Fair Value Measurements (Tables)

9 Months Ended

Sep. 28, 2014

The following table is a summary of the activity related to derivatives designated as cash flow hedges for the fiscal third quarters in 2014 and 2013:




	Gain/(Loss) Recognized In Accumulated OCI⁽¹⁾					Gain/(Loss) Reclassified From Accumulated OCI Into Income⁽¹⁾				Gain/(Loss) Recognized In Other Income/Expense⁽²⁾
(Dollars in Millions)	Fiscal Third Quarters Ended
Cash Flow Hedges By Income Statement Caption	September 28, 2014			September 29, 2013		September 28, 2014		September 29, 2013		September 28, 2014		September 29, 2013
Sales to customers⁽³⁾	$	(43	)	25		(2	)	17		—		—
Cost of products sold⁽³⁾	(37		)	42		37		51		(2	)	—
Research and development expense⁽³⁾	25			(20	)	8		(14	)	—		—
Interest (income)/Interest expense, net⁽⁴⁾	11			7		(6	)	(2	)	—		—
Other (income) expense, net⁽³⁾	58			(13	)	12		(8	)	—		—
Total	$	14		41		49		44		(2	)	—

The following table is a summary of the activity related to derivatives designated as cash flow hedges for the first fiscal nine months in 2014 and 2013:




	Gain/(Loss) Recognized In Accumulated OCI⁽¹⁾					Gain/(Loss) Reclassified From Accumulated OCI Into Income⁽¹⁾				Gain/(Loss) Recognized In Other Income/Expense⁽²⁾
(Dollars in Millions)	Fiscal Nine Months Ended
Cash Flow Hedges By Income Statement Caption	September 28, 2014			September 29, 2013		September 28, 2014		September 29, 2013		September 28, 2014		September 29, 2013
Sales to customers⁽³⁾	$	(73	)	22		6		24		1		—
Cost of products sold⁽³⁾	(187		)	220		196		72		(4	)	4
Research and development expense⁽³⁾	28			(27	)	(5	)	(31	)	(1	)	(3	)
Interest (income)/Interest expense, net⁽⁴⁾	21			15		(12	)	(6	)	—		—
Other (income) expense, net⁽³⁾	72			(6	)	(9	)	(6	)	—		(1	)
Total	$	(139	)	224		176		53		(4	)	—

All amounts shown in the table above are net of tax.

(1) Effective portion

(2) Ineffective portion

(3) Forward foreign exchange contracts

(4) Cross currency interest rate swaps

Financial assets and liabilities at fair value

The Company’s significant financial assets and liabilities measured at fair value as of September 28, 2014 and December 29, 2013 were as follows:



	September 28, 2014					December 29, 2013
(Dollars in Millions)	Level 1		Level 2	Level 3	Total	Total⁽¹⁾
Derivatives designated as hedging instruments:
Assets:
Forward foreign exchange contracts	$	—	534	—	534	537
Interest rate contracts⁽²⁾	—		111	—	111	169
Total	—		645	—	645	706
Liabilities:
Forward foreign exchange contracts	—		579	—	579	133
Interest rate contracts⁽³⁾⁽⁴⁾	—		4	—	4	26
Total	—		583	—	583	159
Derivatives not designated as hedging instruments:
Assets:
Forward foreign exchange contracts	—		28	—	28	25
Liabilities:
Forward foreign exchange contracts	—		40	—	40	29
Other Investments⁽⁵⁾	$	396	—	—	396	333


(1)	As of December 29, 2013, these assets and liabilities are classified as Level 2 with the exception of Other investments of $333 million, which are classified as Level 1.


(2)	Includes $110 million and $169 million of non-current assets for September 28, 2014 and December 29, 2013, respectively.


(3)	Includes $4 million and $19 million of non-current liabilities for September 28, 2014 and December 29, 2013, respectively.


(4)	Includes cross currency interest rate swaps and interest rate swaps.


(5)	Classified as non-current other assets.

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 28, 2014:



(Dollars in Millions)	Carrying Amount		Estimated Fair Value
Financial Assets
Current Investments
Cash	$	2,226	2,226
Government securities and obligations	19,247		19,249
Reverse repurchase agreements	8,138		8,138
Corporate debt securities	1,280		1,281
Money market funds	1,364		1,364
Time deposits	750		750
Total cash, cash equivalents and current marketable securities	$	33,005	33,008

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

The Company classifies all highly liquid investments with stated maturities of three months or less from date of purchase as cash equivalents and all highly liquid investments with stated maturities of greater than three months from the date of purchase as current marketable securities.
The estimated fair value was the same as the amortized cost as of December 29, 2013.

Financial Liabilities

Current Debt	$	2,115	2,115
Non-Current Debt
2.15% Notes due 2016	898		922
3 month LIBOR+0.07% FRN due 2016	800		801
0.70% Notes due 2016	399		398
5.55% Debentures due 2017	1,000		1,124
5.15% Debentures due 2018	898		1,026
1.65% Notes due 2018	598		598
4.75% Notes due 2019 (1B Euro 1.2726)	1,268		1,534
3% Zero Coupon Convertible Subordinated Debentures due in 2020	164		288
2.95% Debentures due 2020	542		564
3.55% Notes due 2021	446		481
6.73% Debentures due 2023	250		324
3.375% Notes due 2023	550		573
5.50% Notes due 2024 (500 MM GBP 1.6332)	812		993
6.95% Notes due 2029	296		413
4.95% Debentures due 2033	500		586
4.375% Notes due 2033	646		704
5.95% Notes due 2037	995		1,288
5.85% Debentures due 2038	700		912
4.50% Debentures due 2040	539		574
4.85% Notes due 2041	298		343
4.50% Notes due 2043	499		545
Other	54		54
Total Non-Current Debt	$	13,152	15,045

The weighted average effective interest rate on non-current debt is 4.41%.

The excess of the fair value over the carrying value of debt was $1.4 billion at December 29, 2013.

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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