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Changes in those factors could impact the Company’s results of operations and financial condition.
−Removed: Senior management provides oversight for risk management and derivative activities, determines certain of the Company’s financial risk policies and objectives, and provides guidelines for derivative instrument utilization.
−Removed: Senior management also establishes certain associated procedures relative to control and valuation, risk analysis, counterparty credit approval, and ongoing monitoring and reporting.
+Added: Senior management oversees risk management and derivative activities, sets financial risk policies and objectives, and provides guidelines for derivative instrument utilization.
+Added: Senior management also establishes procedures related to control and valuation, risk analysis, counterparty credit approval, and ongoing monitoring and reporting.
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.
−Removed: 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.
−Removed: Further, hypothetical changes were not applied to available-for-sale marketable securities as unrealized and realized gains or losses thereon are historically not material.
−Removed: 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.
−Removed: Information in this Item 7A relative to 2022 reflects the updated methodology.
+Added: These hypothetical changes are not applied to cash equivalents, accounts receivable, and accounts payable due to their short-term nature, nor to available-for-sale marketable securities as unrealized and realized gains or losses thereon are historically not material.
Refer to Note 1.
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3M is also exposed to the translation of foreign currency earnings to the U.S.
−Removed: The Company enters into foreign exchange forward and option contracts to hedge against the effect of exchange rate fluctuations on cash flows denominated in foreign currencies.
+Added: The Company may enter into foreign exchange forward and option contracts to hedge against the effect of exchange rate fluctuations on cash flows denominated in foreign currencies.
These transactions are designated as cash flow hedges.
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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.
−Removed: 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.
+Added: At December 31, 2024 and December 31, 2023, 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 up to approximately $24 million and by approximately $175 million, respectively.
+Added: The similar impact on non-functional currency denominated debt used as hedging instruments would be approximately $182 million and $192 million, respectively, at December 31, 2024 and December 31, 2023.
Interest Rates Risk:
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In addition, the Company may enter into interest rate swaps that are designated and qualify as fair value hedges.
−Removed: 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.
+Added: At December 31, 2024 and December 31, 2023, an instantaneous 100 basis point change in applicable interest rates would increase/decrease the Company's pre-tax earnings by approximately $10 million and $13 million, respectively, on an annualized basis as it relates to 3M's floating-rate notes and interest rate swap agreements.
Commodity Prices Risk:
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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.