Price Risk Cash Flow Hedge Unrealized Gain to be Reclassified During Next 12 Months



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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSThe following table presents the effect of fair value and cash flow hedge accounting in the Unaudited Consolidated Statements of Earnings, Comprehensive Income and Retained Earnings for first six months 2022 and 2021.

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| Location and Amount of Gain or (Loss) Recognized in Earnings from Fair Value and Cash Flow Hedging Relationships |
|  |  | First Six Months |
|  |  | 2022 |  | 2021 |
| (Dollars in millions) |  | Sales |  | Cost of Sales |  | Net Interest Expense |  | Sales |  | Cost of Sales |  | Net Interest Expense |
| Total amounts of income and expense line items presented in the Unaudited Consolidated Statements of Earnings, Comprehensive Income and Retained Earnings in which the effects of fair value or cash flow hedges are recognized |  | $ | 5,498  |  |  | $ | 4,278  |  |  | $ | 91  |  |  | $ | 5,062  |  |  | $ | 3,783  |  |  | $ | 101  |  |
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| The effects of fair value and cash flow hedging: |  |  |  |  |  |  |  |  |  |  |  |  |
| Gain or (loss) on fair value hedging relationships: |  |  |  |  |  |  |  |  |  |  |  |  |
| Interest contracts (fixed-for-floating interest rate swaps): |  |  |  |  |  |  |  |  |  |  |  |  |
| Hedged items |  |  |  |  |  | 1  |  |  |  |  |  |  | 1  |  |
| Derivatives designated as hedging instruments |  |  |  |  |  | (1) |  |  |  |  |  |  | (1) |  |
| Gain or (loss) on cash flow hedging relationships: |  |  |  |  |  |  |  |  |  |  |  |  |
| Interest contracts (forward starting interest rate and treasury lock swap contracts): |  |  |  |  |  |  |  |  |  |  |  |  |
| Amount reclassified from AOCI into earnings |  |  |  |  |  | (5) |  |  |  |  |  |  | (5) |  |
| Commodity Contracts: |  |  |  |  |  |  |  |  |  |  |  |  |
| Amount reclassified from AOCI into earnings |  |  |  | 37  |  |  |  |  |  |  | (5) |  |  |  |
| Foreign Exchange Contracts: |  |  |  |  |  |  |  |  |  |  |  |  |
| Amount reclassified from AOCI into earnings |  | 15  |  |  |  |  |  |  | (10) |  |  |  |  |  |

  
The Company enters into foreign exchange derivatives denominated in multiple currencies which are transacted and settled in the same quarter. These derivatives are not designated as hedges due to the short-term nature and the gains or losses on these derivatives are marked-to-market in line item "Other (income) charges, net" in the Unaudited Consolidated Statements of Earnings, Comprehensive Income and Retained Earnings. As a result of these derivatives, the Company recognized a net loss of $6 million during both second quarter and first six months 2022, and recognized a net loss of $5 million during second quarter 2021 and no gain or loss during first six months 2021.  
Pre-tax monetized positions and mark-to-market gains and losses from raw materials and energy, currency, and certain interest rate hedges that were included in AOCI included net gains of $223 million and net losses of $7 million at June 30, 2022 and December 31, 2021, respectively. Gains in AOCI increased between June 30, 2022 and December 31, 2021 primarily as a result of an increase in euro to U.S. dollar exchange rates. If recognized, approximately $42 million in pre-tax gains, as of June 30, 2022, would be reclassified into earnings during the next 12 months.  
8.RETIREMENT PLANS  
Defined Benefit Pension Plans and Other Postretirement Benefit Plans  
Eastman maintains defined benefit pension plans that provide eligible employees with retirement benefits. In addition, Eastman provides life insurance for eligible retirees hired prior to January 1, 2007. The Company provided a subsidy for pre-Medicare health care and dental benefits to eligible retirees hired prior to January 1, 2007 that ended on December 31, 2021. Company funding is also provided for eligible Medicare retirees hired prior to January 1, 2007 with a health reimbursement arrangement. Costs recognized for these benefits are estimated amounts, which may change as actual costs for the year are determined.  
For additional information regarding retirement plans, see Note 11, "Retirement Plans", to the consolidated financial statements in Part II, Item 8 of the Company's 2021 [Annual Report on Form 10-K](http://www.sec.gov/Archives/edgar/data/915389/000091538922000010/emn-20211231.htm).   
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