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Derivative Financial Instruments and Risk Management (Tables)
 9 Months Ended
Sep. 30, 2019
Derivative  
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, 2019
 
December 31, 2018
Designated derivatives
 
 
 
 
 
Foreign exchange contracts
 
 
 

 
 

Machinery, Energy & Transportation
Receivables – trade and other
 
$
23

 
$
16

Machinery, Energy & Transportation
Long-term receivables – trade and other
 
1

 
—

Machinery, Energy & Transportation
Accrued expenses
 
(35
)
 
(26
)
Machinery, Energy & Transportation
Other liabilities
 
—

 
(9
)
Financial Products
Receivables – trade and other
 
59

 
53

Financial Products
Long-term receivables – trade and other
 
59

 
35

Financial Products
Accrued expenses
 
(6
)
 
(9
)
Interest rate contracts
 
 
 
 
 

Financial Products
Receivables – trade and other
 
—

 
1

Financial Products
Long-term receivables – trade and other
 
7

 
3

Financial Products
Accrued expenses
 
(61
)
 
(40
)
 
 
 
$
47

 
$
24

Undesignated derivatives
 
 
 

 
 

Foreign exchange contracts
 
 
 

 
 

Machinery, Energy & Transportation
Receivables – trade and other
 
$
2

 
$
2

Machinery, Energy & Transportation
Accrued expenses
 
(1
)
 
(21
)
Financial Products
Receivables – trade and other
 
22

 
15

Financial Products
Long-term receivables – trade and other
 
6

 
5

Financial Products
Accrued expenses
 
(14
)
 
(14
)
Commodity contracts
 
 
 
 
 

Machinery, Energy & Transportation
Receivables – trade and other
 
2

 
1

Machinery, Energy & Transportation
Accrued expenses
 
(9
)
 
(31
)
 
 
 
$
8

 
$
(43
)
 
 
 
 
 
 
Total notional amounts of derivative instruments
The total notional amounts of the derivative instruments are as follows:
 
 
 
 
 
(Millions of dollars)
 
September 30, 2019
 
December 31, 2018
 
 
 
 
 
Machinery, Energy & Transportation
 
$
2,177

 
$
1,834

Financial Products
 
$
8,639

 
$
10,210

 
 
 
 
 
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:
 
 
 
 
 
 
 
 
Cash Flow Hedges
 
 
 
 
 
 
 
 
Three Months Ended September 30, 2019
 
 
 
Recognized in Earnings
 (Millions of dollars)
Amount of Gains
(Losses) Recognized 
in AOCI
 
Classification of
Gains (Losses)
 
Amount of Gains
(Losses) Reclassified
from AOCI
 
Amount of the line items in the Consolidated Statement of Results of Operations containing hedging gains (losses)
Foreign exchange contracts
 

 
 
 
 

 
 

Machinery, Energy & Transportation
$
(13
)
 
 
 
 
 
 
 


 
Sales of Machinery, Energy & Transportation
 
$
3

 
$
11,974

Financial Products
100

 
 
 
 
 
 
 
 
 
Interest expense of Financial Products
 
9

 
$
189

 
 
 
Other income (expense)
 
89

 
$
88

Interest rate contracts
 
 
 
 
 
 
 
Machinery, Energy & Transportation
—

 
Interest expense excluding Financial Products
 
(2
)
 
$
103

Financial Products
(12
)
 
Interest expense of Financial Products
 
(3
)
 
$
189

 
$
75

 
 
 
$
96

 
 
 
Three Months Ended September 30, 2018
 
 
 
Recognized in Earnings
 
Amount of Gains
(Losses) Recognized
in AOCI
(Effective Portion)
 
Classification of
Gains (Losses)
 
Amount of Gains
(Losses) Reclassified
from AOCI
 
Recognized in Earnings (Ineffective Portion)
Foreign exchange contracts
 
 
 
 
 
 
 
Machinery, Energy & Transportation
$
(15
)
 
Other income (expense)
 
$
(17
)
 
$
—

Financial Products
53

 
Other income (expense)
 
51

 
—

 
 
 
Interest expense of Financial Products
 
5

 
—

Interest rate contracts
 

 
 
 
 

 
 
Financial Products
3

 
Interest expense of Financial Products
 
—

 
—

 
$
41

 
 
 
$
39

 
$
—

 
 
 
 
 
 
 
 



 
 
 
 
 
 
 
 
Cash Flow Hedges
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2019
 
 
 
Recognized in Earnings
 (Millions of dollars)
Amount of Gains
(Losses) Recognized 
in AOCI
 
Classification of
Gains (Losses)
 
Amount of Gains
(Losses) Reclassified
from AOCI
 
Amount of the line items in the Consolidated Statement of Results of Operations containing hedging gains (losses)
Foreign exchange contracts
 

 
 
 
 

 
 

Machinery, Energy & Transportation
$
8

 
 
 
 
 
 
 
 
 
Sales of Machinery, Energy & Transportation
 
$
4

 
$
38,369

 
 
 
Cost of goods sold
 
(4
)
 
$
27,513

Financial Products
132

 
 
 
 
 
 
 
 
 
Interest expense of Financial Products
 
23

 
$
571

 
 
 
Other income (expense)
 
91

 
$
316

Interest rate contracts
 
 
 
 
 
 
 
Machinery, Energy & Transportation
—

 
Interest expense excluding Financial Products
 
(3
)
 
$
309

Financial Products
(72
)
 
Interest expense of Financial Products
 
(2
)
 
$
571

 
$
68

 
 
 
$
109

 
 
 
Nine Months Ended September 30, 2018
 
 
 
Recognized in Earnings
 
Amount of Gains
(Losses) Recognized
in AOCI
(Effective Portion)
 
Classification of
Gains (Losses)
 
Amount of Gains
(Losses) Reclassified
from AOCI
 
Recognized in Earnings (Ineffective Portion)
Foreign exchange contracts
 
 
 
 
 
 
 
Machinery, Energy & Transportation
$
(55
)
 
Other income (expense)
 
$
(12
)
 
$
—

Financial Products
143

 
Other income (expense)
 
141

 
—

 
 
 
Interest expense of Financial Products
 
13

 
—

Interest rate contracts
 

 
 
 
 

 
 
Machinery, Energy & Transportation
—

 
Interest expense excluding Financial Products
 
(2
)
 
—

Financial Products
8

 
Interest expense of Financial Products
 
1

 
—

 
$
96

 
 
 
$
141

 
$
—

 
 
 
 
 
 
 
 
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, 2019
 
Three Months Ended September 30, 2018
Foreign exchange contracts
 
 
 
 
 
Machinery, Energy & Transportation
Other income (expense)
 
$
(1
)
 
$
(5
)
Financial Products
Other income (expense)
 
15

 
13

Commodity contracts
 
 
 

 
 
Machinery, Energy & Transportation
Other income (expense)
 
(6
)
 
(5
)
 
 
 
$
8

 
$
3

 
 
 
 
 
 
 
Classification of Gains (Losses)
 
Nine Months Ended September 30, 2019
 
Nine Months Ended September 30, 2018
Foreign exchange contracts
 
 
 
 
 
Machinery, Energy & Transportation
Other income (expense)
 
$
12

 
$
(43
)
Financial Products
Other income (expense)
 
(24
)
 
29

Commodity contracts
 
 
 
 
 
Machinery, Energy & Transportation
Other income (expense)
 
10

 
(5
)
 
 
 
$
(2
)
 
$
(19
)
 
 
 
 
 
 
Effect of net settlement provisions of the master netting agreements on derivative assets
December 31, 2018
 
 
 
 
 
 
 
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
 
$
19

 
$
—

 
$
19

 
$
(19
)
 
$
—

 
$
—

Financial Products
 
112

 
—

 
112

 
(34
)
 
—

 
78

 Total
 
$
131

 
$
—

 
$
131

 
$
(53
)
 
$
—

 
$
78


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, 2019
 
 
 
 
 
 
 
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
 
$
28

 
$
—

 
$
28

 
$
(25
)
 
$
—

 
$
3

Financial Products
 
153

 
—

 
153

 
(39
)
 
—

 
114

 Total
 
$
181

 
$
—

 
$
181

 
$
(64
)
 
$
—

 
$
117
Effect of net settlement provisions of the master netting agreements on derivative liabilities
September 30, 2019
 
 
 
 
 
 
 
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
 
$
(45
)
 
$
—

 
$
(45
)
 
$
25

 
$
—

 
$
(20
)
Financial Products
 
(81
)
 
—

 
(81
)
 
39

 
—

 
(42
)
 Total
 
$
(126
)
 
$
—

 
$
(126
)
 
$
64

 
$
—

 
$
(62
)

December 31, 2018
 
 
 
 
 
 
 
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
 
$
(87
)
 
$
—

 
$
(87
)
 
$
19

 
$
—

 
$
(68
)
Financial Products
 
(63
)
 
—

 
(63
)
 
34

 
—

 
(29
)
 Total
 
$
(150
)
 
$
—

 
$
(150
)
 
$
53

 
$
—

 
$
(97
)