Derivative Financial Instruments

Cash Flow Hedges

Our cash flow hedges include foreign currency forward contracts and commodity purchase contracts. We use foreign currency forward contracts to manage currency risk associated with certain transactions, specifically forecasted sales and purchases made in foreign currencies. Our foreign currency contracts hedge forecasted transactions through 2024. We use commodity derivatives, such as fixed-price purchase commitments to hedge against potentially unfavorable price changes for items used in production. Our commodity contracts hedge forecasted transactions through 2021.

Fair Value Hedges

Interest rate swaps under which we agree to pay variable rates of interest are designated as fair value hedges of fixed-rate debt. The net change in fair value of the derivatives and the hedged items is reported in Boeing Capital interest expense.

Derivative Instruments Not Receiving Hedge Accounting Treatment

We have entered into agreements to purchase and sell aluminum to address long-term strategic sourcing objectives and non-U.S. business requirements. These agreements are derivative instruments for accounting purposes. The quantities of aluminum in these agreements offset and are priced at prevailing market prices. We also hold certain foreign currency forward contracts which do not qualify for hedge accounting treatment.

Notional Amounts and Fair Values

The notional amounts and fair values of derivative instruments in the Condensed Consolidated Statements of Financial Position were as follows:



	Notional amounts⁽¹⁾				Other assets						Accrued liabilities
	March 31 2018		December 31 2017		March 31 2018			December 31 2017			March 31 2018			December 31 2017
Derivatives designated as hedging instruments:
Foreign exchange contracts		$3,141		$2,930		$138			$131			($55	)		($63	)
Interest rate contracts	125		125		3			3
Commodity contracts	35		56		4			4			(6		)	(6		)
Derivatives not receiving hedge accounting treatment:
Foreign exchange contracts	270		406		14			16			(4		)	(5		)
Commodity contracts	676		563
Total derivatives		$4,247		$4,080		$159			$154			($65	)		($74	)
Netting arrangements					(53		)	(61		)	53			61
Net recorded balance						$106			$93			($12	)		($13	)


⁽¹⁾	Notional amounts represent the gross contract/notional amount of the derivatives outstanding.

Gains/(losses) associated with our cash flow and undesignated hedging transactions and their effect on Other comprehensive income/(loss) and Net earnings were as follows:



	Three months ended March 31
	2018			2017
Effective portion recognized in Other comprehensive income, net of taxes:
Foreign exchange contracts		($2	)		$56
Commodity contracts				(4		)
Effective portion reclassified out of Accumulated other comprehensive loss into earnings, net of taxes:
Foreign exchange contracts	(4		)	(15		)
Commodity contracts				(1		)
Forward points recognized in Other income, net:
Foreign exchange contracts	6			1
Undesignated derivatives recognized in Other income, net:
Foreign exchange contracts	3			5

Based on our portfolio of cash flow hedges, we expect to reclassify losses of $14 (pre-tax) out of Accumulated other comprehensive loss into earnings during the next 12 months. Ineffectiveness related to our hedges recognized in Other income was insignificant for the three months ended March 31, 2018 and 2017.

We have derivative instruments with credit-risk-related contingent features. For foreign exchange contracts with original maturities of at least five years, our derivative counterparties could require settlement if we default on our five-year credit facility. For certain commodity contracts, our counterparties could require collateral posted in an amount determined by our credit ratings. The fair value of foreign exchange and commodity contracts that have credit-risk-related contingent features that are in a net liability position at March 31, 2018 was $15. At March 31, 2018, there was no collateral posted related to our derivatives.