3M 2014 Annual Report Download - page 102

Download and view the complete annual report

Please find page 102 of the 2014 3M annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 132

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132

96
Credit Risk and Offsetting of Assets and Liabilities of Derivative Instruments
The Company is exposed to credit loss in the event of nonperformance by counterparties in interest rate swaps, currency
swaps, commodity price 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. As of December 31, 2014, 3M has International Swaps and Derivatives
Association (ISDA) agreements with 15 applicable banks and financial institutions which contain netting provisions. In
addition to a master agreement with 3M supported by a primary counterparty's parent guarantee, 3M also has associated
credit support agreements in place with 14 of its primary derivative counterparties which, among other things, provide the
circumstances under which either party is required to post eligible collateral (when the market value of transactions
covered by these agreements exceeds specified thresholds or if a counterparty’s credit rating has been downgraded to a
predetermined rating). 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. As of the applicable dates presented below, no cash collateral had been received or pledged related to
these derivative instruments.
Offsetting of Financial Assets/Liabilities under Master Netting Agreements with Derivative Counterparties
December 31, 2014
Gross Amounts not Offset in the
Consolidated Balance Sheet that are Subject
to Master Netting Agreements
(Millions)
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
Derivatives subject to master
netting agreements
$
256
$
20
$
―
$
236
Derivatives not subject to master
netting agreements
―
―
Total
$
256
$
236
December 31, 2014
Gross Amounts not Offset in
the
Consolidated Balance Sheet that are Subject
to Master Netting Agreements
(Millions)
Gross Amount of
Derivative Liabilities
Presented in the
Consolidated
Balance Sheet
Gross Amount of
Eligible Offsetting
Recognized
Derivative Assets
Cash Collateral
Pledged
Net Amount of
Derivative Liabilities
Derivatives subject to master
netting agreements
$
36
$
20
$
―
$
16
Derivatives not subject to master
netting agreements
7
7
Total
$
43
$
23