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Derivative Financial Instruments and Risk Management (Tables)
 9 Months Ended
Sep. 30, 2017
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Location and fair value of derivative instruments reported in the Consolidated Statement of Financial Position
The location and fair value of derivative instruments reported in the Consolidated Statement of Financial Position are as follows:
 
 
 
 
 
 
 
 (Millions of dollars)
Consolidated Statement of Financial
 
Asset (Liability) Fair Value
 
Position Location
 
September 30, 2017
 
December 31, 2016
Designated derivatives
 
 
 
 
 
Foreign exchange contracts
 
 
 

 
 

Machinery, Energy & Transportation
Receivables – trade and other
 
$
14

 
$
13

Machinery, Energy & Transportation
Long-term receivables – trade and other
 
3

 
—

Machinery, Energy & Transportation
Accrued expenses
 
(8
)
 
(93
)
Machinery, Energy & Transportation
Other liabilities
 
(5
)
 
(36
)
Financial Products
Long-term receivables – trade and other
 
8

 
29

Financial Products
Accrued expenses
 
(41
)
 
(3
)
Interest rate contracts
 
 
 
 
 

Financial Products
Long-term receivables – trade and other
 
3

 
4

Financial Products
Accrued expenses
 
(1
)
 
(1
)
 
 
 
$
(27
)
 
$
(87
)
Undesignated derivatives
 
 
 

 
 

Foreign exchange contracts
 
 
 

 
 

Machinery, Energy & Transportation
Receivables – trade and other
 
$
11

 
$
—

Machinery, Energy & Transportation
Accrued expenses
 
(2
)
 
(30
)
Financial Products
Receivables – trade and other
 
42

 
39

Financial Products
Accrued expenses
 
(8
)
 
(4
)
Commodity contracts
 
 
 
 
 

Machinery, Energy & Transportation
Receivables – trade and other
 
12

 
10

 
 
 
$
55

 
$
15

 
 
 
 
 
 
Total notional amounts of derivative instruments
The total notional amounts of the derivative instruments are as follows:

 
 
 
 
 
(Millions of dollars)
 
September 30, 2017
 
December 31, 2016
 
 
 
 
 
Machinery, Energy & Transportation
 
$
2,081

 
$
2,530

Financial Products
 
$
3,560

 
$
2,626

 
 
 
 
 
Effect of derivatives designated as hedging instruments on Consolidated Statement of Results of Operations
The effect of derivatives designated as hedging instruments on the Consolidated Statement of Results of Operations is as follows: 

Fair Value Hedges
 
 
 
 
 
 
 
 
 
Three Months Ended
September 30, 2017
 
Three Months Ended
September 30, 2016
 
 (Millions of dollars)
Classification
 
Gains (Losses) 
on Derivatives
 
Gains (Losses) 
on Borrowings
 
Gains (Losses) 
on Derivatives
 
Gains (Losses) 
on Borrowings
 
Interest rate contracts
 
 
 
 
 
 
 
 
 

 
Financial Products
Other income (expense)
 
$
—

 
$
—

 
$
(11
)
 
$
11

 
 
 
 
$
—

 
$
—

 
$
(11
)
 
$
11

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended
September 30, 2017
 
Nine Months Ended
September 30, 2016
 
 
Classification
 
Gains (Losses) 
on Derivatives
 
Gains (Losses) 
on Borrowings
 
Gains (Losses) 
on Derivatives
 
Gains (Losses) 
on Borrowings
 
Interest rate contracts
 
 
 
 
 
 
 
 
 
 
Financial Products
Other income (expense)
 
$
(1
)
 
$
1

 
$
(11
)
 
$
10

 
 
 
 
$
(1
)
 
$
1

 
$
(11
)
 
$
10

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


 
 
 
 
 
 
 
 
 
Cash Flow Hedges
 
 
 
 
 
 
 
 
 
Three Months Ended September 30, 2017
 
 
 
 
Recognized in Earnings
 
 (Millions of dollars)
Amount of Gains
(Losses) Recognized 
in AOCI
(Effective Portion)
 
Classification of 
Gains (Losses)
 
Amount of
Gains (Losses)
Reclassified 
from AOCI to
Earnings
 
Recognized
in Earnings 
(Ineffective
Portion)
 
Foreign exchange contracts
 

 
 
 
 

 
 

 
Machinery, Energy & Transportation
$
16

 
Other income (expense)
 
$
4

 
$
—

 
Financial Products
(21
)
 
Other income (expense)
 
(20
)
 
—

 
Interest rate contracts
 
 
 
 
 
 
 
 
Machinery, Energy & Transportation
—

 
Interest expense excluding Financial Products
 
(2
)
 
—

 
Financial Products
(1
)
 
Interest expense of Financial Products
 
2

 
—


 
$
(6
)
 
 
 
$
(16
)
 
$
—

 
 
Three Months Ended September 30, 2016
 
 
 
 
Recognized in Earnings
 
 
Amount of Gains
(Losses) Recognized 
in AOCI
(Effective Portion)
 
Classification of 
Gains (Losses)
 
Amount of
Gains (Losses)
Reclassified 
from AOCI to
Earnings
 
Recognized
in Earnings 
(Ineffective
Portion)
 
Foreign exchange contracts
 
 
 
 
 
 
 
 
Machinery, Energy & Transportation
$
(29
)
 
Other income (expense)
 
$
4

 
$
—

 
Financial Products
(17
)
 
Other income (expense)
 
(10
)
 
—

 
Interest rate contracts
 

 
 
 
 

 
 

 
Machinery, Energy & Transportation
—

 
Interest expense excluding Financial Products
 
(2
)
 
—

 
Financial Products
2

 
Interest expense of Financial Products
 
—

 
—


 
$
(44
)
 
 
 
$
(8
)
 
$
—

 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2017
 
 
 
 
Recognized in Earnings
 
 
Amount of Gains
(Losses) Recognized 
in AOCI
(Effective Portion)
 
Classification of 
Gains (Losses)
 
Amount of
Gains (Losses)
Reclassified 
from AOCI to
Earnings
 
Recognized
in Earnings 
(Ineffective
Portion)
 
Foreign exchange contracts
 
 
 
 
 
 
 
 
Machinery, Energy & Transportation
$
72

 
Other income (expense)
 
$
(49
)

$
—

 
Financial Products
(62
)
 
Other income (expense)
 
(69
)
 
—

 
Interest rate contracts
 
 
 
 
 

 
 

 
Machinery, Energy & Transportation
—

 
Interest expense excluding Financial Products
 
(5
)
 
—

 
Financial Products
(1
)
 
Interest expense of Financial Products
 
5

 
—


 
$
9

 
 
 
$
(118
)
 
$
—

 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2016
 
 
 
 
Recognized in Earnings
 
 
Amount of Gains
(Losses) Recognized 
in AOCI
(Effective Portion)
 
Classification of 
Gains (Losses)
 
Amount of
Gains (Losses)
Reclassified 
from AOCI to
Earnings
 
Recognized
in Earnings 
(Ineffective
Portion)
 
Foreign exchange contracts
 
 
 
 
 
 
 
 
Machinery, Energy & Transportation
$
(35
)
 
Other income (expense)
 
$
—


$
—

 
Financial Products
(23
)
 
Other income (expense)
 
(16
)
 
—

 
Interest rate contracts
 

 
 
 
 

 
 

 
Machinery, Energy & Transportation
—

 
Interest expense excluding Financial Products
 
(5
)
 
—

 
Financial Products
—

 
Interest expense of Financial Products
 
(3
)
 
—


 
$
(58
)
 
 
 
$
(24
)
 
$
—

 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
Effect of derivatives not designated as hedging instruments on the Consolidated Statement of Results of Operations
The effect of derivatives not designated as hedging instruments on the Consolidated Statement of Results of Operations is as follows: 

 
 
 
 

 
 
 (Millions of dollars)
Classification of Gains (Losses)
 
Three Months Ended
September 30, 2017
 
Three Months Ended
September 30, 2016
Foreign exchange contracts
 
 
 
 
 
Machinery, Energy & Transportation
Other income (expense)
 
$
15

 
$
2

Financial Products
Other income (expense)
 
11

 
(5
)
Commodity contracts
 
 
 

 
 
Machinery, Energy & Transportation
Other income (expense)
 
11

 
3

 
 
 
$
37

 
$
—

 
 
 
 
 
 
 
Classification of Gains (Losses)
 
Nine Months Ended
September 30, 2017
 
Nine Months Ended
September 30, 2016
Foreign exchange contracts
 
 
 
 
 
Machinery, Energy & Transportation
Other income (expense)
 
$
67

 
$
24

Financial Products
Other income (expense)
 
21

 
(33
)
Commodity contracts
 
 
 
 
 
Machinery, Energy & Transportation
Other income (expense)
 
12

 
9

 
 
 
$
100

 
$
—

 
 
 
 
 
 
Effect of net settlement provisions of the master netting agreements on derivative assets
December 31, 2016
 
 
 
 
 
 
 
Gross Amounts Not Offset in the Statement of Financial Position
 
 
(Millions of dollars)
 
Gross Amount of Recognized Assets
 
Gross Amounts Offset in the Statement of Financial Position
 
Net Amount of Assets Presented in the Statement of Financial Position
 
Financial Instruments
 
Cash Collateral Received
 
Net Amount of Assets
Derivatives
 
 
 
 
 
 
 
 
 
 
 
 
Machinery, Energy & Transportation
 
$
23

 
$
—

 
$
23

 
$
(21
)
 
$
—

 
$
2

Financial Products
 
72

 
—

 
72

 
(7
)
 
—

 
65

 Total
 
$
95

 
$
—

 
$
95

 
$
(28
)
 
$
—

 
$
67

The effect of the net settlement provisions of the master netting agreements on our derivative balances upon an event of default or termination event is as follows:

 
 
 
 
 
 
 
 
 
 
 
 
 
September 30, 2017
 
 
 
 
 
 
 
Gross Amounts Not Offset in the Statement of Financial Position
 
 
(Millions of dollars)
 
Gross Amount of Recognized Assets
 
Gross Amounts Offset in the Statement of Financial Position
 
Net Amount of Assets Presented in the Statement of Financial Position
 
Financial Instruments
 
Cash Collateral Received
 
Net Amount of Assets
Derivatives
 
 
 
 
 
 
 
 
 
 
 
 
Machinery, Energy & Transportation
 
$
40

 
$
—

 
$
40

 
$
(14
)
 
$
—

 
$
26

Financial Products
 
53

 
—

 
53

 
(8
)
 
—

 
45

 Total
 
$
93

 
$
—

 
$
93

 
$
(22
)
 
$
—

 
$
71
Effect of net settlement provisions of the master netting agreements on derivative liabilities
September 30, 2017
 
 
 
 
 
 
 
Gross Amounts Not Offset in the Statement of Financial Position
 
 
(Millions of dollars)
 
Gross Amount of Recognized Liabilities
 
Gross Amounts Offset in the Statement of Financial Position
 
Net Amount of Liabilities Presented in the Statement of Financial Position
 
Financial Instruments
 
Cash Collateral Pledged
 
Net Amount of Liabilities
Derivatives
 
 
 
 
 
 
 
 
 
 
 
 
Machinery, Energy & Transportation
 
$
(15
)
 
$
—

 
$
(15
)
 
$
14

 
$
—

 
$
(1
)
Financial Products
 
(50
)
 
—

 
(50
)
 
8

 
—

 
(42
)
 Total
 
$
(65
)
 
$
—

 
$
(65
)
 
$
22

 
$
—

 
$
(43
)
December 31, 2016
 
 
 
 
 
 
 
Gross Amounts Not Offset in the Statement of Financial Position
 
 
(Millions of dollars)
 
Gross Amount of Recognized Liabilities
 
Gross Amounts Offset in the Statement of Financial Position
 
Net Amount of Liabilities Presented in the Statement of Financial Position
 
Financial Instruments
 
Cash Collateral Pledged
 
Net Amount of Liabilities
Derivatives
 
 
 
 
 
 
 
 
 
 
 
 
Machinery, Energy & Transportation
 
$
(159
)
 
$
—

 
$
(159
)
 
$
21

 
$
—

 
$
(138
)
Financial Products
 
(8
)
 
—

 
(8
)
 
7

 
—

 
(1
)
 Total
 
$
(167
)
 
$
—

 
$
(167
)
 
$
28

 
$
—

 
$
(139
)