Eligible Offsetting Recognized Derivative AssetsNet Amount of Derivative Liabilities
December 31,
December 31,
December 31,
202520242025202420252024
Derivatives subject to master netting agreements33016517564155101
Currency Effects: 3M estimates that year-on-year foreign currency transaction effects, impacted pre-tax income (loss) from continuing operations approximately as follows. These estimates include transaction gains and losses, including derivative instruments designed to reduce foreign currency exchange rate risks.
(Millions)202520242023
Year-on-year change in pre-tax income (loss) from foreign currency transactions
$(59)$(34)$40