Note 12. Financial Instruments and Fair Value Measures

Our credit, market, foreign currency and interest rate risk management policies are described in Note 15, Financial Instruments and Fair Value Measures of Notes to Consolidated Financial Statements in our 2018 Annual Report on Form 10-K.

The following table sets forth the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis:



	March 31, 2019		December 31, 2018
Assets:
Foreign currency exchange contracts	$	180	$	119
Available for sale investments	2,214		1,784
Interest rate swap agreements	25		20
Cross currency swap agreements	45		32
Liabilities:
Foreign currency exchange contracts	$	9	$	4
Interest rate swap agreements	46		65

The foreign currency exchange contracts, interest rate swap agreements, and cross currency swap agreements are valued using broker quotations, or market transactions in either the listed or over-the-counter markets. As such, these derivative instruments are classified within level 2. The Company also holds investments in commercial paper, certificates of deposits, and time deposits that are designated as available for sale and are valued using published prices based off observable market data. As such, these investments are classified within level 2. The Company also holds available for sale investments in U.S. government and corporate debt securities valued utilizing published prices based on quoted market pricing, which are classified within level 1.

The carrying value of cash and cash equivalents, trade accounts and notes receivables, payables, commercial paper and short-term borrowings contained in the Consolidated Balance Sheet approximates fair value. The following table sets forth the Company’s financial assets and liabilities that were not carried at fair value:



	March 31, 2019				December 31, 2018
	Carrying Value		Fair Value		Carrying Value		Fair Value
Assets
Long-term receivables	$	343	$	336	$	333	$	329
Liabilities
Long-term debt and related current maturities	$	12,598	$	13,299	$	12,629	$	13,133

The following table sets forth the amounts on the Consolidated Balance Sheet related to cumulative basis adjustments for fair value hedges:



Line in the Consolidated Balance Sheet of Hedged Item	Carrying Amount of the Hedged Item				Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Item
Line in the Consolidated Balance Sheet of Hedged Item	March 31, 2019		December 31, 2018		March 31, 2019			December 31, 2018
Long-term debt	$	2,579	$	2,555	$	(21	)	$	(45	)

The Company determined the fair value of the long-term receivables by discounting based upon the terms of the receivable and counterparty details including credit quality. As such, the fair value of these receivables is considered level 2. The Company determined the fair value of the long-term debt and related current maturities utilizing transactions in the listed markets for identical or similar liabilities. As such, the fair value of the long-term debt and related current maturities is considered level 2 as well.

Interest rate swap agreements are designated as hedge relationships with gains or losses on the derivative recognized in Interest and other financial charges offsetting the gains and losses on the underlying debt being hedged. For the three months ended March 31, 2019, we recognized $24 million of gains in earnings on interest rate swap agreements. For the three months ended March 31, 2018, we recognized $46 million of losses in earnings on interest rate swap agreements. Gains and losses are fully offset by losses and gains on the underlying debt being hedged.

We economically hedge our exposure to changes in foreign exchange rates primarily with forward contracts. These contracts are marked-to-market with the resulting gains and losses recognized in earnings offsetting the gains and losses on the non-functional currency denominated monetary assets and liabilities being hedged. For the three months ended March 31, 2019 and 2018, we recognized $47 million and $129 million of expense in Other (income) expense.

The following tables summarize the location and impact to the Consolidated Statement of Operations related to fair value and cash flow hedging relationships:



			Three Months Ended March 31, 2019
			Revenue		Cost of Products Sold		SG&A		Other (Income) Expense			Interest and Other Financial Charges
			$	8,884	$	4,622	$	1,363	$	(285	)	$	85
Gain or (loss) on cash flow hedges:
	Foreign Currency Exchange Contracts:
		Amount reclassified from accumulated other comprehensive income into income	—		16		—		24			—
		Amount excluded from effectiveness testing recognized in earnings using an amortization approach	—		6		—		9			—
Gain or (loss) on fair value hedges:
	Interest Rate Swap Agreements:
		Hedged Items	—		—		—		—			(24		)
		Derivatives designated as hedges	—		—		—		—			24



			Three Months Ended March 31, 2018
			Revenue			Cost of Products Sold			SG&A		Other (Income) Expense			Interest and Other Financial Charges
			$	10,392		$	5,905		$	1,475	$	(268	)	$	83
Gain or (loss) on cash flow hedges:
	Foreign Currency Exchange Contracts:
		Amount reclassified from accumulated other comprehensive income into income	(3		)	(22		)	2		—			—
Gain or (loss) on fair value hedges:
	Interest Rate Swap Agreements:
		Hedged Items	—			—			—		—			46
		Derivatives designated as hedges	—			—			—		—			(46		)

The following table summarizes the amounts of gain or (loss) on net investment hedges recognized in Accumulated other comprehensive income (loss):



	Three Months Ended March 31,
Derivatives Net Investment Hedging Relationships	2019		2018
Euro-denominated long-term debt	$	68	$	(82	)
Euro-denominated commercial paper	71		(101		)
Cross currency swap	13		(58		)
Foreign currency exchange contracts	7		—