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Derivative Financial Instruments and Risk Management (Tables)
 3 Months Ended
Mar. 31, 2020
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
 
March 31, 2020
 
December 31, 2019
Designated derivatives
 
 
 
 
 
Foreign exchange contracts
 
 
 

 
 

Machinery, Energy & Transportation
Receivables – trade and other
 
$
56

 
$
18

Machinery, Energy & Transportation
Long-term receivables – trade and other
 
9

 
9

Machinery, Energy & Transportation
Accrued expenses
 
(114
)
 
(20
)
Machinery, Energy & Transportation
Other liabilities
 
(28
)
 
—

Financial Products
Receivables – trade and other
 
70

 
54

Financial Products
Long-term receivables – trade and other
 
82

 
13

Financial Products
Accrued expenses
 
(1
)
 
(3
)
Interest rate contracts
 
 
 
 
 

Machinery, Energy & Transportation
Receivables – trade and other
 
6

 
—

Machinery, Energy & Transportation
Accrued expenses
 
(10
)
 
—

Financial Products
Long-term receivables – trade and other
 
61

 
5

Financial Products
Accrued expenses
 
(31
)
 
(25
)
 
 
 
$
100

 
$
51

Undesignated derivatives
 
 
 

 
 

Foreign exchange contracts
 
 
 

 
 

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

 
$
1

Machinery, Energy & Transportation
Accrued expenses
 
(7
)
 
—

Financial Products
Receivables – trade and other
 
75

 
7

Financial Products
Long-term receivables – trade and other
 
13

 
5

Financial Products
Accrued expenses
 
(28
)
 
(22
)
Commodity contracts
 
 
 
 
 

Machinery, Energy & Transportation
Receivables – trade and other
 
1

 
4

Machinery, Energy & Transportation
Accrued expenses
 
(35
)
 
(1
)
 
 
 
$
21

 
$
(6
)
 
 
 
 
 
 
Total notional amounts of derivative instruments
The total notional amounts of the derivative instruments were as follows:
 
 
 
 
 
(Millions of dollars)
 
March 31, 2020
 
December 31, 2019
 
 
 
 
 
Machinery, Energy & Transportation
 
$
4,784

 
$
2,563

Financial Products
 
$
10,580

 
$
8,931

 
 
 
 
 
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 March 31, 2020
 
 
 
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
Foreign exchange contracts
 

 
 
 
 

 
 

Machinery, Energy & Transportation
$
(90
)
 
Sales of Machinery, Energy & Transportation
 
$
5

 
$
9,914

 
 
 
Cost of goods sold
 
(11
)
 
7,266

Financial Products
101

 
Interest expense of Financial Products
 
11

 
175

 
 
 
Other income (expense)
 
71

 
222

Interest rate contracts
 
 
 
 
 
 
 
Machinery, Energy & Transportation
(4
)
 
Interest expense excluding Financial Products
 
(1
)
 
113

Financial Products
(15
)
 
Interest expense of Financial Products
 
(5
)
 
175

 
$
(8
)
 
 
 
$
70

 
 
 
Three Months Ended March 31, 2019
 
 
 
Recognized in Earnings
 
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
Foreign exchange contracts
 
 
 
 
 
 
 
Machinery, Energy & Transportation
$
17

 
Sales of Machinery, Energy & Transportation
 
$
1

 
$
12,724

 
 
 
Cost of goods sold
 
(3
)
 
9,003

Financial Products
22

 
Interest expense of Financial Products
 
7

 
190

 
 
 
Other income (expense)
 
6

 
160

Interest rate contracts
 

 
 
 
 

 
 
Machinery, Energy & Transportation
—

 
Interest expense excluding Financial Products
 
(1
)
 
103

Financial Products
(26
)
 
Interest expense of Financial Products
 
1

 
190

 
$
13

 
 
 
$
11

 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 March 31, 2020
 
Three Months Ended March 31, 2019
Foreign exchange contracts
 
 
 
 
 
Machinery, Energy & Transportation
Other income (expense)
 
$
(3
)
 
$
6

Financial Products
Other income (expense)
 
108

 
(29
)
Commodity contracts
 
 
 

 
 
Machinery, Energy & Transportation
Other income (expense)
 
(46
)
 
23

 
 
 
$
59

 
$
—

 
 
 
 
 
 
Effect of net settlement provisions of the master netting agreements on derivative assets
December 31, 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
 
$
32

 
$
—

 
$
32

 
$
(13
)
 
$
—

 
$
19

Financial Products
 
84

 
—

 
84

 
(21
)
 
—

 
63

 Total
 
$
116

 
$
—

 
$
116

 
$
(34
)
 
$
—

 
$
82


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:

 
 
 
 
 
 
 
 
 
 
 
 
 
March 31, 2020
 
 
 
 
 
 
 
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
 
$
74

 
$
—

 
$
74

 
$
(74
)
 
$
—

 
$
—

Financial Products
 
301

 
—

 
301

 
(47
)
 
—

 
254

 Total
 
$
375

 
$
—

 
$
375

 
$
(121
)
 
$
—

 
$
254
Effect of net settlement provisions of the master netting agreements on derivative liabilities
March 31, 2020
 
 
 
 
 
 
 
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
 
$
(194
)
 
$
—

 
$
(194
)
 
$
74

 
$
—

 
$
(120
)
Financial Products
 
(60
)
 
—

 
(60
)
 
47

 
—

 
(13
)
 Total
 
$
(254
)
 
$
—

 
$
(254
)
 
$
121

 
$
—

 
$
(133
)

December 31, 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
 
$
(21
)
 
$
—

 
$
(21
)
 
$
13

 
$
—

 
$
(8
)
Financial Products
 
(50
)
 
—

 
(50
)
 
21

 
—

 
(29
)
 Total
 
$
(71
)
 
$
—

 
$
(71
)
 
$
34

 
$
—

 
$
(37
)