DERIVATIVE INSTRUMENTS

12 Months Ended

Oct. 29, 2023

DERIVATIVE INSTRUMENTS

DERIVATIVE INSTRUMENTS

26. DERIVATIVE INSTRUMENTS

Fair values of our derivative instruments and the associated notional amounts at the end of 2023 and 2022 were as follows. Assets are recorded in “Other assets,” while liabilities are recorded in “Accounts payable and accrued expenses.”

			Fair Value
	Notional		Assets		Liabilities
2023
Cash flow hedges:
Interest rate contracts	$	1,500	$	45
Fair value hedges:
Interest rate contracts		12,691			$	970
Not designated as hedging instruments:
Interest rate contracts		13,853		169		98
Foreign exchange contracts		8,117		75		54
Cross-currency interest rate contracts		176		3		8
2022
Cash flow hedges:
Interest rate contracts	$	1,950	$	87
Fair value hedges:
Interest rate contracts		10,112			$	1,004
Not designated as hedging instruments:
Interest rate contracts		10,568		212		107
Foreign exchange contracts		8,185		66		118
Cross-currency interest rate contracts		260		8		2

The amounts recorded, at October 29, 2023 and October 30, 2022, in the consolidated balance sheets related to borrowings designated in fair value hedging relationships were as follows. Fair value hedging adjustments are included in the carrying amount of the hedged item.

	Active Hedging				Discontinued Hedging
	Relationships				Relationships
	Carrying		Cumulative		Carrying		Cumulative
	Amount of		Fair Value		Amount of		Fair Value
	Hedged		Hedging		Formerly		Hedging
	Item		Amount		Hedged Item		Amount
2023
Short-term borrowings					$	1,814	$	15
Long-term borrowings	$	11,660	$	(976)		7,144		(288)
2022
Short-term borrowings					$	2,515	$	15
Long-term borrowings	$	9,060	$	(1,006)		5,520		(19)

The classification and gains (losses), including accrued interest expense, related to derivative instruments on the statements of consolidated income consisted of the following:

	2023		2022		2021
Fair Value Hedges
Interest rate contracts – Interest expense	$	(542)	$	(1,144)	$	(236)
Cash Flow Hedges
Recognized in OCI:
Interest rate contracts – OCI (pretax)	$	25	$	89	$	8
Reclassified from OCI:
Interest rate contracts – Interest expense		62		9		(13)
Not Designated as Hedges
Interest rate contracts – Net sales	$	1	$	53	$	13
Interest rate contracts – Interest expense		40		81		14
Foreign exchange contracts – Net sales		(6)		(6)
Foreign exchange contracts – Cost of sales		8		(64)		(101)
Foreign exchange contracts – Other operating expenses		100		402		(262)
Total not designated	$	143	$	466	$	(336)

The amount of gain recorded in OCI at October 29, 2023 that is expected to be reclassified to “Interest expense” or “Other operating expenses” in the next twelve months if interest rates or exchange rates remain unchanged is $31 after-tax. There were no gains or losses reclassified from OCI to earnings based on the probability that the original forecasted transaction would not occur.

Counterparty Risk and Collateral

Derivative instruments are subject to significant concentrations of credit risk to the banking sector. We manage individual counterparty exposure by setting limits that consider the credit rating of the counterparty, the credit default swap spread of the counterparty, and other financial commitments and exposures between us and the counterparty banks. All interest rate derivatives are transacted under International Swaps and Derivatives Association (ISDA) documentation. Some of these agreements include credit support provisions. Each master agreement permits the net settlement of amounts owed in the event of default or termination.

Certain of our derivative agreements contain credit support provisions that may require us to post collateral based on the size of the net liability positions and credit ratings. The aggregate fair value of all derivatives with credit-risk-related contingent features that were in a net liability position at October 29, 2023 and October 30, 2022, was $1.1 billion and $1.1 billion, respectively. In accordance with the limits established in these agreements, we posted $659 of cash collateral at October 29, 2023 and $701 at October 30, 2022. In addition, we paid $8 of collateral that was outstanding at both October 29, 2023 and October 30, 2022 to participate in an international futures market to hedge currency exposure, not included in the table below.

Derivatives are recorded without offsetting for netting arrangements or collateral. The impact on the derivative assets and liabilities related to netting arrangements and collateral at October 29, 2023 and October 30, 2022 follows:

	Gross Amounts		Netting				Net
	Recognized		Arrangements		Collateral		Amount
2023
Assets	$	292	$	(152)			$	140
Liabilities		1,130		(152)	$	(659)		319
2022
Assets	$	373	$	(179)	$	(54)	$	140
Liabilities		1,231		(179)		(701)		351