| Financial Instruments: | 3 . Financial Instruments: Fair Value Measurements Accounting guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Under this guidance, the company is required t o classify certain assets and liabilities based on the following fair value hierarchy: Level 1—Quoted prices (unadjusted) in active markets for identical assets or liabilities that can be accessed at the measurement date; Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and Level 3—Unobservable inputs for the asset or liability. The guidance requires the use of observable market data if such data is avail able without undue cost and effort. When available, the company uses unadjusted quoted market prices in active markets to measure the fair value and classifies such items as Level 1. If quoted market prices are not available, fair value is based up on internally developed models that use current market-based or independently sourced market parameters such as interest rates and currency rates. Items valued using internally generated models are classified according to the lowest level input or value dr iver that is significant to the valuation. The determination of fair value considers various factors including interest rate yield curves and time value underlying the financial instruments. For derivatives and debt securities, the company uses a discounted cash flow analysis using discount rates commensurate with the duration of the instrument. In determining the fair value of financial instruments, the company considers certain market valuation adjustments to the “base valuations” calcula ted using the methodologies described below for several parameters that market participants would consider in determining fair value: Counterparty credit risk adjustments are applied to financial instruments, taking into account the actual credit risk of a counterparty as observed in the credit default swap market to determine the true fair value of such an instrument. Credit risk adjustments are applied to reflect the company’s own credit risk when valuing all liabilities measured at fair value. The metho dology is consistent with that applied in developing counterparty credit risk adjustments, but incorporates the company’s own credit risk as observed in the credit default swap market. As an example, the fair value of derivatives is derived utiliz ing a discounted cash flow model that uses observable market inputs such as known notional value amounts, yield curves, spot and forward exchange rates as well as discount rates. These inputs relate to liquid, heavily traded currencies with active markets which are available for the full term of the derivative. Certain financial assets are measured at fair value on a nonrecurring basis. These assets include equity method investments that are recognized at fair value at the measurement date to the ex tent that they are deemed to be other-than-temporarily impaired. Certain assets that are measured at fair value on a recurring basis can be subject to nonrecurring fair value measurements. These assets include available-for-sale equity investments that are deemed to be other-than-temporarily impaired. In the event of an other-than-temporary impairment of a financial investment, fair value is measured using a model described above. Non-financial assets such as property, plant and equipment, land, goo dwill and intangible assets are also subject to nonrecurring fair value measurements if they are deemed to be impaired. The impairment models used for nonfinancial assets depend on the type of asset. In the third quarter of 2014, the company recorded an im pairment on certain assets that were initially reported as held for sale at September 30, 2014. See note 9 , “Acquisitions/Divestitures,” for additional information. There were no material impairments of non-financial assets for the nine months ended September 30, 2015 . Accounting guidance permits the measurement of eligible financial assets, financial liabilities and firm commitments at fair value, on an instrument-by-instrument basis, that are otherwise not permitted to be accounted for at fair value under other account ing standards. This election is irrevocable. The company has not applied the fair value option to any eligible assets or liabilities. The following tables present the company’s financial assets and financial liabilities that are measured at fair v alue on a recurring basis at September 30, 2015 and December 31, 2014 . (Dollars in millions) At September 30, 2015 Level 1 Level 2 Level 3 Total Assets: Cash equivalents (1) Time deposits and certificates of deposit $ — $ 4,626 $ — $ 4,626 Commercial paper — 275 — 275 Money market funds 2,155 — — 2,155 U.S. government securities — 0 — 0 Canadian government securities — 186 — 186 Other securities — 7 — 7 Total 2,155 5,094 — 7,250 (6) Debt securities - current (2) — 88 — 88 (6) Debt securities - noncurrent (3) 1 8 — 9 Trading security investments (3) 54 — — 54 Available-for-sale equity investments (3) 160 — — 160 Derivative assets (4) Interest rate contracts — 739 — 739 Foreign exchange contracts — 542 — 542 Equity contracts — 2 — 2 Total — 1,283 — 1,283 (7) Total assets $ 2,371 $ 6,473 $ — $ 8,844 (7) Liabilities: Derivative liabilities (5) Foreign exchange contracts $ — $ 187 $ — $ 187 Equity contracts — 43 — 43 Interest rate contracts — 0 — 0 Total liabilities $ — $ 230 $ — $ 230 (7) (1) Included within cash and cash equivalents in the Consolidated Statement of Financial Position. (2) Commercial paper and certificates of deposit reported as marketable securities in the Consolidated Statement of Financial Position. (3) Included within investments and sundry assets in the Consolidated Statement of Financial Position. (4) The gross balances of derivative assets contained within prepaid expenses and other current assets, and investments and sundry assets in t he Consolidated Statement of Financial Position at September 30, 2015 were $502 million and $781 million, respectively. (5) The gross balances of derivative liabilities contained within other accrued expenses and liabilities, and other lia bilities in the Consolidated Statement of Financial Position at September 30, 2015 were $167 million and $ 63 million, respectively. (6) Available-for-sale securities with carrying values that approximate fair value. (7) If derivative exposures cover ed by a qualifying master netting agreement had been netted in the Consolidated Statement of Financial Position, the total derivative asset and liability positions each would have been reduced by $180 million. (Dollars in millions) At December 31, 2014 Level 1 Level 2 Level 3 Total Assets: Cash equivalents (1) Time deposits and certificates of deposit $ — $ 3,517 $ — $ 3,517 Commercial paper — 764 — 764 Money market funds 662 — — 662 U.S government securities — 410 — 410 Other securities — 6 — 6 Total 662 4,697 — 5,359 (5) Debt securities - noncurrent (2) 1 8 — 9 Trading security investments (2) 74 — — 74 Available-for-sale equity investments (2) 243 — — 243 Derivative assets (3) Interest rate contracts — 633 — 633 Foreign exchange contracts — 775 — 775 Equity contracts — 24 — 24 Total — 1,432 — 1,432 (6) Total assets $ 980 $ 6,138 $ — $ 7,118 (6) Liabilities: Derivative liabilities (4) Foreign exchange contracts $ — $ 177 $ — $ 177 Equity contracts — 19 — 19 Total liabilities $ — $ 196 $ — $ 196 (6) (1) Included within cash and cash equivalents in the Consolidated Statement of Financial Position. (2) Included within investments and sundry assets in the Consolidated Statement of Financial Position. (3) The gross balances of derivative assets contained within prepaid expenses and other current assets, and investments and sundry assets in the Consolidated Statement of Financial Position at December 31, 2014 were $751 million and $681 million, res pectively. (4) The gross balances of derivative liabilities contained within other accrued expenses and liabilities, and other liabilities in the Consolidated Statement of Financial Position at December 31, 2014 were $165 million and $31 milli on, respectively. (5) Available-for-sale securities with carrying values that approximate fair value. (6) If derivative exposures covered by a qualifying master netting agreement had been netted in the Consolidated Statement of Financial Position, the tot al derivative asset and liability positions each would have been reduced by $97 million. There were no transfers between Levels 1 and 2 for the nine months ended September 30, 2015 . During the year ended December 31, 2014 , the company transferred trading s ecurit y investments valued at $74 million from Level 2 to Level 1 due to the expiration of certain regulatory restrictions. Financial Assets and Liabilities Not Measured at Fair Value Short-Term Receivables and Payables Notes and other accounts receivable and other investments are financial assets with carrying values that approximate fair value. Accounts payable, other accrued expenses and short-term debt (excluding the current portion of long-term debt) are financial liabilities with carrying values that approximate fair value. If measured at fair value in the financial statements, these financial instruments would be classified as Level 3 in the fair value hierarchy. Loans and Long-term Receivables Fair values are based on discounted future ca sh flows using current interest rates offered for similar loans to clients with similar credit ratings for the same remaining maturities. At September 30, 2015 and December 31, 2014 , the difference between the carrying amount and estimated fair value for loans an d long-term receivables was immaterial. If measured at fair value in the financial statements, these financial instruments would be classified as Level 3 in the fair value hierarchy. Long-Term Debt Fair value of publicly-traded long-term debt is based on quoted market prices for the identical liability when traded as an asset in an active market. For other long-term debt for which a quoted market price is not available, an expected present value technique that uses rates currently available to the company for debt with similar terms and remaining maturities is used to estimate fair value. The carrying amount of long-term debt was $ 32 ,122 million and $ 35,073 million, and the estimated fair value was $ 33 ,889 million and $ 37,524 million at September 30, 2015 and December 31, 2014 , respectively. If measured at fair value in the financial statements, long-term debt (including the current portion) would be classified as Level 2 in the fair value hierarchy. Debt and Marketable Equity Securities The compa ny’s cash equivalents and current debt securities are considered available-for-sale and recorded at fair value, which is not materially different from carrying value, in the Consolidated Statement of Financial Position. The following tables summar ize the company’s noncurrent debt and marketable equity securities which are considered available-for-sale and recorded at fair value in the Consolidated Statement of Financial Position. Gross Gross (Dollars in millions) Adjusted Unrealized Unrealized Fair At September 30, 2015: Cost Gains Losses Value Debt securities – noncurrent (1) $ 6 $ 3 $ — $ 9 Available-for-sale equity investments (1) $ 272 $ 6 $ 118 $ 160 (1) Included within investments and sundry assets in the Consolidated Statement of Financial Position. Gross Gross (Dollars in millions) Adjusted Unrealized Unrealized Fair At December 31, 2014: Cost Gains Losses Value Debt securities – noncurrent (1) $ 7 $ 3 $ — $ 9 Available-for-sale equity investments (1) $ 272 $ 2 $ 31 $ 243 (1) Included within investments and sundry assets in the Consolidated Statement of Financial Position. During the fourth quarter of 2014, the company acquired equity securities in conjunction with the sale of the industry standard server business which are classified as available-for-sale securities. Gross unrealized losses of $ 99 million and $ 86 million related to available-for-sale securities for the three and nine months ended September 30, 2015 , respectively, were recorded in the Consolidated Statement of Financial Position. Based on an evaluation of available evidence as of September 30, 2015 and December 31, 2014 , the company believes that unrealized losses on available-for-sale securities were temporary and did not represent a need for an other -than-temporary impairment. In determining whether an other -than-temporary decline in market value has occurred, the company considers the duration that, and extent to which, the fair value of the investment is below its cost, the financial condition and near-term prospects of the issuer and the company’s intent and ability to retain the security in ord er to allow for an anticipated recovery in fair value . The duration of the decline in market value of these securities has occurred over a short-term, and the company has the ability to hold these securities and has no plans to sell this investment prior to recovery of its cost basis. Sales of debt and available-for-sale equity investments during the period were as follows: (Dollars in millions) For the three months ended September 30: 2015 2014 Proceeds $ 1 $ 1 Gross realized gains (before taxes) 0 0 Gross realized losses (before taxes) 0 0 (Dollars in millions) For the nine months ended September 30: 2015 2014 Proceeds $ 7 $ 16 Gross realized gains (before taxes) 1 0 Gross realized losses (before taxes) 1 5 The after-tax net unrealized holding gains/(losses) on available-for-sale debt and equity securities that have been included in other comprehensive income/(loss) for the period and after-tax net (gains)/losses reclassified from accumulated other comprehensive income/(loss) to net income were as follows: (Dollars in millions) For the three months ended September 30: 2015 2014 Net unrealized gains/(losses) arising during the period $ (63) $ 0 Net unrealized (gains)/losses reclassified to net income* 0 0 *There were no writedowns for the three months ended September 30, 2015 and 2014, respectively. (Dollars in millions) For the nine months ended September 30: 2015 2014 Net unrealized gains/(losses) arising during the period $ (52) $ 1 Net unrealized (gains)/losses reclassified to net income* 0 3 * There were no writedowns for the nine months ended September 30, 2015 and 2014, respectively. The contractual maturities of substantially all available-for-sale debt securities are less than one year at September 30, 2015 . Derivative Financial Instruments The company operates in multiple functional currencies and is a significant lender and borrower in the global markets. In the normal course of business, the company is exposed to the impact of interest rate changes and foreign currency fluctuations, and to a lesser extent equity and commodity price changes and client credit risk. The company limits these risks by following established risk management policies and procedures, including the use of derivatives, and, where cost effective, financing with debt in the currencies in which assets are denominated. For interest rate exposures, derivatives are used to better align rate movements between the interest rates associated with the company’s lease and other fina ncial assets and the interest rates associated with its financing debt. Derivatives are also used to manage the related cost of debt. For foreign currency exposures, derivatives are used to better manage the cash flow volatility arising from foreign exchan ge rate fluctuations. As a result of the use of derivative instruments, the company is exposed to the risk that counterparties to derivative contracts will fail to meet their contractual obligations. To mitigate the counterparty credit risk, the c ompany has a policy of only entering into contracts with carefully selected major financial institutions based upon their overall credit profile. The company’s established policies and procedures for mitigating credit risk on principal transactions include reviewing and establishing limits for credit exposure and continually assessing the creditworthiness of counterparties. The right of set-off that exists under certain of these arrangements enables the legal entities of the company subject to the arrangeme nt to net amounts due to and from the counterparty reducing the maximum loss from credit risk in the event of counterparty default. The company is also a party to collateral security arrangements with most of its major derivative counterparties. Th ese arrangements require the company to hold or post collateral (cash or U.S. Treasury securities) when the derivative fair values exceed contractually established thresholds. Posting thresholds can be fixed or can vary based on credit default swap pricing or credit ratings received from the major credit agencies. The aggregate fair value of all derivative instruments under these collateralized arrangements that were in a liability position at September 30, 2015 and December 31, 2014 was $12 million and $21 millio n, respectively, for which no collateral was posted at September 30, 2015 and December 31, 2014 . Full collateralization of these agreements would be required in the event that the company’s credit rating falls below investment grade or if its credit default swap spread exceeds 250 basis points, as applicable, pursuant to the terms of the collateral security arrangements. The aggregate fair value of derivative instruments in asset positions as of September 30, 2015 and December 31, 2014 was $1,283 million and $1,432 milli on, respectively. This amount represents the maximum exposure to loss at the reporting date if the counterparties failed to perform as contracted. This exposure was reduced by $180 million and $97 million at September 30, 2015 and December 31, 2014 , respectively, of liabilities included in master netting arrangements with those counterparties. Additionally, at September 30, 2015 and December 31, 2014 , this exposure was reduced by $193 million and $487 million of cash collateral, and $48 million and $31 million of non-cas h collateral in U.S. Treasury securities, respectively, received by the company. At September 30, 2015 and December 31, 2014 , the net exposure related to derivative assets recorded in the Consolidated Statement of Financial Position was $862 million and $817 mill ion, respectively. At September 30, 2015 and December 31, 2014 , the net exposure related to derivative liabilities recorded in the Consolidated Statement of Financial Position was $50 million and $99 million, respectively. In the Consolidated Statement of Financial Position, the company does not offset derivative assets against liabilities in master netting arrangements nor does it offset receivables or payables recognized upon payment or receipt of cash collateral against the fair values of the related derivative instruments. No amount was recognized in other receivables at September 30, 2015 or December 31, 2014 for the right to reclaim cash collateral. The amount recognized in accounts payable for the obligation to return cash collateral was $193 million and $487 million at September 30, 2015 and December 31, 2014 , respectively. The company restricts the use of cash collateral received to rehypothecation , and therefore reports it in prepaid expenses and other current assets in the Consolidated Statement of Financial Position. No amount was rehypothecated at September 30, 2015 and December 31, 2014 . The company may employ derivative instruments to hedge the volatility in stockholders’ equity resulting from changes in currency exchange rates of significant foreign s ubsidiaries of the company with respect to the U.S. dollar. These instruments, designated as net investment hedges, expose the company to liquidity risk as the derivatives have an immediate cash flow impact upon maturity which is not offset by a cash flow from the translation of the underlying hedged equity. The company monitors this cash loss potential on an ongoing basis and may discontinue some of these hedging relationships by de-designating or terminating the derivative instrument in order to manage th e liquidity risk. Although not designated as accounting hedges, the company may utilize derivatives to offset the changes in the fair value of the de-designated instruments from the date of de-designation until maturity. In its hedging programs, t he company uses forward contracts, futures contracts, interest-rate swaps, cross-currency swaps, and options depending upon the underlying exposure. The company is not a party to leveraged derivative instruments. A brief description of the major h edging programs, categorized by underlying risk, follows. Interest Rate Risk Fixed and Variable Rate Borrowings The company issues debt in the global capital markets, principally to fund its financing lease and loan portfolios. Access to cost-e ffective financing can result in interest rate mismatches with the underlying assets. To manage these mismatches and to reduce overall interest cost, the company uses interest-rate swaps to convert specific fixed-rate debt issuances into variable-rate debt (i.e., fair value hedges) and to convert specific variable-rate debt issuances into fixed-rate debt (i.e., cash flow hedges). At September 30, 2015 and December 31, 2014 , the total notional amount of the company’s interest rate swaps was $6.4 billion and $5.8 bi llion, respectively. The weighted-average remaining maturity of these instruments at September 30, 2015 and December 31, 2014 was approximately 7.5 years and 8.7 years, respectively. Forecasted Debt Issuance The company is exposed to interest rate vol atility on future debt issuances. To manage this risk, the company may use forward starting interest-rate swaps to lock in the rate on the interest payments related to the forecasted debt issuance. These swaps are accounted for as cash flow hedges. The com pany did not have any derivative instruments relating to this program outstanding at September 30, 2015 and December 31, 2014 . At September 30, 2015 and December 31, 2014 , net gains of approximately $1 million (before taxes) were recorded in accumulated other co mprehensive income/(loss) in connection with cash flow hedges of the company’s borrowings. Within these amounts, gains of less than $1 million are expected to be reclassified to net income within the next 12 months, providing an offsetting economic impact against the underlying transactions. Foreign Exchange Risk Long-Term Investments in Foreign Subsidiaries (Net Investment) A large portion of the company’s foreign currency denominated debt portfolio is designated as a hedge of net investment in foreign subsidiaries to reduce the volatility in stockholders’ equity caused by changes in foreign currency exchange rates in the functional currency of major foreign subsidiaries with respect to the U.S. dollar. The company also uses cross-currency sw aps and foreign exchange forward contracts for this risk management purpose. At September 30, 2015 and December 31, 2014 , the total notional amount of derivative instruments designated as net investment hedges was $5.3 billion and $2.2 billion, respectively. The weighted-average remaining maturity of these instruments at September 30, 2015 and December 31, 2014 was approximately 0.2 years for both periods. Anticipated Royalties and Cost Transactions The company’s operations generate significant nonfunctional cur rency, third-party vendor payments and intercompany payments for royalties and goods and services among the company’s non-U.S. subsidiaries and with the parent company. In anticipation of these foreign currency cash flows and in view of the volatility of t he currency markets, the company selectively employs foreign exchange forward contracts to manage its currency risk. These forward contracts are accounted for as cash flow hedges. The maximum length of time over which the company has hedged its exposure to the variability in future cash flows is four years. At September 30, 2015 and December 31, 2014 , the total notional amount of forward contracts designated as cash flow hedges of forecasted royalty and cost transactions was $8.7 billion and $9.3 billion, respecti vely. The weighted-average remaining maturity of these instruments at September 30, 2015 and December 31, 2014 was 0.6 years and 0.7 years, respectively. At September 30, 2015 and December 31, 2014 , in connection with cash flow hedges of anticipated royalties and cost transactions, the company recorded net gains of $226 million and $602 million (before taxes), respectively, in accumulated other comprehensive income/(loss). Within these amounts, $207 million and $572 million of gains, respectively, are expected to be reclassified to net income within the next 12 months, providing an offsetting economic impact against the underlying anticipated transactions. Foreign Currency Denominated Borrowings The company is exposed to exchange rate volatil ity on foreign currency denominated debt. To manage this risk, the company employs cross-currency swaps to convert fixed-rate foreign currency denominated debt to fixed-rate debt denominated in the functional currency of the borrowing entity. These swaps a re accounted for as cash flow hedges. The maximum length of time over which the company has hedged its exposure to the variability in future cash flows is approximately seven years. At September 30, 2015 and December 31, 2014 , no amounts were outstanding under th is program. At September 30, 2015 and December 31, 2014 , in connection with cash flow hedges of foreign currency denominated borrowings, the company recorded net losses of $2 million (before taxes) in accumulated other comprehensive income/(loss). Within these amounts, less than $1 million of losses are expected to be reclassified to net income within the next 12 months, providing an offsetting economic impact against the underlying exposure. Subsidiary Cash and Foreign Currency Asset/Liability Management The company uses its Global Treasury Centers to manage the cash of its subsidiaries. These centers principally use currency swaps to convert cash flows in a cost-effective manner. In addition, the company uses foreign exchange forward c ontracts to economically hedge, on a net basis, the foreign currency exposure of a portion of the company’s nonfunctional currency assets and liabilities. The terms of these forward and swap contracts are generally less than one year. The changes in the fa ir values of these contracts and of the underlying hedged exposures are generally offsetting and are recorded in other (income) and expense in the Consolidated Statement of Earnings. At September 30, 2015 and December 31, 2014 , the total notional amount of deriva tive instruments in economic hedges of foreign currency exposure was $10.8 billion and $13.1 billion, respectively. Equity Risk Management The company is exposed to market price changes in certain broad market indices and in the company’s own s tock primarily related to certain obligations to employees. Changes in the overall value of these employee compensation obligations are recorded in selling, general and administrative (SG&A) expense in the Consolidated Statement of Earnings. Although not d esignated as accounting hedges, the company utilizes derivatives, including equity swaps and futures, to economically hedge the exposures related to its employee compensation obligations. The derivatives are linked to the total return on certain broad mark et indices or the total return on the company’s common stock, and are recorded at fair value with gains or losses also reported in SG&A expense in the Consolidated Statement of Earnings. At September 30, 2015 and December 31, 2014 , the total notional amount of de rivative instruments in economic hedges of these compensation obligations was $1.2 billion and $1.3 billion, respectively. Other Risks The company may hold warrants to purchase shares of common stock in connection with various investments that are deemed derivatives because they contain net share or net cash settlement provisions. The company records the changes in the fair value of these warrants in other (income) and expense in the Consolidated Statement of Earnings. The company did not have any warrants qualifying as derivatives outstanding at September 30, 2015 and December 31, 2014 . The company is exposed to a potential loss if a cl ient fails to pay amounts due under contractual terms. The company may utilize credit default swaps to economically hedge its credit exposures. The swaps are recorded at fair value with gains and losses reported in other (income) and expense in the Consoli dated Statement of Earnings. The company did not have any derivative instruments relating to this program outstanding at September 30, 2015 and December 31, 2014 . The company is exposed to market volatility on certain investment securities. The company ma y utilize options or forwards to economically hedge its market exposure. The derivatives are recorded at fair value with gains and losses reported in other (income) and expense in the Consolidated Statement of Earnings. At September 30, 2015 and December 31, 2014 , the total notional amount of derivative instruments in economic hedges of investment securities was less than $0.1 billion for both periods. The following tables provide a quantitative summary of the derivative and non-derivative instrument-relat ed risk management activity as of September 30, 2015 and December 31, 2014 , as well as for the three and nine months ended September 30, 2015 and 2014 , respectively. Fair Values of Derivative Instruments in the Consolidated Statement of Financial Position As of September 30, 2015 and December 31, 2014 (Dollars in millions) Fair Value of Derivative Assets Fair Value of Derivative Liabilities Balance Sheet Balance Sheet Classification 9/30/2015 12/31/2014 Classification 9/30/2015 12/31/2014 Designated as hedging instruments: Interest rate contracts: Prepaid expenses and Other accrued other current assets $ — $ 5 expenses and liabilities $ — $ 0 Investments and sundry assets 739 628 Other liabilities — — Foreign exchange Prepaid expenses and Other accrued contracts: other current assets 299 632 expenses and liabilities 89 50 Investments and sundry assets 5 17 Other liabilities 30 21 Fair value of derivative Fair value of derivative assets $ 1,043 $ 1,281 liabilities $ 119 $ 72 Not designated as hedging instruments: Foreign exchange Prepaid expenses and Other accrued contracts: other current assets $ 201 $ 90 expenses and liabilities $ 36 $ 101 Investments and sundry assets 37 37 Other liabilities 33 4 Equity contracts: Prepaid expenses and Other accrued other current assets 2 24 expenses and liabilities 43 14 Investments and sundry assets — 0 Other liabilities — 5 Fair value of derivative Fair value of derivative assets $ 241 $ 151 liabilities $ 112 $ 125 Total debt designated as hedging instruments: Short-term debt N/A N/A $ — $ 0 Long-term debt N/A N/A $ 7,709 $ 7,766 Total $ 1,283 $ 1,432 $ 7,939 $ 7,963 N/A-not applicable The Effect of Derivative Instruments in the Consolidated Statement of Earnings For the three months ended September 30, 2015 and 2014 (Dollars in millions) Gain (Loss) Recognized in Earnings Consolidated Statement of Recognized on Attributable to Risk Earnings Line Item Derivatives(1) Being Hedged(2) For the three months ended September 30: 2015 2014 2015 2014 Derivative instruments in fair value hedges(4): Interest rate contracts Cost of financing $ 125 $ 16 $ (99) $ 11 Interest expense 112 15 (88) 10 Derivative instruments not designated as hedging instruments(1): Foreign exchange contracts Other (income) and expense 208 (452) N/A N/A Interest rate contracts Other (income) and expense 0 (3) N/A N/A Equity contracts SG&A expense (81) (14) N/A N/A Other (income) and expense (8) 5 N/A N/A Total $ 357 $ (433) $ (187) $ 21 (Dollars in millions) Gain (Loss) Recognized in Earnings and Other Comprehensive Income Consolidated (Ineffectiveness) and Effective Portion Statement of Effective Portion Reclassified Amounts Excluded from Recognized in OCI Earnings Line Item from AOCI Effectiveness Testing For the three months ended September 30: 2015 2014 2015 2014 2015 2014 Derivative instruments in cash flow hedges: Interest rate contracts $ — $ — Interest expense $ 0 $ (1) $ — $ — Other (income) Foreign exchange 36 524 and expense 185 (57) 0 (1) contracts Cost of sales 46 (4) — — S |
