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DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
 9 Months Ended
Sep. 30, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
In the normal course of business, our operations are exposed to global market risks, including the effect of changes in interest rates, and foreign currency exchange rates. To manage these risks, we enter into derivative and nonderivative contracts and have elected to apply hedge accounting to certain of these instruments. Derivatives that are designated in hedging relationships are evaluated for effectiveness using regression analysis at the time they are designated and throughout the hedge period. Some derivatives do not qualify for hedge accounting; for others, we elect not to apply hedge accounting.

Income Effect of Derivative Financial Instruments

The gains/(losses), by hedge designation, reported in income for the periods ended September 30 were as follows (in millions):
Third QuarterFirst Nine Months
2025202620252026
Fair value hedges
Interest rate contracts
Net interest settlements and accruals on hedging instruments$(45)$— $(137)$(14)
Fair value changes on hedging instruments34 (861)598 (1,226)
Fair value changes on hedged debt (33)832 (576)1,188 
Cross-currency interest rate swap contracts
Net interest settlements and accruals on hedging instruments(23)(15)(66)(41)
Fair value changes on hedging instruments(14)(193)490 (433)
Fair value changes on hedged debt(1)189 (476)422 
Derivatives not designated as hedging instruments
Interest rate contracts— 173 (63)265 
Foreign currency exchange contracts (a)6 43 (129)119 
Cross-currency interest rate swap contracts(49)(45)299 (119)
Total$(125)$123 $(60)$161 
__________
(a)Reflects forward contracts between us and an affiliated company.
NOTE 7. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

Balance Sheet Effect of Derivative Financial Instruments

Derivative assets and liabilities are reported on our consolidated balance sheets at fair value and are presented on a gross basis. The notional amounts of the derivative instruments do not necessarily represent amounts exchanged by the parties and are not a direct measure of our financial exposure. We also enter into master agreements with counterparties that may allow for netting of exposures in the event of default or breach of the counterparty agreement. Collateral represents cash received or paid under reciprocal arrangements that we have entered into with our derivative counterparties, which we do not use to offset our derivative assets and liabilities.

The fair value of our derivative instruments and the associated notional amounts were as follows (in millions):
December 31, 2025September 30, 2026
NotionalFair Value of AssetsFair Value of LiabilitiesNotionalFair Value of AssetsFair Value of Liabilities
Fair value hedges
Interest rate contracts$18,582 $374 $220 $22,167 $6 $879 
Cross-currency interest rate swap contracts4,158 383 5 6,330 166 217 
Derivatives not designated as hedging instruments
Interest rate contracts87,293 364 619 86,290 826 704 
Foreign currency exchange contracts (a)6,566 28 75 3,819 75 — 
Cross-currency interest rate swap contracts7,121 379 28 6,257 191 70 
Total derivative financial instruments, gross (b) (c) $123,720 $1,528 $947 $124,863 $1,264 $1,870 
__________
(a)Includes forward contracts between us and an affiliated company, including offsetting forward contracts with our consolidated entities, totaling $3.5 billion in notional amounts and $24 million in both assets and liabilities at December 31, 2025. The balances were zero for notional amounts, assets, and liabilities at September 30, 2026.
(b)At December 31, 2025 and September 30, 2026, we held collateral of $5 million and $50 million, respectively, and we posted collateral of $102 million and $139 million, respectively.
(c)At December 31, 2025 and September 30, 2026, the fair value of assets and liabilities available for counterparty netting was $610 million and $778 million, respectively. All derivatives are categorized within Level 2 of the fair value hierarchy.

Nonderivative Hedging Instruments

In the first quarter of 2026, we designated a foreign-denominated debt issuance as a net investment hedge to manage the foreign currency risk of a portion of our investment in a foreign subsidiary with a non-U.S. dollar functional currency. The designated balance of $828 million at September 30, 2026 is reported in Debt on our consolidated balance sheets. The cumulative foreign currency remeasurement gains and losses on the designated debt are recorded in Accumulated other comprehensive income/(loss), offsetting translation adjustments on the investment. Upon the sale or substantial liquidation of our investment in the foreign subsidiary, gains and losses are reclassified to Other income/(loss), net. For the third quarter and the first nine months of 2026, a $3 million gain and a $39 million gain, respectively, were recognized in Foreign currency translation gains/(losses) on our consolidated statements of comprehensive income, net of tax, and no amount was reclassified to income.