Fair Value Measurements (Tables)

3 Months Ended

9 Months Ended

Sep. 29, 2013

The following table is a summary of the activity related to derivatives designated as hedges for the fiscal third quarters in 2013 and 2012:




	Gain/(Loss) Recognized in Accumulated OCI⁽¹⁾					Gain/(Loss) Reclassified from Accumulated OCI into Income⁽¹⁾				Gain/(Loss) Recognized in Other Income/Expense⁽²⁾
	Fiscal Third Quarters Ended
Cash Flow Hedges by Income Statement Caption	September 29, 2013			September 30, 2012		September 29, 2013		September 30, 2012		September 29, 2013	September 30, 2012
(Dollars in Millions)
Sales to customers⁽³⁾	$	25		30		17		(12	)	—	(1	)
Cost of products sold⁽³⁾	42			(61	)	51		(19	)	—	(1	)
Research and development expense⁽³⁾	(20		)	22		(14	)	43		—	—
Interest (income)/Interest expense, net⁽⁴⁾	7			28		(2	)	(2	)	—	—
Other (income)expense, net⁽³⁾	(13		)	(24	)	(8	)	19		—	1
Total	$	41		(5	)	44		29		—	(1	)

The following table is a summary of the activity related to derivatives designated as hedges for the fiscal nine months in 2013 and 2012:




	Gain/(Loss) Recognized in Accumulated OCI⁽¹⁾					Gain/(Loss) Reclassified from Accumulated OCI into Income⁽¹⁾				Gain/(Loss) Recognized in Other Income/Expense⁽²⁾
	Fiscal Nine Months Ended
Cash Flow Hedges by Income Statement Caption	September 29, 2013			September 30, 2012		September 29, 2013		September 30, 2012		September 29, 2013		September 30, 2012
(Dollars in Millions)
Sales to customers⁽³⁾	$	22		16		24		(42	)	—		(1	)
Cost of products sold⁽³⁾	220			(100	)	72		(53	)	4		(1	)
Research and development expense⁽³⁾	(27		)	33		(31	)	56		(3	)	—
Interest (income)/Interest expense, net⁽⁴⁾	15			(14	)	(6	)	(11	)	—		—
Other (income)expense, net⁽³⁾	(6		)	(25	)	(6	)	27		(1	)	—
Total	$	224		(90	)	53		(23	)	—		(2	)

Financial assets and liabilities at fair value

The Company’s significant financial assets and liabilities measured at fair value as of September 29, 2013 and December 30, 2012 were as follows:



	September 29, 2013					December 30, 2012
(Dollars in Millions)	Level 1		Level 2	Level 3	Total	Total⁽²⁾
Derivatives designated as hedging instruments:
Assets:
Foreign exchange contracts	$	—	482	—	482	423
Cross currency interest rate swaps⁽³⁾	—		127	—	127	98
Total	—		609	—	609	521
Liabilities:
Foreign exchange contracts	—		181	—	181	252
Cross currency interest rate swaps⁽⁴⁾	—		10	—	10	10
Total	—		191	—	191	262
Derivatives not designated as hedging instruments:
Assets:
Foreign exchange contracts	—		37	—	37	75
Liabilities:
Foreign exchange contracts	—		15	—	15	23
Other Investments⁽¹⁾	$	405	—	—	405	1,247


(1)	Classified as non-current other assets. The change in the fair value from December 30, 2012 was primarily due to the sale of Elan American Depositary Shares.


(2)	As of December 30, 2012, these assets and liabilities are classified as Level 2 with the exception of Other Investments of $1,247 million which are classified as Level 1.


(3)	Includes $127 million and $96 million of non-current assets for September 29, 2013 and December 30, 2012, respectively.


(4)	Includes $5 million and $4 million of non-current liabilities for September 29, 2013 and December 30, 2012, respectively.

Financial assets and liabilities not measured at fair value

Financial Instruments not measured at Fair Value:

The following financial assets and liabilities are held at carrying amount on the consolidated balance sheet as of September 29, 2013:



(Dollars in Millions)	Carrying Amount		Estimated Fair Value
Financial Assets
Current Investments
Cash	$	2,701	2,701
Government securities and obligations	19,884		19,884
Corporate debt securities	611		611
Money market funds	1,399		1,399
Time deposits	633		633
Total cash, cash equivalents and current marketable securities	$	25,228	25,228

Fair value of government securities and obligations and corporate debt securities was estimated using quoted broker prices and significant other observable inputs.
Financial Liabilities

Current Debt	$	5,359	5,359
Non-Current Debt
2.15% Notes due 2016	898		932
5.55% Debentures due 2017	1,000		1,159
5.15% Debentures due 2018	898		1,041
4.75% Notes due 2019 (1B Euro 1.3503)	1,345		1,605
3% Zero Coupon Convertible Subordinated Debentures due in 2020	178		260
2.95% Debentures due 2020	542		564
3.55% Notes due 2021	446		470
6.73% Debentures due 2023	250		323
5.50% Notes due 2024 (500 GBP 1.6042)	797		965
6.95% Notes due 2029	296		404
4.95% Debentures due 2033	500		561
5.95% Notes due 2037	995		1,226
5.85% Debentures due 2038	700		832
4.50% Debentures due 2040	539		556
4.85% Notes due 2041	298		322
Other	66		66
Total Non-Current Debt	$	9,748	11,286

The weighted average effective interest rate on non-current debt is 5.12%.

Fair value of the non-current debt was estimated using market prices, which were corroborated by quoted broker prices and significant other observable inputs.

- Definition

Tabular disclosure of the fair value of financial instruments, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

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