
	2020								2019
	Level 1		Level 2		Level 3		Net Balance		Level 1		Level 2		Level 3		Net Balance
Assets
Derivatives	$	—	$	118	$	—	$	118	$	—	$	58	$	—	$	58
Investment securities	1,502		—		30		1,532		24		—		259		283
Total assets	1,502		118		30		1,650		24		58		259		341

Liabilities
Derivatives	—		(52)		—		(52)		—		(27)		—		(27)
Total liabilities	$	—	$	(52)	$	—	$	(52)	$	—	$	(27)	$	—	$	(27)

The following table provides a reconciliation of recurring Level 3 fair value measurements for investment securities:


	2020		2019
Balance at beginning of year	$	259	$	288
Purchases	12		7
Proceeds at maturity	(239)		(38)
Unrealized gains (losses) recognized in accumulated other comprehensive income (loss)	(2)		2
Balance at end of year	$	30	$	259

The most significant unobservable input used in the valuation of our Level 3 instruments is the discount rate. Discount rates are determined based on inputs that market participants would use when pricing investments, including credit and liquidity risk. An increase in the discount rate would result in a decrease in the fair value of our investment securities. There are no unrealized gains or losses recognized in the consolidated statement of income (loss) on account of any Level 3 instrument still held at the reporting date. We held $1 million and $111 million of these investment securities on behalf of GE at December 31, 2020 and 2019, respectively.


	2020								2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Investment securities
Non-U.S. debt securities (1)	$	30	$	—	$	—	$	30	$	257	$	2	$	—	$	259
Equity securities (2)	76		1,431		(5)		1,502		17		8		(1)		24
Total	$	106	$	1,431	$	(5)	$	1,532	$	274	$	10	$	(1)	$	283

At December 31, 2020, our equity securities consist primarily of our investment in C3.ai. In June 2019, we entered into a stock purchase agreement and certain other related agreements with C3.ai, a company with a suite of artificial intelligence (AI) software that resulted in us acquiring an economic interest in C3.ai of approximately 15%. Our investment in C3.ai did not have a recurring readily determinable fair value until December 9, 2020 when C3.ai stock began trading publicly. At December 31, 2020, we owned 10,813,095 shares of C3.ai Class A common stock, an economic interest of approximately 11%, with a fair value of $1,500 million. For the year ended December 31, 2020, we recorded a mark-to-market unrealized gain of $1,417 million on our investment in C3.ai, which is reported in the “Non-operating income (loss)” caption in our consolidated statement of income (loss). See “Note 18. Related Party Transactions” for further details on our agreements with C3.ai.

As of December 31, 2020, $1,514 million of total investment securities are recorded in "All other current assets" of the consolidated statements of financial position, with the remaining $18 million in "All other assets." As of December 31, 2019, $254 million of equity securities are recorded in "All other current assets" of the consolidated statements of financial position, with the remaining $29 million in "All other assets."

Our financial instruments include cash and equivalents, current receivables, investments, accounts payable, short and long-term debt, and derivative financial instruments. Except for long-term debt, the estimated fair value of these financial instruments at December 31, 2020 and 2019 approximates their carrying value as reflected in our consolidated financial statements. For further information on the fair value of our debt, see "Note 10. Borrowings."

We use derivatives to manage our risks and do not use derivatives for speculation. The table below summarizes the fair value of all derivatives, including hedging instruments and embedded derivatives.


	2020				2019
	Assets		(Liabilities)		Assets		(Liabilities)
Derivatives accounted for as hedges
Currency exchange contracts	$	5	$	—	$	11	$	—

Derivatives not accounted for as hedges
Currency exchange contracts and other	113		(52)		47		(27)
Total derivatives	$	118	$	(52)	$	58	$	(27)

Derivatives are classified in the consolidated statements of financial position depending on their respective maturity date. As of December 31, 2020 and 2019, $115 million and $52 million of derivative assets are recorded in "All other current assets" and $3 million and $6 million are recorded in "All other assets" of the consolidated statements of financial position, respectively. As of December 31, 2020 and 2019, $48 million and $24 million of derivative liabilities are recorded in "All other current liabilities" and $4 million and $3 million are recorded in "All other liabilities" of the consolidated statements of financial position, respectively.

We use cash flow hedging primarily to reduce or eliminate the effects of foreign exchange rate changes on purchase and sale contracts. Accordingly, the vast majority of our derivative activity in this category consists of currency exchange contracts. We also use commodity derivatives to reduce or eliminate price risk on raw materials purchased for use in manufacturing.

Changes in the fair value of cash flow hedges are recorded in a separate component of equity (referred to below as Accumulated Other Comprehensive Income, or AOCI) and are recorded in earnings in the period in which the hedged transaction occurs. The table below summarizes our hedging instrument activity for currency exchange contracts.



	2020		2019		2018
Gain (loss) recognized in AOCI	$	(2)	$	13	$	(6)
Gain (loss) reclassified from AOCI to earnings	$	4	$	(1)	$	(1)

We expect to transfer $5 million to earnings as a gain in the next 12 months contemporaneously with the earnings effects of the related forecasted transactions. The maximum term of derivative instruments that hedge forecasted transactions was one year at December 31, 2020 and 2019.

These derivatives are not designated as hedges from an accounting standpoint (and therefore we do not apply hedge accounting to the relationship) but otherwise serve the same economic purpose as other hedging arrangements. These derivatives are marked to fair value through earnings each period.


Derivatives not designated as hedging instruments	Consolidated statement of income caption	2020		2019		2018
Currency exchange contracts (1)	Cost of goods sold	$	59	$	(13)	$	(35)
Currency exchange contracts	Cost of services sold	62		(15)		32
Commodity derivatives	Cost of goods sold	2		2		(1)
Other derivatives	Other non-operating income (loss), net	8		2		—
Total (2)		$	131	$	(24)	$	(4)

(1)Excludes losses on embedded derivatives of $14 million, $7 million and $3 million for the years ended December 31, 2020, 2019 and 2018, respectively, as embedded derivatives are not considered to be hedging instruments in our economic hedges.

(2)The effect on earnings from changes in fair value of derivatives not designated as hedges is substantially offset by the earnings effect of the economically hedged items in the same income statement caption in current and future periods.

The notional amount of a derivative is the number of units of the underlying. A substantial majority of the outstanding notional amount of $7.0 billion and $5.7 billion at December 31, 2020 and 2019, respectively, is related to hedges of anticipated sales and purchases in foreign currency, commodity purchases, and contractual terms in contracts that are considered embedded derivatives and for intercompany borrowings in foreign currencies. We generally disclose derivative notional amounts on a gross basis to indicate the total counterparty risk. Where we have gross purchase and sale derivative contracts for a particular currency, we look to execute these contracts with the same counterparty to reduce our exposure. The notional amount of these derivative instruments do not generally represent cash amounts exchanged by us and the counterparties, but rather the nominal amount upon which changes in the value of the derivatives are measured.

Fair values of our derivatives can change significantly from period to period based on, among other factors, market movements and changes in our positions. We manage counterparty credit risk (the risk that counterparties will default and not make payments to us according to the terms of our agreements) on an individual counterparty basis.

As of December 31, 2020 and 2019, the carrying amount of equity securities without readily determinable fair values was $554 million and $637 million, respectively. In 2019, certain of these equity securities were remeasured to fair value as of the date that an observable transaction occurred, which resulted in the Company recording an unrealized gain of $19 million.

During 2018, we discontinued applying the equity method on our investment in BJ Services, as required under U.S. GAAP, as previous losses had reduced our investment to zero, and we have no requirements to advance any additional funds.