Share-Based Compensation (Tables)

12 Months Ended

Sep. 30, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Compensation Cost Relating to Share-Based Payments

The amounts and location of compensation cost relating to share-based payments included in consolidated statements of income is as follows:

(Millions of dollars)	2015		2014		2013
Cost of products sold	$	23	$	23	$	20
Selling and administrative expense	82		74		66
Research and development expense	17		16		14
Acquisition-related costs	44		—		—
	$	166	$	113	$	100

Assumptions for Estimation of Fair Values of Stock Appreciation Rights Granted During Reporting Periods

The fair value was estimated on the date of grant using a lattice-based binomial option valuation model that uses the following weighted-average assumptions:

	2015	2014	2013
Risk-free interest rate	2.20%	2.31%	1.33%
Expected volatility	19.0%	19.0%	21.0%
Expected dividend yield	1.78%	2.00%	2.60%
Expected life	7.6 years	7.8 years	8.0 years
Fair value derived	$24.82	$19.90	$12.08

Summary of SARs Outstanding

A summary of SARs outstanding as of September 30, 2015 and changes during the year then ended is as follows:

	SARs (in thousands)		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (Millions of dollars)
Balance at October 1	7,852		$	78.49
Granted	1,037		134.73
Exercised	(1,458	)	72.88
Forfeited, canceled or expired	(167	)	103.50
Balance at September 30	7,264		$	87.07	5.96	$	333
Vested and expected to vest at September 30	7,010		$	86.34	5.88	$	327
Exercisable at September 30	4,725		$	76.18	4.81	$	267

Summary of Stock Options Outstanding

A summary of stock options outstanding as of September 30, 2015 and changes during the year then ended is as follows:

	Stock Options (in thousands)		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (Millions of dollars)
Balance at October 1	74		$	54.57
Acquisition-related conversions (A)	1,971		82.32
Exercised	(900	)	83.70
Forfeited, canceled or expired	(7	)	73.41
Balance at September 30	1,139		$	79.47	4.31	$	61
Vested at September 30	1,111		$	79.10	4.29	$	60
Exercisable at September 30	865		$	74.82	3.99	$	50

(A) Represents options granted upon the conversion of pre-acquisition equity awards of CareFusion, as previously discussed.

Summary of Performance-Based Restricted Stock Units Outstanding

A summary of performance-based restricted stock units outstanding as of September 30, 2015 and changes during the year then ended is as follows:

	Stock Units (in thousands)		Weighted Average Grant Date Fair Value
Balance at October 1	1,255		$	83.47
Granted	352		148.04
Distributed	(139	)	72.12
Forfeited or canceled	(330	)	79.12
Balance at September 30(A)	1,139		$	106.07
Expected to vest at September 30(B)	542		$	97.09

(A) Based on 200% of target payout.

(B) Net of expected forfeited units and units in excess of the expected performance payout of 68 thousand and 528 thousand shares, respectively.

Summary of Time-Vested Restricted Stock Units Outstanding

A summary of time-vested restricted stock units outstanding as of September 30, 2015 and changes during the year then ended is as follows:

	Stock Units (in thousands)		Weighted Average Grant Date Fair Value
Balance at October 1	3,015		$	80.03
Granted (A)	1,946		136.30
Distributed	(1,128	)	99.07
Forfeited or canceled	(766	)	107.50
Balance at September 30	3,067		$	101.88
Expected to vest at September 30	2,878		$	100.65

(A) Includes approximately 1 million units granted upon the conversion of pre-acquisition equity awards of CareFusion, as previously discussed.