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Fair Value Measurements (Tables)
 9 Months Ended
Sep. 29, 2019
Fair Value Disclosures [Abstract]  
Summary of Derivative Activity

 
September 29, 2019
September 30, 2018
(Dollars in Millions)
Sales
Cost of Products Sold
R&D Expense
Interest (Income) Expense
Other (Income) Expense
Sales
Cost of Products Sold
R&D Expense
Interest (Income) Expense
Other (Income) Expense
The effects of fair value, net investment and cash flow hedging:
 
 
 
 
 
 
 
 
 
 
Gain (Loss) on fair value hedging relationship:
 
 
 
 
 
 
 
 
 
 
Interest rate swaps contracts:
 
 
 
 
 
 
 
 
 
 
    Hedged items
$
—

—

—

(3
)
—

—

—

—

(7
)
—

    Derivatives designated as hedging instruments
—

—

—

3

—

—

—

—

7

—

 
 
 
 
 
 
 
 
 
 
 
Gain (Loss) on net investment hedging relationship:
 
 
 
 
 
 
 
 
 
 
Cross currency interest rate swaps contracts:
 
 
 
 
 
 
 
 
 
 
   Amount of gain or (loss) recognized in income on derivative amount excluded from effectiveness testing
—

—

—

39

—

—

—

—

25

—

   Amount of gain or (loss) recognized in AOCI
—

—

—

39

—

—

—

—

25

—

 
 
 
 
 
 
 
 
 
 
 
Gain (Loss) on cash flow hedging relationship:
 
 
 
 
 
 
 
 
 
 
Forward foreign exchange contracts:
 
 
 
 
 
 
 
 
 
 
   Amount of gain or (loss) reclassified from AOCI into income
(8
)
(77
)
1,911

—

1

4

97

10

—

(3
)
 
 
 
 
 
 
 
 
 
 
 
   Amount of gain or (loss) recognized in AOCI
(23
)
(197
)
1,939

—

5

15

192

(4
)
—

(1
)
 
 
 
 
 
 
 
 
 
 
 
Cross currency interest rate swaps contracts:
 
 
 
 
 
 
 
 
 
 
   Amount of gain or (loss) reclassified from AOCI into income
—

—

—

89

—

—


—

34

—

   Amount of gain or (loss) recognized in AOCI
$
—

—

—

159

—

—

—

—

35

—

 
 
 
 
 
 
 
 
 
 
 


The following table is a summary of the activity related to derivatives and hedges for the fiscal nine months ended in 2019 and 2018:
 
September 29, 2019
September 30, 2018
(Dollars in Millions)
Sales
Cost of Products Sold
R&D Expense
Interest (Income) Expense
Other (Income) Expense
Sales
Cost of Products Sold
R&D Expense
Interest (Income) Expense
Other (Income) Expense
The effects of fair value, net investment and cash flow hedging:
 
 
 
 
 
 
 
 
 
 
Gain (Loss) on fair value hedging relationship:
 
 
 
 
 
 
 
 
 
 
Interest rate swaps contracts:
 
 
 
 
 
 
 
 
 
 
 Hedged items
$
—

—

—

(2
)
—

—

—

—

3

—

 Derivatives designated as hedging instruments
—

—

—

2

—

—

—

—

(3
)
—

 
 
 
 
 
 
 
 
 
 
 
Gain (Loss) on net investment hedging relationship:
 
 
 
 
 
 
 
 
 
 
Cross currency interest rate swaps contracts:
 
 
 
 
 
 
 
 
 
 
   Amount of gain or (loss) recognized in income on derivative amount excluded from effectiveness testing
—

—

—

117

—

—

—

—

27

—

   Amount of gain or (loss) recognized in AOCI
—

—

—

117

—

—

—

—

27

—

 
 
 
 
 
 
 
 
 
 
 
Gain (Loss) on cash flow hedging relationship:
 
 
 
 
 
 
 
 
 
 
Forward foreign exchange contracts:
 
 
 
 
 
 
 
 
 
 
   Amount of gain or (loss) reclassified from AOCI into income
(43
)
(213
)
1,808

—

9

50

175

(242
)
—

(24
)
 
 
 
 
 
 
 
 
 
 
 
   Amount of gain or (loss) recognized in AOCI
(29
)
(543
)
1,847

—

15

(3
)
138

(220
)
—

(16
)
 
 
 
 
 
 
 
 
 
 
 
Cross currency interest rate swaps contracts:
 
 
 
 
 
 
 
 
 
 
   Amount of gain or (loss) reclassified from AOCI into income
—

—

—

207

—

—

—

—

106

—

   Amount of gain or (loss) recognized in AOCI
$
—

—

—

299

—

—

—

—

111

—

 
 
 
 
 
 
 
 
 
 
 








 
 
Gain/(Loss)
Recognized In
Accumulated
OCI
 
Location of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income Into Income
 
Gain/(Loss) Reclassified From
Accumulated OCI
Into Income
(Dollars in Millions)
 
September 29, 2019
 
September 30, 2018
 
 
 
September 29, 2019
 
September 30, 2018
Debt
 
$
162

 
(50
)
 
Other (income) expense
 
—

 
—

Cross Currency interest rate swaps
 
$
152

 
(75
)
 
Other (income) expense


 
—

 
—

 
 
 
 
 
 
 
 
 
 
 


The following table is the effect of net investment hedges for the fiscal nine months ended in 2019 and 2018:
 
 
Gain/(Loss)
Recognized In
Accumulated OCI
 
Location of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income Into Income
 
Gain/(Loss) Reclassified From
Accumulated OCI
Into Income
(Dollars in Millions)
 
September 29, 2019
 
September 30, 2018
 
 
 
September 29, 2019
 
September 30, 2018
Debt
 
$
176

 
106

 
Other (income) expense

 
—

 
—

Cross Currency interest rate swaps
 
$
465

 
(37
)
 
Other (income) expense
 
—

 
—
Schedule of Derivatives Recorded in Consolidated Balance Sheet
As of September 29, 2019, and December 30, 2018, the following amounts were recorded on the Consolidated Balance Sheet related to cumulative basis adjustment for fair value hedges:
Line item in the Consolidated Balance Sheet in which the hedged item is included
 
Carrying Amount of the Hedged Liability

 
Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Liability
(Dollars in Millions)
 
September 29, 2019
 
December 30, 2018
 
September 29, 2019
 
December 30, 2018
Current Portion of Long-term Debt
 
$
502

 
494

 
(2
)
 
5

Long-term Debt
 
—

 
—

 
—

 
—
Schedule of Effect of Derivatives not Designated as Hedging Instruments
The following table is the effect of derivatives not designated as hedging instrument for the fiscal third quarter and fiscal nine months ended in 2019 and 2018:
 
 
 
 
Gain/(Loss)
Recognized In
Income on Derivative
Gain/(Loss)
Recognized In
Income on Derivative
(Dollars in Millions)
 
Location of Gain /(Loss) Recognized in Income on Derivative
 
Fiscal Third Quarter Ended
Fiscal Nine Months Ended
Derivatives Not Designated as Hedging Instruments
 
 
 
September 29, 2019
 
September 30, 2018
September 29, 2019
 
September 30, 2018
Foreign Exchange Contracts
 
Other (income) expense
 
$
(13
)
 
49

(101
)
 
(23
)
Summary of Activity Related to Equity Investments
The following table is a summary of the activity related to equity investments:
(Dollars in Millions)
 
December 30, 2018
 
 
 
 
 
September 29, 2019
 
 
 
 
Carrying Value
 
Changes in Fair Value Reflected in Net Income (1)
 
Sales/ Purchases/Other (2)
 
Carrying Value
 
Non Current Other Assets
Equity Investments with readily determinable value
 
$
511

 
201

 
151

 
863

 
863

 
 
 
 
 
 
 
 
 
 
 
Equity Investments without readily determinable value
 
$
681

 
(28
)
 
46

 
699

 
699


(1) Recorded in Other Income/Expense
(2) Other includes impact of currency
Financial Assets and Liabilities at Fair Value
The Company’s significant financial assets and liabilities measured at fair value as of September 29, 2019 and December 30, 2018 were as follows:
 
 
September 29, 2019
 
 
 
December 30, 2018
(Dollars in Millions)
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Total(1)
Derivatives designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
Forward foreign exchange contracts
 
$
—

 
498

 
—

 
498

 
501

Interest rate contracts (2)(4)
 
—

 
681

 
—

 
681

 
161

Total
 
—

 
1,179

 
—

 
1,179

 
662

Liabilities:
 
 
 
 
 
 
 
 
 
 
Forward foreign exchange contracts
 
—

 
635

 
—

 
635

 
548

Interest rate contracts (3)(4)
 
—

 
410

 
—

 
410

 
292

Total
 
—

 
1,045

 
—

 
1,045

 
840

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

 
32

 
—

 
32

 
32

Liabilities:
 
 
 
 
 
 
 
 
 
 
Forward foreign exchange contracts
 
—

 
38

 
—

 
38

 
32

Other Investments:
 
 
 
 
 
 
 
 
 
 
Equity investments (5)
 
863

 
—

 
—

 
863

 
511

Debt securities(6)
 
$
—

 
4,327

 
—

 
4,327

 
9,734

Other Liabilities
 
 
 
 
 
 
 
 
 
 
Contingent consideration (7)
 
 
 
 
 
1,596

 
1,596

 
335



Gross to Net Derivative Reconciliation
 
September 29, 2019
 
December 30, 2018
(Dollars in Millions)
 
 
 
 
Total Gross Assets
 
$
1,211

 
694

Credit Support Agreement (CSA)
 
(1,013
)
 
(423
)
Total Net Asset
 
198

 
271

 
 
 
 
 
Total Gross Liabilities
 
1,083

 
872

Credit Support Agreement (CSA)
 
(945
)
 
(605
)
Total Net Liabilities
 
$
138

 
267

 
 
 
 
 


Summarized information about changes in liabilities for contingent consideration is as follows:

 
 
Nine months ended
 
 
September 29, 2019

 
September 30, 2018

(Dollars in Millions)
 
 
 
 
Beginning Balance
 
$
335

 
$
600

Changes in estimated fair value
 
129

 
(162
)
Additions
 
1,132

 
125

Payments
 
—

 
(160
)
Ending Balance
 
$
1,596

 
$
403




(1) 
December 30, 2018 assets and liabilities are all classified as Level 2 with the exception of equity investments of $511 million, which are classified as Level 1 and $335 million, classified as Level 3.
(2) 
Includes $1 million and $6 million of non-current other assets as of September 29, 2019 and December 30, 2018, respectively.
(3) 
Includes $3 million of non-current other liabilities as of December 30, 2018.
(4) 
Includes cross currency interest rate swaps and interest rate swaps.
(5) 
Classified as non-current other assets. The carrying amount of the equity investments were $863 million and $511 million as of September 29, 2019 and December 30, 2018, respectively.
(6) 
Classified within cash equivalents and current marketable securities.
(7) 
Includes $1,453 million (primarily related to Auris Health) and $335 million, classified as non-current other liabilities as of September 29, 2019 and December 30, 2018, respectively. Includes $143 million classified as current liabilities as of
Marketable Securities

The Company's cash, cash equivalents and current marketable securities as of September 29, 2019 comprised:
(Dollars in Millions)
Carrying Amount
 
Unrecognized Gain
 
Estimated Fair Value
 
Cash & Cash Equivalents
 
Current Marketable Securities
Cash
$
2,667

 
—

 
2,667

 
2,667

 
 
Other sovereign securities(1)
709

 
—

 
709

 
619

 
90

U.S. reverse repurchase agreements
6,182

 
—

 
6,182

 
6,182

 

Other reverse repurchase agreements
241

 
—

 
241

 
241

 
 
Corporate debt securities(1)
1,647

 
—

 
1,647

 
1,159

 
488

Money market funds
1,481

 
—

 
1,481

 
1,481

 
 
Time deposits(1)
691

 
—

 
691

 
691

 
 
   Subtotal
13,618

 
—

 
13,618

 
13,040

 
578

 
 
 
 
 
 
 
 
 
 
 
 
 
Unrealized Gain
 
 
 
 
 
 
Government securities
4,050

 
1

 
4,051

 
3,195

 
856

Other sovereign securities
4

 
—

 
4

 
—

 
4

Corporate debt securities
272

 
—

 
272

 
14

 
258

   Subtotal available for sale debt(2)
$
4,326

 
1

 
4,327

 
3,209

 
1,118

Total cash, cash equivalents and current marketable securities
$
17,944

 
1

 
17,945

 
16,249

 
1,696

(1) Held to maturity investments are reported at amortized cost and gains or losses are reported in earnings.
(2) Available for sale debt securities are reported at fair value with unrealized gains and losses reported net of taxes in other comprehensive income.
Schedule of Available for Sale Securities Maturities
The contractual maturities of the available for sale securities as of September 29, 2019 are as follows:
(Dollars in Millions)
 
Cost Basis
 
Fair Value
Due within one year
 
$
4,267

 
4,268

Due after one year through five years
 
59

 
59

Due after five years through ten years
 
—

 
—

Total debt securities
 
$
4,326

 
4,327
Financial 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 September 29, 2019:
(Dollars in Millions)
 
Carrying Amount
 
Estimated Fair Value
 
 
 
 
 
Financial Liabilities
 
 
 
 
 
 
 
 
 
Current Debt
 
$
2,299

 
2,349

 
 
 
 
 
Non-Current Debt
 
 
 
 
1.950% Notes due 2020
 
500

 
501

3.55% Notes due 2021
 
449

 
461

2.45% Notes due 2021
 
349

 
354

1.65% Notes due 2021
 
999

 
997

0.250% Notes due 2022 (1B Euro 1.0958)
 
1,094

 
1,108

2.25% Notes due 2022
 
997

 
1,011

6.73% Debentures due 2023
 
250

 
298

3.375% Notes due 2023
 
804

 
854

2.05% Notes due 2023
 
498

 
502

0.650% Notes due 2024 (750MM Euro 1.0958)
 
819

 
850

5.50% Notes due 2024 (500 MM GBP 1.2353)
 
613

 
752

2.625% Notes due 2025
 
748

 
771

2.45% Notes due 2026
 
1,992

 
2,028

2.95% Notes due 2027
 
996

 
1,052

2.90% Notes due 2028
 
1,494

 
1,573

1.150% Notes due 2028 (750MM Euro 1.0958)
 
815

 
887

6.95% Notes due 2029
 
297

 
416

4.95% Debentures due 2033
 
498

 
627

4.375% Notes due 2033
 
855

 
1,021

1.650% Notes due 2035 (1.5B Euro 1.0958)
 
1,628

 
1,916

3.55% Notes due 2036
 
989

 
1,082

5.95% Notes due 2037
 
992

 
1,394

3.625% Notes due 2037
 
1,487

 
1,656

3.40% Notes due 2038
 
991

 
1,073

5.85% Debentures due 2038
 
696

 
983

4.50% Debentures due 2040
 
539

 
668

4.85% Notes due 2041
 
297

 
387

4.50% Notes due 2043
 
495

 
629

3.70% Notes due 2046
 
1,973

 
2,232

3.75% Notes due 2047
 
991

 
1,124

3.50% Notes due 2048
 
742

 
817

Other
 
32

 
33

Total Non-Current Debt
 
$
26,919

 
30,057