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Fair Value Measurements (Tables)
 6 Months Ended
Jul. 03, 2016
Fair Value Disclosures [Abstract]  
Summary of designated derivatives
The following table is a summary of the activity related to derivatives designated as cash flow hedges for the fiscal second quarters in 2016 and 2015:
 
 
 
 
 
 
 
 
 
 
 
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 Second Quarters Ended
Cash Flow Hedges By Income Statement Caption
 
July 3, 2016
 
June 28, 2015
 
July 3, 2016
 
June 28, 2015
 
July 3, 2016
 
June 28, 2015
Sales to customers(3)
 
$
(27
)
 
37

 
(3
)
 
(30
)
 
—

 
(1
)
Cost of products sold(3)
 
(178
)
 
52

 
13

 
47

 
(2
)
 
14

Research and development expense(3)
 
12

 
(7
)
 
(1
)
 
7

 
(1
)
 
—

Interest (income)/Interest expense, net(4)
 
(3
)
 
7

 
7

 
—

 
—

 
—

Other (income) expense, net(3) (5)
 
(54
)
 
(28
)
 
(6
)
 
19

 
—

 
1

Total
 
$
(250
)
 
61

 
10

 
43

 
(3
)
 
14



The following table is a summary of the activity related to derivatives designated as cash flow hedges for the first fiscal six months in 2016 and 2015:
 
 
 
 
 
 
 
 
 
 
 
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 Six Months Ended
Cash Flow Hedges By Income Statement Caption
 
July 3, 2016
 
June 28, 2015
 
July 3, 2016
 
June 28, 2015
 
July 3, 2016
 
June 28, 2015
Sales to customers(3)
 
$
(27
)
 
(55
)
 
(21
)
 
(71
)
 
—

 
(2
)
Cost of products sold(3)
 
(222
)
 
(116
)
 
(8
)
 
116

 
(6
)
 
14

Research and development expense(3)
 
(95
)
 
(3
)
 
(96
)
 
(9
)
 
(1
)
 
—

Interest (income)/Interest expense, net(4)
 
9

 
(29
)
 
15

 
(3
)
 
—

 
—

Other (income) expense, net(3) (5)
 
(106
)
 
69

 
(2
)
 
42

 
(3
)
 
1

Total
 
$
(441
)
 
(134
)
 
(112
)
 
75

 
(10
)
 
13

 
 
 
 
 
 
 
 
 
 
 
 
 

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
(5) Includes equity collar contracts
Financial assets and liabilities at fair value
The Company’s significant financial assets and liabilities measured at fair value as of July 3, 2016 and January 3, 2016 were as follows:
 
 
July 3, 2016
 
 
 
January 3, 2016
(Dollars in Millions)
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Total(1)
Derivatives designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
Forward foreign exchange contracts(7)
 
$
—

 
279

 
—

 
279

 
452

Interest rate contracts (2)(4)(7)
 
—

 
55

 
—

 
55

 
28

Total
 
—

 
334

 
—

 
334

 
480

Liabilities:
 
 
 
 
 
 
 
 
 
 
Forward foreign exchange contracts(8)
 
—

 
569

 
—

 
569

 
358

Interest rate contracts (3)(4)(8)
 
—

 
314

 
—

 
314

 
241

Equity collar contracts (8)(9)
 
—

 
108

 
—

 
108

 
—

Total
 
—

 
991

 
—

 
991

 
599

Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
Forward foreign exchange contracts(7)
 
—

 
28

 
—

 
28

 
33

Liabilities:
 
 
 
 
 
 
 
 
 
 
Forward foreign exchange contracts(8)
 
—

 
62

 
—

 
62

 
41

Available For Sale Other Investments:
 
 
 
 
 
 
 
 
 
 
Equity investments(5)
 
1,276

 
—

 
—

 
1,276

 
1,494

Debt securities(6)
 
$
—

 
12,046

 
—

 
12,046

 
8,316


(1)
2015 assets and liabilities are all classified as Level 2 with the exception of equity investments of $1,494 million, which are classified as Level 1.
(2)
Includes $41 million and $20 million of non-current other assets for July 3, 2016 and January 3, 2016, respectively.
(3)
Includes $314 million and $239 million of non-current other liabilities for July 3, 2016 and January 3, 2016, respectively.
(4)
Includes cross currency interest rate swaps and interest rate swaps.
(5)
Classified as non-current other assets with the exception of $272 million of current other assets for July 3, 2016. The carrying amount of the equity investments were $530 million and $528 million as of July 3, 2016 and January 3, 2016, respectively. The unrealized gains were $767 million and $979 million as of July 3, 2016 and January 3, 2016, respectively. The unrealized losses were $21 million and $13 million as of July 3, 2016 and January 3, 2016, respectively.
(6)
Classified as current marketable securities.
(7)
Classified as other current assets.
(8)
Classified as accounts payable.
(9)
Includes $41 million of non-current other liabilities for July 3, 2016.

Marketable Securities
The Company's cash, cash equivalents and current marketable securities as of July 3, 2016 comprised:
 
July 3, 2016
(Dollars in Millions)
Carrying Amount
 
Unrecognized Gain
 
Unrecognized Loss
 
Estimated Fair Value
 
Cash & Cash Equivalents
 
Current Marketable Securities
Cash
$
1,619

 
—

 
—

 
1,619

 
1,619

 
 
U.S. Gov't Securities(1)
6,548

 
1

 
—

 
6,549

 
900

 
5,648

Other Sovereign Securities(1)
2,494

 
—

 
—

 
2,494

 
1,359

 
1,135

U.S. Reverse repurchase agreements(1)
11,288

 
—

 
—

 
11,288

 
9,587

 
1,701

Other Reverse repurchase agreements(1)
1,600

 
—

 
—

 
1,600

 
1,600

 
 
Corporate debt securities(1)
4,598

 
1

 
—

 
4,599

 
1,456

 
3,142

Money market funds
882

 
—

 
—

 
882

 
882

 
 
Time deposits(1)
1,237

 
—

 
—

 
1,237

 
1,237

 
 
     Subtotal
30,266

 
2

 
—

 
30,268

 
18,640

 
11,626

 
 
 
Unrealized Gain
 
Unrealized Loss
 
 
 
 
 
 
Gov't securities
10,036

 
176

 
—

 
10,212

 
—

 
10,212

Corporate debt securities
1,818

 
17

 
(1
)
 
1,834

 
—

 
1,834

Equity investments
37

 
246

 
(11
)
 
272

 
—

 
272

     Subtotal Available for Sale(2)
$
11,891

 
439

 
(12
)
 
12,318

 
—

 
12,318

Total cash, cash equivalents and current marketable securities


 


 


 


 
18,640

 
23,944


(1) Held to maturity investments are reported at amortized cost and gains or losses are reported in earnings.
(2) Available for sale securities are reported at fair value with unrealized gains and losses reported net of taxes in other comprehensive income.
Financial assets and liabilities not measured at fair value

Financial Instruments not measured at Fair Value:
The following financial liabilities are held at carrying amount on the consolidated balance sheet as of July 3, 2016:
(Dollars in Millions)
 
Carrying Amount
 
Estimated Fair Value
 
 
 
 
 
Financial Liabilities
 
 
 
 
 
 
 
 
 
Current Debt
 
$
1,708

 
1,708

 
 
 
 
 
Non-Current Debt
 
 
 
 
5.55% Debentures due 2017
 
999

 
1,053

1.125% Notes due 2017
 
703

 
709

5.15% Debentures due 2018
 
899

 
975

1.65% Notes due 2018
 
609

 
620

4.75% Notes due 2019 (1B Euro 1.1098)
 
1,105

 
1,286

1.875% Notes due 2019
 
514

 
528

0.89% Notes due 2019
 
299

 
300

1.125% Notes due 2019
 
698

 
704

3% Zero Coupon Convertible Subordinated Debentures due in 2020
 
110

 
183

2.95% Debentures due 2020
 
545

 
585

3.55% Notes due 2021
 
447

 
492

2.45% Notes due 2021
 
348

 
371

1.65% Notes due 2021
 
997

 
1,015

0.250% Notes due 2022 (1B Euro 1.1098)
 
1,105

 
1,123

6.73% Debentures due 2023
 
249

 
335

3.375% Notes due 2023
 
808

 
905

2.05% Notes due 2023
 
497

 
510

0.650% Notes due 2024 (750MM Euro 1.1098)
 
827

 
848

5.50% Notes due 2024 (500 MM GBP 1.3418)
 
664

 
879

2.45% Notes due 2026
 
1,989

 
2,063

1.150% Notes due 2028 (750MM Euro 1.1098)
 
823

 
857

6.95% Notes due 2029
 
296

 
444

4.95% Debentures due 2033
 
497

 
643

4.375% Notes due 2033
 
857

 
1,039

1.650% Notes due 2035 (1.5B Euro 1.1098)
 
1,645

 
1,811

3.55% Notes due 2036
 
986

 
1,096

5.95% Notes due 2037
 
990

 
1,472

5.85% Debentures due 2038
 
695

 
1,031

4.50% Debentures due 2040
 
537

 
680

4.85% Notes due 2041
 
296

 
387

4.50% Notes due 2043
 
495

 
617

3.70% Notes due 2046
 
1,970

 
2,251

Other
 
36

 
36

Total Non-Current Debt
 
$
24,535

 
27,848