DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Tables)

3 Months Ended

Mar. 31, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Derivative Financial Instruments Recognized in Condensed Consolidated Balance Sheet

The fair value of derivative financial instruments recognized in the Consolidated Balance Sheets is as follows:

(In millions)	Notional amount		Other  current assets		Other noncurrent assets		Other current liabilities		Other noncurrent liabilities		Type of hedge	Term
March 31, 2023
Derivatives designated as hedges
Currency exchange contracts	$	1,138	$	49	$	3	$	14	$	5	Cash flow	1 to 34 months
Commodity contracts	48		4		—		1		—		Cash flow	1 to 12 months
Currency exchange contracts	587		1		—		—		—		Net investment	3 months
Total			$	53	$	3	$	15	$	5
Derivatives not designated as hedges
Currency exchange contracts	$	4,977	$	22			$	14				1 to 12 months
December 31, 2022
Derivatives designated as hedges
Currency exchange contracts	$	1,240	$	35	$	2	$	17	$	9	Cash flow	1 to 36 months
Commodity contracts	64		4		—		2		—		Cash flow	1 to 12 months
Total			$	39	$	2	$	19	$	9
Derivatives not designated as hedges
Currency exchange contracts	$	4,683	$	30			$	14				1 to 12 months

Schedule of Notional Amounts of Outstanding Derivative Positions

As of March 31, 2023, the volume of outstanding commodity contracts that were entered into to hedge forecasted transactions:

Commodity	March 31, 2023		Term
Aluminum	4	Millions of pounds	1 to 12 months
Copper	7	Millions of pounds	1 to 12 months
Gold	1,690	Troy ounces	1 to 12 months
Silver	510,167	Troy ounces	1 to 12 months

Schedule of Derivative Instruments Recorded in Balance Sheet

The following amounts were recorded on the Consolidated Balance Sheets related to fixed-to-floating interest rate swaps:

(In millions)	Carrying amount of the hedged assets (liabilities)				Cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged asset (liabilities) (a)
Location on Consolidated Balance Sheets	March 31, 2023		December 31, 2022		March 31, 2023		December 31, 2022
Long-term debt	$	(713)	$	(713)	$	(47)	$	(48)

(a) At March 31, 2023 and December 31, 2022, these amounts include the cumulative liability amount of fair value hedging adjustments remaining for which the hedge accounting has been discontinued of $47 million and $48 million, respectively.

Schedule of Impact of Hedging Activities to Consolidated Statement of Income

The impact of cash flow and fair value hedging activities to the Consolidated Statements of Income is as follows:

	Three months ended March 31, 2023
(In millions)	Net sales		Cost of products sold		Interest expense - net
Amounts from Consolidated Statements of Income	$	5,483	$	3,599	$	50
Gain (loss) on derivatives designated as cash flow hedges
Forward starting floating-to-fixed interest rate swaps
Hedged item	$	—	$	—	$	(3)
Derivative designated as hedging instrument	—		—		3
Currency exchange contracts
Hedged item	$	2	$	(15)	$	—
Derivative designated as hedging instrument	(2)		15		—

	Three months ended March 31, 2022
(In millions)	Net sales		Cost of products sold		Interest expense - net
Amounts from Consolidated Statements of Income	$	4,843	$	3,269	$	32
Gain (loss) on derivatives designated as cash flow hedges
Currency exchange contracts
Hedged item	$	2	$	(3)	$	—
Derivative designated as hedging instrument	(2)		3		—
Commodity contracts
Hedged item	$	—	$	(1)	$	—
Derivative designated as hedging instrument	—		1		—
Gain (loss) on derivatives designated as fair value hedges
Fixed-to-floating interest rate swaps
Hedged item	$	—	$	—	$	8
Derivative designated as hedging instrument	—		—		(8)

Schedule of Amounts Recognized in Net Income

The impact of derivatives not designated as hedges to the Consolidated Statements of Income is as follows:

	Gain (loss) recognized in Consolidated Statements of Income				Consolidated Statements of Income classification
	Three months ended March 31
(In millions)	2023		2022
Gain (loss) on derivatives not designated as hedges
Currency exchange contracts	$	11	$	(8)	Interest expense - net
Commodity contracts	—		1		Other expense (income) - net and Cost of products sold (a)
Total	$	11	$	(7)

(a) In the second quarter of 2022, Eaton changed the presentation of gains and losses associated with derivative contracts for commodities that are not designated as hedges from Cost of product sold to Other expense (income) - net on the Consolidated Statements of Income. Prior period amounts have not been reclassified as they are not material.

Schedule of Amounts Recognized in Accumulated Other Comprehensive Income

The impact of derivative and non-derivative instruments designated as hedges to the Consolidated Statements of Income and Comprehensive Income is as follows:

	Gain (loss) recognized in other comprehensive income (loss)				Location of gain (loss) reclassified from Accumulated other comprehensive loss	Gain (loss) reclassified from Accumulated other comprehensive loss
	Three months ended March 31					Three months ended March 31
(In millions)	2023		2022			2023		2022
Derivatives designated as cash    flow hedges
Forward starting floating-to-fixed    interest rate swaps	$	—	$	124	Interest expense - net	$	3	$	—
Currency exchange contracts	31		—		Net sales and Cost of products sold	11		—
Commodity contracts	2		5		Cost of products sold	—		1
Derivatives designated as net    investment hedges
Currency exchange contracts
Effective portion	(14)		—		Gain (loss) on sale of business	—		—
Amount excluded from effectiveness       testing	5		—		Interest expense - net	1		—
Non-derivative designated as net    investment hedges
Foreign currency denominated debt	(63)		62		Gain (loss) on sale of business	—		—
Total	$	(39)	$	191		$	15	$	1