4 unchanged sentences
Senior management also establishes certain associated procedures relative to control and valuation, risk analysis, counterparty credit approval, and ongoing monitoring and reporting.
−Removed: The Company is exposed to credit loss in the event of nonperformance by counterparties in interest rate swaps, currency swaps, and forward and option contracts.
−Removed: However, the Company’s risk is limited to the fair value of the instruments.
−Removed: 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.
−Removed: The Company does not anticipate nonperformance by any of these counterparties.
−Removed: Foreign Exchange Rates Risk:
+Added: To quantify 3M’s primary market risk exposure, the Company performs a sensitivity analysis based on hypothetical changes in foreign currency spot exchange rates and interest rates as further described in the sections below.
+Added: Note also that hypothetical changes in these rates were not applied to cash equivalents, accounts receivable, and accounts payable, because of the short-term nature of these instruments.
+Added: Further, hypothetical changes were not applied to available-for-sale marketable securities as unrealized and realized gains or losses thereon are historically not material.
+Added: 3M changed its methodology for quantifying market risk exposure in 2023 (previously utilized a value-at-risk analysis) to better align with how the Company manages its risk exposure and to enhance the information presented about 3M’s principal market risks.
+Added: Information in this Item 7A relative to 2022 reflects the updated methodology.
+Added: Refer to Note 1.
+Added: Significant Accounting Policies, Note 12.
+Added: Marketable Securities, Note 13.
+Added: Long-Term Debt and Short-Term Borrowings, Note 16.
+Added: Derivatives and Note 17.
+Added: Fair Value Measurements within Item 8 of this Form 10-K for additional discussion of foreign currency exchange, interest rates and financial instruments.
+Added: Foreign Currency Exchange Rates Risk:
Foreign currency exchange rates and fluctuations in those rates may affect the Company’s net investment in foreign subsidiaries and may cause fluctuations in cash flows related to foreign denominated transactions.
3 unchanged sentences
3M may de-designate these cash flow hedge relationships in advance of the occurrence of the forecasted transaction.
−Removed: The maximum length of time over which 3M hedges its exposure to the variability in future cash flows of the forecasted transactions is 36 months.
In addition, 3M enters into foreign currency contracts that are not designated in hedging relationships to offset, in part, the impacts of changes in value of various non-functional currency denominated items including certain intercompany financing balances.
−Removed: As circumstances warrant, the Company also uses foreign currency forward contracts and foreign currency denominated debt as hedging instruments to hedge portions of the Company’s net investments in foreign operations.
−Removed: The dollar equivalent gross notional amount of the Company’s foreign exchange forward and option contracts designated as either cash flow hedges or net investment hedges was $3.2 billion at December 31, 2022.
−Removed: The dollar equivalent gross notional amount of the Company’s foreign exchange forward and option contracts not designated as hedging instruments was $2.8 billion at December 31, 2022.
−Removed: In addition, as of December 31, 2022, the Company had €2.4 billion in principal amount of foreign currency denominated debt designated as non-derivative hedging instruments in certain net investment hedges as discussed in Note 14 in the “Net Investment Hedges” section.
+Added: As circumstances warrant, the Company also uses foreign exchange contracts and foreign currency denominated debt as hedging instruments to hedge portions of the Company’s net investments in foreign operations.
+Added: At December 31, 2023 and December 31, 2022, an instantaneous 10% change in applicable foreign currency spot exchange rates would have increased/decreased the aggregate fair value carrying amount of foreign exchange forward and option contracts by approximately $175 million and $187 million, respectively, and of non-functional currency denominated debt used as hedging instruments by approximately $192 million and $249 million, respectively.
Interest Rates Risk:
2 unchanged sentences
In addition, the Company may enter into interest rate swaps that are designated and qualify as fair value hedges.
−Removed: Under these arrangements, the Company agrees to exchange, at specified intervals, the difference between fixed and floating interest amounts calculated by reference to an agreed-upon notional principal amount.
−Removed: The dollar equivalent (based on inception date foreign currency exchange rates) gross notional amount of the Company’s interest rate swaps at December 31, 2022 was $800 million.
−Removed: Additional details about 3M’s long-term debt can be found in Note 12, including references to information regarding derivatives and/or hedging instruments, further discussed in Note 14, associated with the Company’s long-term debt.
+Added: At December 31, 2023 and December 31, 2022, an instantaneous 100 basis point change in applicable interest rates would increase/decrease the Company's pre-tax earnings by approximately $13 million on an annualized basis as it relates to 3M's floating-rate notes and interest rate swap agreements.
Commodity Prices Risk:
The Company manages commodity price risks through negotiated supply contracts and price protection agreements.
−Removed: T able of Contents
−Removed: Value At Risk:
−Removed: The value at risk analysis is performed annually to assess the Company’s sensitivity to changes in currency rates, interest rates, and commodity prices.
−Removed: A Monte Carlo simulation technique was used to test the impact on after-tax earnings related to debt instruments, interest rate derivatives and underlying foreign exchange and commodity exposures outstanding at December 31, 2022.
−Removed: The model (third-party bank dataset) used a 95 percent confidence level over a 12-month time horizon.
−Removed: This model does not purport to represent what actually will be experienced by the Company.
−Removed: The following table summarizes the possible adverse and positive impacts to after-tax earnings related to these exposures.
−Removed: Adverse impact on after-tax earnings Positive impact on after-tax earnings
−Removed: (Millions) 2022 2021 2022 2021
−Removed: Foreign exchange rates $ (315) $ (140) $ 314 $ 147
−Removed: Interest rates (18) (2) 18 2
−Removed: Commodity prices (5) (21) 7 14
−Removed: An analysis of the global exposures related to purchased components and materials is performed at each year-end.
−Removed: A one percent price change would result in a pre-tax cost or savings of approximately $85 million per year.
−Removed: The global energy exposure is such that a ten percent price change would result in a pre-tax cost or savings of approximately $45 million per year.
−Removed: Global energy exposure includes energy costs used in 3M production and other facilities, primarily electricity and natural gas.
+Added: 3M does not enter into derivative financial instruments associated with commodities.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.