NOTE 19. FINANCIAL INSTRUMENTS. The following table provides information about assets and liabilities not carried at fair value and excludes finance leases, equity securities without readily determinable fair value and non-financial assets and liabilities. Substantially all of these assets are considered to be Level 3 and the vast majority of our liabilities’ fair value are considered Level 2.


		March 31, 2021				December 31, 2020
		Carrying amount (net)		Estimated fair value		Carrying amount (net)		Estimated fair value
Assets	Loans and other receivables	$	2,901	$	3,066	$	2,904	$	3,125

Liabilities	Borrowings (Note 12)	71,358		81,967		74,902		86,001
	Investment contracts (Note 13)	2,021		2,402		2,049		2,547

The fair value in relation to carrying value for borrowings at March 31, 2021 compared to December 31, 2020 was unchanged, as an increase in market interest rates was offset by narrowing GE Industrial credit spreads and a decline in fair value adjustments for debt in fair value hedge relationships. Unlike the carrying amount, estimated fair value of borrowings included $1,178 million and $898 million of accrued interest at March 31, 2021 and December 31, 2020, respectively.

Assets and liabilities that are reflected in the accompanying financial statements at fair value are not included in the above disclosures; such items include cash and equivalents, investment securities and derivative financial instruments.

DERIVATIVES AND HEDGING. Our policy requires that derivatives are used solely for managing risks and not for speculative purposes. Total gross notional was $91,921 million ($43,768 million in GE Capital and $48,153 million in GE Industrial) and $95,647 million ($45,445 million in GE Capital and $50,202 million in GE Industrial) at March 31, 2021 and December 31, 2020, respectively. GE Capital notional relates primarily to managing interest rate and currency risk between financial assets and liabilities, and GE Industrial notional relates primarily to managing currency risk.


FAIR VALUE OF DERIVATIVES	March 31, 2021						December 31, 2020
	Gross Notional		All other assets		All other liabilities		Gross Notional		All other assets		All other liabilities
Interest rate contracts	$	20,395	$	1,404	$	16	$	20,500	$	1,912	$	7
Currency exchange contracts	6,701		193		65		7,387		164		125

Derivatives accounted for as hedges	$	27,096	$	1,597	$	81	$	27,886	$	2,076	$	132

Interest rate contracts	$	361	$	14	$	7	$	346	$	8	$	(1)
Currency exchange contracts	62,369		967		911		65,379		767		918
Other contracts	2,095		322		7		2,036		218		71
Derivatives not accounted for as hedges	$	64,825	$	1,302	$	926	$	67,761	$	993	$	989

Gross derivatives	$	91,921	$	2,899	$	1,007	$	95,647	$	3,069	$	1,121

Netting and credit adjustments			$	(729)	$	(729)			$	(647)	$	(647)
Cash collateral adjustments			(1,497)		(6)				(1,935)		(104)
Net derivatives recognized in statement of financial position			$	673	$	271			$	487	$	369

Net accrued interest			$	24	$	(19)			$	—	$	—
Securities held as collateral			(174)		—				(2)		—
Net amount			$	522	$	252			$	484	$	369

It is standard market practice to post or receive cash collateral with our derivative counterparties in order to minimize counterparty exposure. Included in GE Capital Cash, cash equivalents and restricted cash was total net cash collateral received on derivatives of $1,542 million (comprising $2,313 million received and $771 million posted) at March 31, 2021 and $3,289 million (comprising $4,203 million received and $914 million posted) at December 31, 2020. Of these amounts, $584 million and $1,968 million at March 31, 2021 and December 31, 2020, respectively, were received on interest rate derivatives traded through clearing houses, which are recorded as a reduction of derivative assets and net accrued interest.

Also included in total net cash collateral received are amounts presented as cash collateral adjustments in the table above, amounts related to accrued interest on interest rate derivatives presented as a reduction of Net accrued interest of $159 million and $292 million at March 31, 2021 and December 31, 2020, respectively, and excess net cash collateral posted of $693 million (comprising $31 million received and $723 million posted) at March 31, 2021, and $802 million (comprising $3 million received and $805 million posted) at December 31, 2020, which are excluded from cash collateral adjustments in the table above.

FAIR VALUE HEDGES. We use derivatives to hedge the effects of interest rate and currency exchange rate changes on our borrowings. At March 31, 2021, the cumulative amount of hedging adjustments of $3,826 million (including $2,330 million on discontinued hedging relationships) was included in the carrying amount of the hedged liability of $26,926 million. At March 31, 2020, the cumulative amount of hedging adjustments of $6,527 million (including $2,348 million on discontinued hedging relationships) was included in the carrying amount of the hedged liability of $41,735 million. The cumulative amount of hedging adjustments was primarily recorded in long-term borrowings.

CASH FLOW HEDGES. Changes in the fair value of cash flow hedges are recorded in AOCI and recorded in earnings in the period in which the hedged transaction occurs. The gain (loss) recognized in AOCI was $36 million and $(313) million for the three months ended March 31, 2021 and 2020, respectively. These amounts were primarily related to currency exchange and interest rate contracts.

The total amount in AOCI related to cash flow hedges of forecasted transactions was a $62 million gain at March 31, 2021. We expect to reclassify $4 million of gain to earnings in the next 12 months contemporaneously with the earnings effects of the related forecasted transactions. For the three months ended March 31, 2021 and 2020, we recognized an immaterial amount and $18 million of loss (primarily as a result of the disposition of BioPharma), respectively, related to hedged forecasted transactions and firm commitments that did not occur by the end of the originally specified period. At March 31, 2021 and 2020, the maximum term of derivative instruments that hedge forecasted transactions was 14 years and 15 years, respectively.

NET INVESTMENT HEDGES. For these hedges, the portion of the fair value changes of the derivatives or debt instruments that relates to changes in spot currency exchange rates is recorded in a separate component of AOCI. The portion of the fair value changes of the derivatives related to differences between spot and forward rates is recorded in earnings each period. The amounts recorded in AOCI affect earnings if the hedged investment is sold, substantially liquidated, or control is lost.

The total gain (loss) recognized in AOCI on hedging instruments for the three months ended March 31, 2021 and 2020 was $272 million and $158 million, respectively, predominantly from foreign currency debt. For all periods presented we recognized an immaterial amount excluded from assessment and recognized in earnings.

The carrying value of foreign currency debt designated as net investment hedges was $8,106 million and $9,145 million at March 31, 2021 and 2020, respectively. No amount was reclassified from AOCI into earnings for the three months ended March 31, 2021 and 2020, respectively.

EFFECTS OF DERIVATIVES ON EARNINGS. All derivatives are marked to fair value on our consolidated Statement of Financial Position, whether they are designated in a hedging relationship for accounting purposes or are used as economic hedges. For derivatives not designated as hedging instruments, substantially all of the gain or loss recognized in earnings is offset by either the current period change in value of underlying exposures, which is recorded in earnings in the current period or a future period when the recording of the exposures occur.


	Three months ended March 31, 2021										Three months ended March 31, 2020
	Revenues		Cost of sales		Interest Expense		SG&A		Other Income		Revenues		Cost of sales		Interest Expense		SG&A		Other Income
Total amounts presented in the consolidated Statement of Earnings (Loss)	$	17,118	$	12,538	$	500	$	2,891	$	626	$	19,490	$	14,426	$	561	$	3,061	$	6,869

Total effect of cash flow hedges	$	(21)	$	(4)	$	(8)	$	—	$	—	$	(21)	$	(25)	$	(10)	$	(3)	$	—

Hedged items					$	1,843									$	(2,480)
Derivatives designated as hedging instruments					(1,899)										2,511
Total effect of fair value hedges					$	(56)									$	31

Interest rate contracts	$	1	$	—	$	(9)	$	—	$	(1)	$	(26)	$	—	$	(9)	$	—	$	—
Currency exchange contracts	303		—		—		59		38		(521)		13		—		54		11
Other	—		—		—		55		19		—		—		—		(160)		(22)
Total effect of derivatives not designated as hedges	$	305	$	—	$	(9)	$	114	$	56	$	(547)	$	13	$	(9)	$	(106)	$	(12)

The gain (loss) of amount excluded for cash flow hedges was $(16) million and $15 million for the three months ended March 31, 2021 and 2020, respectively. This amount is recognized primarily in Revenues in our consolidated Statement of Earnings (Loss).

COUNTERPARTY CREDIT RISK. We manage the risk that counterparties will default and not make payments to us according to the terms of our agreements on an individual counterparty basis. Where we have agreed to netting of derivative exposures with a counterparty, we net our exposures with that counterparty and apply the value of collateral posted to us to determine the exposure. We actively monitor these net exposures against defined limits and take appropriate actions in response, including requiring additional collateral. Our exposures to counterparties (including accrued interest), net of collateral we held, was $404 million and $392 million at March 31, 2021 and December 31, 2020, respectively. Counterparties' exposures to our derivative liability (including accrued interest), net of collateral posted by us, was $186 million and $307 million at March 31, 2021 and December 31, 2020, respectively.