Derivative, notional amount

[Table of Contents](#i988dd6b5140d4a1b8c6b4c50f020743f_10)To manage this exchange rate risk, we have historically utilized a combination of forward contracts, options and currency swaps. Contracts that qualify are designated as cash flow hedges of certain forecasted transactions denominated in foreign currencies or net investment hedges of foreign denominated subsidiaries. For cash flow hedges, the effective portion of the changes in fair value of these instruments is reported in AOCI and reclassified into earnings in the same financial statement line item and in the same period or periods during which the related hedged transactions affect earnings. The ineffective portion, which is not material for any year presented, is immediately recognized in earnings. For net investment hedges, all changes in the fair value of these instruments are recorded in AOCI, offsetting the currency translation adjustment of the related investment that is also recorded in AOCI.   
The change in value of certain non-qualifying instruments used to manage foreign exchange exposure of intercompany financing transactions and certain balance sheet items subject to revaluation is immediately recognized in earnings, substantially offsetting the foreign currency mark-to-market impact of the related exposure.  
COMMODITY RISK MANAGEMENT  
Certain raw materials used in our production processes are subject to price volatility caused by weather, supply conditions, political and economic variables and other unpredictable factors. To manage the volatility in earnings due to price fluctuations, we may utilize swap contracts or forward purchase contracts.   
Derivative instruments are reported in the consolidated balance sheets at their fair values, unless the derivative instruments qualify for the normal purchase normal sale ("NPNS") exception under GAAP and such exception has been elected. If the NPNS exception is elected, the fair values of such contracts are not recognized on the balance sheet.  
Contracts that qualify are designated as cash flow hedges of forecasted commodity purchases. The effective portion of the changes in fair value for these instruments is reported in AOCI and reclassified into earnings in the same financial statement line item and in the same period or periods during which the hedged transactions affect earnings. The ineffective and non-qualifying portions, which are not material for any year presented, are immediately recognized in earnings. The change in the fair value of certain non-qualifying instruments used to reduce commodity price volatility is immediately recognized in earnings.The notional amounts of qualifying and non-qualifying instruments used in hedging transactions were as follows:   


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| --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |
| In millions | December 31, 2021 | December 31, 2020 |
| Derivatives in Cash Flow Hedging Relationships: (a) |  |  |
| Foreign exchange contracts (USD) | —  |  | 3  |  |
|  |  |  |
| Derivatives Not Designated as Hedging Instruments: |  |  |
| Electricity contract (MWh) | 0.5  |  | 0.2  |  |

  
(a)These contracts had maturities of two years or less as of December 31, 2021.  
The following table shows gains or losses recognized in AOCI, net of tax, related to derivative instruments:  


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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |
|    | Gain (Loss)Recognized in AOCI on Derivatives(Effective Portion) |
| In millions | 2021 | 2020 | 2019 |
| Derivatives in Cash Flow Hedging Relationships: |  |  |  |
| Foreign exchange contracts | $ | 3  |  | $ | (34) |  | $ | 4  |  |
| Derivatives in Net Investment Hedging Relationships: |  |  |  |
| Foreign exchange contracts | 18  |  | —  |  | —  |  |
| Interest rate contracts | —  |  | 25  |  | 7  |  |
| Total | $ | 18  |  | $ | 25  |  | $ | 7  |  |

  
During the next 12 months, the amount of the December 31, 2021 AOCI balance, after tax, that is expected to be reclassified to earnings is a loss of $1 million.77
