Derivatives and Other Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2013

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Schedule of Fair Values and Corresponding Level of Fair Value Hierarchy of Outstanding Derivative Contracts Recorded as Assets

The fair values and corresponding classifications under the appropriate level of the fair value hierarchy of outstanding derivative contracts recorded as assets in the accompanying Consolidated Balance Sheet were as follows:

Asset Derivatives	Level		December 31, 2013		December 31, 2012
Derivatives designated as hedging instruments:
Prepaid expenses and other current assets:
Aluminum contracts		1	$	4	$	23
Aluminum contracts		3		9		7
Foreign exchange contracts		1		2		-
Interest rate contracts		2		9		8
Other noncurrent assets:
Aluminum contracts		1		-		3
Aluminum contracts		3		16		-
Energy contracts		3		6		3
Interest rate contracts		2		23		37
Total derivatives designated as hedging instruments			$	69	$	81
Derivatives not designated as hedging instruments*:
Prepaid expenses and other current assets:
Aluminum contracts		3	$	149	$	211
Other noncurrent assets:
Aluminum contracts		3		175		329
Foreign exchange contracts		1		-		1
Total derivatives not designated as hedging instruments			$	324	$	541
Less margin held**:
Prepaid expenses and other current assets:
Aluminum contracts		1	$	-	$	9
Interest rate contracts		2		3		8
Other noncurrent assets:
Interest rate contracts		2		-		9
Sub-total			$	3	$	26
Total Asset Derivatives			$	390	$	596

* See the “Other” section within Note X for additional information on Alcoa’s purpose for entering into derivatives not designated as hedging instruments and its overall risk management strategies.

** All margin held is in the form of cash and is valued under a Level 1 technique. The levels that correspond to the margin held in the table above reference the level of the corresponding asset for which it is held. Alcoa elected to net the margin held against the fair value amounts recognized for derivative instruments executed with the same counterparties under master netting arrangements.

Schedule of Fair Values and Corresponding Level of Fair Value Hierarchy of Outstanding Derivative Contracts Recorded as Liabilities

The fair values and corresponding classifications under the appropriate level of the fair value hierarchy of outstanding derivative contracts recorded as liabilities in the accompanying Consolidated Balance Sheet were as follows:

Liability Derivatives	Level		December 31, 2013		December 31, 2012
Derivatives designated as hedging instruments:
Other current liabilities:
Aluminum contracts		1	$	45	$	13
Aluminum contracts		3		23		35
Other noncurrent liabilities and deferred credits:
Aluminum contracts		1		14		1
Aluminum contracts		3		387		573
Total derivatives designated as hedging instruments			$	469	$	622
Derivatives not designated as hedging instruments*:
Other current liabilities:
Aluminum contracts		1	$	4	$	1
Aluminum contracts		2		-		21
Embedded credit derivative		3		2		3
Foreign exchange contracts		1		3		-
Other noncurrent liabilities and deferred credits:
Aluminum contracts		2		-		5
Embedded credit derivative		3		19		27
Total derivatives not designated as hedging instruments			$	28	$	57
Less margin posted**:
Other current liabilities:
Aluminum contracts		1	$	18	$	-
Total Liability Derivatives			$	479	$	679

* See the “Other” section within Note X for additional information on Alcoa’s purpose for entering into derivatives not designated as hedging instruments and its overall risk management strategies.

** All margin posted is in the form of cash and is valued under a Level 1 technique. The levels that correspond to the margin posted in the table above reference the level of the corresponding liability for which it is posted. Alcoa elected to net the margin posted against the fair value amounts recognized for derivative instruments executed with the same counterparties under master netting arrangements.

Gross Amounts of Recognized Derivative Assets and Liabilities and Gross Amounts Offset in Accompanying Consolidated Balance Sheet

The gross amounts of recognized derivative assets and liabilities and gross amounts offset in the accompanying Consolidated Balance Sheet were as follows:

	Assets						Liabilities
	December 31, 2013			December 31, 2012			December 31, 2013			December 31, 2012
Gross amounts recognized:
Aluminum contracts	$	40		$	72		$	81		$	69
Interest rate contracts		32			45			3			17
	$	72		$	117		$	84		$	86
Gross amounts offset:
Aluminum contracts*	$	(36	)	$	(55	)	$	(36	)	$	(55	)
Interest rate contracts**		(3	)		(17	)		(3	)		(17	)
	$	(39	)	$	(72	)	$	(39	)	$	(72	)
Net amounts presented in the Consolidated Balance Sheet:
Aluminum contracts	$	4		$	17		$	45		$	14
Interest rate contracts		29			28			-			-
	$	33		$	45		$	45		$	14

* The amounts under Assets and Liabilities as of December 31, 2013 include $18 of margin posted with counterparties. The amounts under Assets and Liabilities as of December 31, 2012 include $9 of margin held from counterparties.

** The amounts under Assets and Liabilities as of December 31, 2013 and December 31, 2012 represent margin held from the counterparty.

Schedule of Net Fair Values of Outstanding Derivative Contracts and Effect of Hypothetical Change (Increase or Decrease of 10%) in Market Prices or Rates

The following table shows the net fair values of outstanding derivative contracts at December 31, 2013 and the effect on these amounts of a hypothetical change (increase or decrease of 10%) in the market prices or rates that existed at December 31, 2013:

	Fair value asset/(liability)			Index change of + / - 10%
Aluminum contracts	$	(102	)	$	47
Embedded credit derivative		(21	)		2
Energy contracts		6			214
Foreign exchange contracts		(1	)		14
Interest rate contracts		29			1

Schedule of Derivative Contract Assets and Liabilities Measured and Recognized at Fair Value on Recurring Basis

The following table presents Alcoa’s derivative contract assets and liabilities that are measured and recognized at fair value on a recurring basis classified under the appropriate level of the fair value hierarchy (there were no transfers in or out of Levels 1 and 2 during the periods presented):

December 31,	2013			2012
Assets:
Level 1	$	6		$	27
Level 2		32			45
Level 3		355			550
Margin held		(3	)		(26	)
Total	$	390		$	596
Liabilities:
Level 1	$	66		$	15
Level 2		-			26
Level 3		431			638
Margin posted		(18	)		-
Total	$	479		$	679

Schedule of Reconciliation of Activity for Derivative Contracts

Financial instruments classified as Level 3 in the fair value hierarchy represent derivative contracts in which management has used at least one significant unobservable input in the valuation model. The following tables present a reconciliation of activity for such derivative contracts:

	Assets					Liabilities
2013	Aluminum contracts			Energy contracts		Aluminum contracts			Embedded credit derivative
Opening balance—January 1, 2013	$	547		$	3	$	608		$	30
Total gains or losses (realized and unrealized) included in:
Sales		(5	)		-		(24	)		-
Cost of goods sold		(202	)		-		-			(1	)
Other income, net		28			-		-			(8	)
Other comprehensive loss		22			3		(174	)		-
Purchases, sales, issuances, and settlements*		-			-		-			-
Transfers into and/or out of Level 3*		-			-		-			-
Foreign currency translation		(41	)		-		-			-
Closing balance—December 31, 2013	$	349		$	6	$	410		$	21
Change in unrealized gains or losses included in earnings for derivative contracts held at December 31, 2013:
Sales	$	-		$	-	$	-		$	-
Cost of goods sold		-			-		-			-
Other income, net		28			-		-			(8	)

* In 2013, there were no purchases, sales, issuances or settlements of Level 3 financial instruments. Additionally, there were no transfers of financial instruments into or out of Level 3.

	Assets					Liabilities
2012	Aluminum contracts			Energy contracts		Aluminum contracts			Embedded credit derivative
Opening balance—January 1, 2012	$	10		$	2	$	602		$	28
Total gains or losses (realized and unrealized) included in:
Sales		(8	)		-		(33	)		-
Cost of goods sold		(107	)		-		-			(1	)
Other income, net		16			-		-			3
Other comprehensive loss		10			1		39			-
Purchases, sales, issuances, and settlements*		596			-		-			-
Transfers into and/or out of Level 3*		-			-		-			-
Foreign currency translation		30			-		-			-
Closing balance—December 31, 2012	$	547		$	3	$	608		$	30
Change in unrealized gains or losses included in earnings for derivative contracts held at December 31, 2012:
Sales	$	-		$	-	$	-		$	-
Cost of goods sold		-			-		-			-
Other income, net		16			-		-			3

* In July 2012, two embedded derivatives contained within existing power contracts became subject to derivative accounting under GAAP (see below). The amount reflected in this table represents the initial fair value of these embedded derivatives and was classified as an issuance of Level 3 financial instruments. There were no purchases, sales or settlements of Level 3 financial instruments. Additionally, there were no transfers of financial instruments into or out of Level 3.

Schedule of Quantitative Information for Level 3 Derivative Contracts

The following table presents quantitative information for Level 3 derivative contracts:

	Fair value at December 31, 2013		Valuation technique	Unobservable input	Range ($ in full amounts)
Assets:
Aluminum contract	$	-	Discounted cash flow	Interrelationship of future aluminum and oil prices	Aluminum: $1,774 per metric ton in 2014 to $2,221 per metric ton in 2018 Oil: $112 per barrel in 2014 to $89 per barrel in 2018
Aluminum contract		324	Discounted cash flow	Interrelationship of future aluminum prices, foreign currency exchange rates, and the U.S. consumer price index (CPI)	Aluminum: $1,784 per metric ton in 2014 to $2,064 per metric ton in 2016 Foreign currency: A$1 = $0.89 in 2014 to $0.83 in 2016 CPI: 1982 base year of 100 and 231 in 2014 to 246 in 2016
Aluminum contract		25	Discounted cash flow	Interrelationship of LME price to overall energy price	Aluminum: $1,839 per metric ton in 2014 to $2,239 per metric ton in 2019
Energy contracts		6	Discounted cash flow	Price of electricity beyond forward curve	$82 per megawatt hour in 2014 to $154 per megawatt hour in 2036
Liabilities:
Aluminum contracts		410	Discounted cash flow	Price of aluminum beyond forward curve	$2,485 per metric ton in 2023 to $2,647 per metric ton in 2027
Embedded credit derivative		21	Discounted cash flow	Credit spread between Alcoa and counterparty	0.98% to 1.66% (1.32% median)

Schedule of Gain or Loss on Hedged Items and Derivative Contracts

The gain or loss on the hedged items are included in the same line items as the loss or gain on the related derivative contracts as follows (there were no contracts that ceased to qualify as a fair value hedge in any of the periods presented):

Derivatives in Fair Value Hedging Relationships	Location of Gain or (Loss) Recognized in Earnings on  Derivatives	Amount of Gain or (Loss) Recognized in Earnings on Derivatives
		2013			2012			2011
Aluminum contracts*	Sales	$	(142	)	$	(9	)	$	(126	)
Interest rate contracts	Interest expense		10			10			64
Total		$	(132	)	$	1		$	(62	)
Hedged Items in Fair Value Hedging Relationships	Location of Gain or (Loss) Recognized in Earnings on Hedged Items	Amount of Gain or (Loss) Recognized in Earnings on Hedged Items
		2013			2012			2011
Aluminum contracts	Sales	$	143		$	(9	)	$	133
Interest rate contracts	Interest expense		(10	)		(10	)		(31	)
Total		$	133		$	(19	)	$	102

* In 2013, 2012, and 2011, the amount of gain or (loss) recognized in earnings includes $1, $(18), and $7, respectively, related to the ineffective portion of the hedging relationships.

Schedule of Gains and Losses on Derivative Excluded from Assessment of Effectiveness Recognized in Current Earnings

Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings.

Derivatives in Cash Flow Hedging Relationships	Amount of Gain or (Loss) Recognized in OCI on Derivatives (Effective Portion)								Location of Gain or (Loss) Reclassified from Accumulated OCI into Earnings (Effective Portion)	Amount of Gain or (Loss) Reclassified from Accumulated OCI into Earnings (Effective Portion)*									Location of Gain or (Loss) Recognized in Earnings on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing)	Amount of Gain or (Loss) Recognized in Earnings on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing)**
	2013		2012			2011				2013			2012			2011				2013			2012			2011
Aluminum contracts	$	158	$	(10	)	$	72		Sales	$	(16	)	$	36		$	(114	)	Other income, net	$	(1	)	$	(1	)	$	2
Energy contracts		1		-			(3	)	Cost of goods sold		-			-			(8	)	Other income, net		-			-			-
Foreign exchange contracts		-		-			1		Sales		(2	)		-			4		Other income, net		-			-			-
Interest rate contracts		-		-			(2	)	Interest expense		(1	)		(2	)		-		Other income, net		-			-			-
Interest rate contracts		3		(2	)		(5	)	Other income, net		-			-			(3	)	Other income, net		-			-			-
Total	$	162	$	(12	)	$	63			$	(19	)	$	34		$	(121	)		$	(1	)	$	(1	)	$	2

* Assuming market rates remain constant with the rates at December 31, 2013, a loss of $13 is expected to be recognized in earnings over the next 12 months.

** In 2013, 2012, and 2011, the amount of gain or (loss) recognized in earnings represents $(1), $(1), and $3, respectively, related to the amount excluded from the assessment of hedge effectiveness. There was also $(1) recognized in earnings related to the ineffective portion of the hedging relationships in 2011. In 2013 and 2012, there was no ineffectiveness related to the derivatives in cash flow hedging relationships.

Schedule of Outstanding Forward Contracts that were Entered into Hedge Forecasted Transactions

Alcoa had the following outstanding forward contracts that were entered into to hedge forecasted transactions:

December 31,	2013		2012
Aluminum contracts (000 metric tons)		841		1,120
Energy contracts:
Electricity (megawatt hours)		59,409,328		100,578,295
Natural gas (million British thermal units)		19,980,000		19,160,000
Foreign exchange contracts	$	335	$	71

Schedule of Fair Value Gains and Losses on Derivatives Contracts Recorded in Earnings

Alcoa has certain derivative contracts that do not qualify for hedge accounting treatment and, therefore, the fair value gains and losses on these contracts are recorded in earnings as follows:

Derivatives Not Designated as Hedging Instruments	Location of Gain or (Loss) Recognized in Earnings on  Derivatives	Amount of Gain or (Loss) Recognized in Earnings on Derivatives
		2013			2012			2011
Aluminum contracts	Sales	$	(9	)	$	-		$	(13	)
Aluminum contracts	Other income, net		27			16			13
Embedded credit derivative	Other income, net		8			(3	)		(5	)
Energy contract	Other income, net		-			-			47
Foreign exchange contracts	Other income, net		(6	)		-			(3	)
Total		$	20		$	13		$	39

Schedule of Carrying Values and Fair Values of Other Financial Instruments

The carrying values and fair values of Alcoa’s other financial instruments were as follows:

December 31,	2013				2012
	Carrying value		Fair value		Carrying value		Fair value
Cash and cash equivalents	$	1,437	$	1,437	$	1,861	$	1,861
Restricted cash		18		18		189		189
Noncurrent receivables		19		19		20		20
Available-for-sale securities		119		119		67		67
Short-term borrowings		57		57		53		53
Commercial paper		-		-		-		-
Long-term debt due within one year		655		1,040		465		477
Long-term debt, less amount due within one year		7,607		7,863		8,311		9,028