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DERIVATIVES AND HEDGING ACTIVITIES (Note)
 6 Months Ended
Jun. 30, 2015
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives and Hedging Activities [Note Text Block]
DERIVATIVES AND HEDGING ACTIVITIES
As a multinational company we are exposed to market risks, such as changes in interest rates, currency exchanges rates and commodity prices.
For detailed information regarding the Company’s hedging activities and related accounting, refer to Note 14 in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014.
The notional amounts of qualifying and non-qualifying financial instruments used in hedging transactions were as follows:
In millions
June 30, 2015
 
December 31, 2014
 
Derivatives in Cash Flow Hedging Relationships:
 
 
 
 
Foreign exchange contracts (Sell / Buy; denominated in sell notional): (a)
 
 
 
 
Brazilian real / U.S. dollar - Forward
—

 
166

 
British pounds / Brazilian real - Forward
2

  
5

  
European euro / Brazilian real - Forward
4

  
9

  
European euro / Polish zloty - Forward
221

  
280

  
Mexican peso / U.S. dollar - Forward
203


—

 
U.S. dollar / Brazilian real - Forward
52

  
125

  
Derivatives in Fair Value Hedging Relationships:
 
 
 
 
Interest rate contracts (in USD)
17

 
230

 
Derivatives Not Designated as Hedging Instruments:
 
 
 
 
Foreign exchange contracts (Sell / Buy; denominated in sell notional): (b)
 
 
 
 
European euro / British pounds
21


—


Indian rupee / U.S. dollar - Forward
14

  
43

  
Mexican peso / U.S. dollar - Forward
64

  
187

  
U.S. dollar / Brazilian real - Forward
—


11

 
Interest rate contracts (in USD)
38


—



(a)
These contracts had maturities of three years or less as of June 30, 2015.
(b)
These contracts had maturities of one year or less as of June 30, 2015.

The following table shows gains or losses recognized in AOCI, net of tax, related to derivative instruments: 
 
Gain (Loss)
Recognized in
AOCI
on Derivatives
(Effective Portion)
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
In millions
2015
 
2014
 
2015
 
2014
Foreign exchange contracts
$
—

 
$
12

 
$
6

 
$
16

Total
$
—

 
$
12

 
$
6

 
$
16


During the next 12 months, the amount of the June 30, 2015 AOCI balance, after tax, that is expected to be reclassified to earnings is a gain of $1 million.
The amounts of gains and losses recognized in the consolidated statement of operations on qualifying and non-qualifying financial instruments used in hedging transactions were as follows:
 
Gain (Loss)
Reclassified from
AOCI
(Effective Portion)
Location of Gain (Loss)
Reclassified from AOCI
(Effective Portion)
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
In millions
2015
 
2014
 
2015
 
2014
 
Derivatives in Cash Flow Hedging Relationships:
 
 
 
 
 
 
 
 
Foreign exchange contracts
$
(2
)
 
$
4

 
$
(5
)
 
$
(1
)
Cost of products sold
Total
$
(2
)
 
$
4

 
$
(5
)
 
$
(1
)
 
 
Gain (Loss) Recognized
 
Location of Gain (Loss)
In Consolidated
Statement
of Operations
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
 
In millions
2015
 
2014
 
2015
 
2014
 
 
Derivatives in Fair Value Hedging Relationships:
 
 
 
 
 
 
 
 
 
Interest rate contracts
$
2

 
$
—

 
$
3

 
$
—

 
Interest expense, net
Debt
(2
)
 
—

 
(3
)
 
—

 
Interest expense, net
Total
$
—

 
$
—

 
$
—

 
$
—

 
 
Derivatives Not Designated as Hedging Instruments:
 
 
 
 
 
 
 
 
 
Electricity contact
$
1

 
$
2

 
$
1

 
$
3

 
Cost of products sold
Foreign exchange contracts
1

 
—

 
(2
)
 
—

 
Cost of products sold
Interest rate contracts
6

(a)
9

(b)
9

(a)
12

(b)
Interest expense, net
Total
$
8

 
$
11

 
$
8

 
$
15

 
 


(a) Excluding gain of $3 million related to debt reduction recorded to Restructuring and other charges.
(b) Excluding gain of $6 million, net related to debt issuance and debt reduction recorded to Restructuring and other charges.

The following activity is related to fully effective interest rate swaps designated as fair value hedges:
  


2015

 



2014

 
In millions
Issued

 
Terminated

 
Undesignated


Issued


Terminated

 
Undesignated

Second Quarter
$
—


$
175

  
$
38


$
—


$
—


$
—

First Quarter
—

 
—

  
—

 
55


—


—

Total
$
—

  
$
175

  
$
38

 
$
55

 
$
—

  
$
—


Fair Value Measurements
For a discussion of the Company’s fair value measurement policies under the fair value hierarchy, refer to Note 14 in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014.
The Company has not changed its valuation techniques for measuring the fair value of any financial assets or liabilities during the year. Transfers between levels, if any, are recognized at the end of the reporting period.
The following table provides a summary of the impact of our derivative instruments in the consolidated balance sheet:

Fair Value Measurements
Level 2 – Significant Other Observable Inputs
 
 
Assets
 
Liabilities
 
In millions
June 30, 2015
 
December 31, 2014
 
June 30, 2015
 
December 31, 2014
 
Derivatives designated as hedging instruments
 
 
 
 
 
 
 
 
Foreign exchange contracts – cash flow
$
9

(a) 
$
16

(b)
$
9

(d)
$
14

(d)
Total derivatives designated as hedging instruments
$
9

  
$
16

 
$
9

  
$
14

  
Derivatives not designated as hedging instruments
 
 
 
 
 
 
 
 
Electricity contract
$
—


$
—


$
—


$
2

(d)
Foreign exchange contracts
—

  
1

(c)
—


2

(d)
Total derivatives not designated as hedging instruments
$
—

  
$
1

 
$
—

  
$
4

  
Total derivatives
$
9

  
$
17

 
$
9

  
$
18

  
 
(a)
Includes $7 million recorded in Other current assets and $2 million recorded in Deferred charges and other assets in the accompanying consolidated balance sheet.
(b)
Includes $14 million recorded in Other current assets and $2 million recorded in Deferred charges and other assets in the accompanying consolidated balance sheet.
(c)
Included in Other current assets in the accompanying consolidated balance sheet.
(d)
Included in Other accrued liabilities in the accompanying consolidated balance sheet.

The above contracts are subject to enforceable master netting arrangements that provide rights of offset with each counterparty when amounts are payable on the same date in the same currency or in the case of certain specified defaults. Management has made an accounting policy election to not offset the fair value of recognized derivative assets and derivative liabilities in the consolidated balance sheet. The amounts owed to the counterparties and owed to the Company are considered immaterial with respect to each counterparty and in the aggregate with all counterparties.
Credit-Risk-Related Contingent Features
Certain of the Company’s financial instruments used in hedging transactions are governed by standard credit support arrangements with counterparties. If the lower of the Company’s credit rating by Moody’s or S&P were to drop below investment grade, the Company would be required to post collateral for all of its derivatives in a net liability position, although no derivatives would terminate. As of June 30, 2015, there were no derivative contracts in a net liability position that were subject to credit-risk-related contingent features. As of December 31, 2014, the fair value of derivative instruments containing credit risk-related contingent features in a net liability position was $1 million. The Company was not required to post any collateral as of June 30, 2015 or December 31, 2014. For more information on credit-risk-related contingent features, refer to Note 14 in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014.