The Company uses interest rate swaps, currency swaps, and forward and option contracts to manage risks generally associated with foreign exchange rate, interest rate and commodity price fluctuations. Note 14 to the Consolidated Financial Statements in 3M's 2021 Annual Report on Form 10-K explains the types of derivatives and financial instruments used by 3M, how and why 3M uses such instruments, and how such instruments are accounted for. It also contains information regarding previously initiated contracts or instruments.

Refer to the section below titled Statement of Income Location and Impact of Cash Flow and Fair Value Derivative Instruments and Derivatives Not Designated as Hedging Instruments for details on the location within the consolidated statements of income for amounts of gains and losses related to derivative instruments designated as cash flow or fair value hedges (along with similar information relative to the hedged items) and derivatives not designated as hedging instruments. Additional information relative to cash flow hedges, fair value hedges, net investment hedges and derivatives not designated as hedging instruments is included below as applicable.

As of March 31, 2022, the Company had a balance of $55 million associated with the after-tax net unrealized loss associated with cash flow hedging instruments recorded in accumulated other comprehensive income. This includes a remaining balance of $98 million (after-tax loss) related to the forward starting interest rate swap and treasury rate lock contracts, which will be amortized over the respective lives of the notes. Based on exchange rates as of March 31, 2022, of the total after-tax net unrealized balance as of March 31, 2022, 3M expects to reclassify approximately $19 million after-tax net unrealized gain over the next 12 months (with the impact offset by earnings/losses from underlying hedged items).


	Pretax Gain (Loss) Recognized in Other Comprehensive Income on Derivative
	Three months ended March 31,
(Millions)	2022		2021
Foreign currency forward/option contracts	$	6	$	66
Interest rate contracts	—		—
Total	$	6	$	66


(Millions)	Carrying Value of the Hedged Liabilities				Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Value of the Hedged Liabilities
Location on the Consolidated Balance Sheet	March 31, 2022		December 31, 2021		March 31, 2022		December 31, 2021
Short-term borrowings and current portion of long-term debt	$	—	$	—	$	—	$	—
Long-term debt	949		997		(52)		(4)
Total	$	949	$	997	$	(52)	$	(4)

At March 31, 2022, the total notional amount of foreign exchange forward contracts designated in net investment hedges was approximately 150 million euros, along with a principal amount of long-term debt instruments designated in net investment hedges totaling 2.4 billion euros. The maturity dates of these derivative and nonderivative instruments designated in net investment hedges range from 2022 to 2031.

The amount of gain (loss) excluded from effectiveness testing recognized in income relative to instruments designated in net investment hedge relationships is not material. The amount of pretax gain (loss) recognized in other comprehensive income related to derivative and nonderivative instruments designated as net investment hedges are as follows.


	Pretax Gain (Loss) Recognized as Cumulative Translation within Other Comprehensive Income
	Three months ended March 31,
(Millions)	2022		2021
Foreign currency denominated debt	$	59	$	167
Foreign currency forward contracts	2		2
Total	$	61	$	169

The location in the consolidated statement of income and pre-tax amounts recognized in income related to derivative instruments designated in cash flow or fair value hedging relationships and for derivatives not designated as hedging instruments are as follows:


	Location and Amount of Gain (Loss) Recognized in Income
	Three months ended March 31,
	Cost of sales				Other expense (income), net
(Millions)	2022		2021		2022		2021
Information regarding cash flow and fair value hedging relationships:
Total amounts of income and expense line items presented in the consolidated statement of income in which the effects of derivatives are recorded	$	4,826	$	4,525	$	38	$	49
Gain or (loss) on cash flow hedging relationships:
Foreign currency forward/option contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive income into income	9		(7)		—		—
Interest rate contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive income into income	—		—		(2)		(2)
Gain or (loss) on fair value hedging relationships:
Interest rate contracts:
Hedged items	—		—		48		2
Derivatives designated as hedging instruments	—		—		(48)		(2)

Information regarding derivatives not designated as hedging instruments:
Gain or (loss) on derivatives not designated as instruments:
Foreign currency forward/option contracts	(20)		—		25		22

The following tables summarize the fair value of 3M’s derivative instruments, excluding nonderivative instruments used as hedging instruments, and their location in the consolidated balance sheet. Notional amounts below are presented at period end foreign exchange rates, except for certain interest rate swaps, which are presented using the inception date’s foreign exchange rate.


	Gross Notional Amount		Assets					Liabilities
(Millions)			Location	Fair Value Amount				Location	Fair Value Amount
	March 31, 2022	December 31, 2021		March 31, 2022		December 31, 2021			March 31, 2022		December 31, 2021
Derivatives designated as hedging instruments
Foreign currency forward/option contracts	1,835	1,768	Other current assets	$	58	$	54	Other current liabilities	$	25	$	19
Foreign currency forward/option contracts	807	800	Other assets	41		41		Other liabilities	3		1
Interest rate contracts	800	800	Other assets	—		—		Other liabilities	57		9
Total derivatives designated as hedging instruments				99		95			85		29

Derivatives not designated as hedging instruments
Foreign currency forward/option contracts	4,465	3,731	Other current assets	13		24		Other current liabilities	27		4
Total derivatives not designated as hedging instruments				13		24			27		4

Total derivative instruments				$	112	$	119		$	112	$	33

The Company is exposed to credit loss in the event of nonperformance by counterparties in interest rate swaps, currency swaps, and forward and option contracts. However, the Company’s risk is limited to the fair value of the instruments. The Company actively monitors its exposure to credit risk through the use of credit approvals and credit limits, and by selecting major international banks and financial institutions as counterparties. 3M enters into master netting arrangements with counterparties when possible to mitigate credit risk in derivative transactions. A master netting arrangement may allow each counterparty to net settle amounts owed between a 3M entity and the counterparty as a result of multiple, separate derivative transactions. The Company does not anticipate nonperformance by any of these counterparties.

3M has elected to present the fair value of derivative assets and liabilities within the Company’s consolidated balance sheet on a gross basis even when derivative transactions are subject to master netting arrangements and may otherwise qualify for net presentation. However, the following tables provide information as if the Company had elected to offset the asset and liability balances of derivative instruments, netted in accordance with various criteria in the event of default or termination as stipulated by the terms of netting arrangements with each of the counterparties. For each counterparty, if netted, the Company would offset the asset and liability balances of all derivatives at the end of the reporting period based on the 3M entity that is a party to the transactions. Derivatives not subject to master netting agreements are not eligible for net presentation.


					Gross Amounts not Offset in the Consolidated Balance Sheet that are Subject to Master Netting Agreements
	Gross Amount of Derivative Assets Presented in the Consolidated Balance Sheet				Gross Amount of Eligible Offsetting Recognized Derivative Liabilities				Cash Collateral Received				Net Amount of Derivative Assets
(Millions)	March 31, 2022		December 31, 2021		March 31, 2022		December 31, 2021		March 31, 2022		December 31, 2021		March 31, 2022		December 31, 2021
Derivatives subject to master netting agreements	$	112	$	119	$	40	$	25	$	—	$	—	$	72	$	94
Derivatives not subject to master netting agreements	—		—										—		—
Total	$	112	$	119									$	72	$	94


					Gross Amounts not Offset in the Consolidated Balance Sheet that are Subject to Master Netting Agreements
	Gross Amount of Derivative Liabilities Presented in the Consolidated Balance Sheet				Gross Amount of Eligible Offsetting Recognized Derivative Assets				Cash Collateral Received				Net Amount of Derivative Liabilities
(Millions)	March 31, 2022		December 31, 2021		March 31, 2022		December 31, 2021		March 31, 2022		December 31, 2021		March 31, 2022		December 31, 2021
Derivatives subject to master netting agreements	$	110	$	33	$	40	$	25	$	—	$	—	$	70	$	8
Derivatives not subject to master netting agreements	2		—										2		—
Total	$	112	$	33									$	72	$	8

3M estimates that year-on-year foreign currency transaction effects, including hedging impacts, increased pre-tax income by approximately $17 million and decreased pre-tax income by approximately $10 million for the three months ended March 31, 2022 and 2021, respectively. These estimates include transaction gains and losses, including derivative instruments designed to reduce foreign currency exchange rate risks.