Fair Value Measurements (Tables)

12 Months Ended

Jan. 02, 2022

The following table is a summary of the activity related to derivatives and hedges for the fiscal years ended January 2, 2022 and January 3, 2021, net of tax:



	January 2, 2022						January 3, 2021
(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	$	—	—	—	(109)	—	—	—	—	—	—
Derivatives designated as hedging instruments	—		—	—	109	—	—	—	—	—	—

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	$	—	—	—	174	—	—	—	—	153	—
Amount of gain or (loss) recognized in AOCI	—		—	—	174	—	—	—	—	153	—

Gain (Loss) on cash flow hedging relationship:
Forward foreign exchange contracts:
Amount of gain or (loss) reclassified from AOCI into income	17		119	30	—	47	12	(329)	(137)	—	(16)



Amount of gain or (loss) recognized in AOCI	(94)		(557)	123	—	146	44	298	(91)	—	(52)

Cross currency interest rate swaps contracts:
Amount of gain or (loss) reclassified from AOCI into income	—		—	—	402	—	—	—	—	370	—

Amount of gain or (loss) recognized in AOCI	$	—	—	—	9	—	—	—	—	748	—

As of January 2, 2022 and January 3, 2021, 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)	January 2, 2022		January 3, 2021		January 2, 2022		January 3, 2021

Long-term Debt	$	9,793	$	—	$	(142)	$	—

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 years ended January 2, 2022 and January 3, 2021:

(Dollars in Millions)

Location of Gain /(Loss) Recognized in Income on Derivative

Gain/(Loss)
Recognized In
Income on Derivative

Derivatives Not Designated as Hedging Instruments

January 2, 2022

January 3, 2021

Foreign Exchange Contracts

Other (income) expense

(70)

Schedule of Effect of Net Investment Hedges

The following table is the effect of net investment hedges for the fiscal years ended January 2, 2022 and January 3, 2021:


	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)	January 2, 2022		January 3, 2021		January 2, 2022	January 3, 2021
Debt	$	387	(473)	Interest (income) expense	—	—
Cross Currency interest rate swaps	$	548	65	Interest (income) expense	—	—

Summary of Activity Related to Equity Investments

The following table is a summary of the activity related to equity investments for the fiscal years ended January 2, 2022 and January 3, 2021:


	January 3, 2021				January 2, 2022
(Dollars in Millions)	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	$	1,481	198	205	1,884	1,884

Equity Investments without readily determinable value	$	738	394	(632)	500	500


	December 29, 2019				January 3, 2021
(Dollars in Millions)	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	$	1,148	527	(194)	1,481	1,481

Equity Investments without readily determinable value	$	712	(55)	81	738	738

(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 the fiscal year ended January 2, 2022 and January 3, 2021 were as follows:


	2021					2020
(Dollars in Millions)	Level 1		Level 2	Level 3	Total	Total (1)
Derivatives designated as hedging instruments:
Assets:
Forward foreign exchange contracts	$	—	540	—	540	849
Interest rate contracts (2)	—		796	—	796	240

Total	$	—	1,336	—	1,336	1,089
Liabilities:
Forward foreign exchange contracts	—		881	—	881	702
Interest rate contracts (2)	—		979	—	979	1,569


Total	$	—	1,860	—	1,860	2,271
Derivatives not designated as hedging instruments:
Assets:
Forward foreign exchange contracts	$	—	24	—	24	49
Liabilities:
Forward foreign exchange contracts	—		28	—	28	38
Available For Sale Other Investments:
Equity investments(3)	1,884		—	—	1,884	1,481
Debt securities(4)	—		19,727	—	19,727	14,042
Other Liabilities
Contingent Consideration(5)	$			533	533	633


Gross to Net Derivative Reconciliation	2021		2020
(Dollars in Millions)
Total Gross Assets	$	1,360	1,138
Credit Support Agreement (CSA)	(1,285)		(1,107)
Total Net Asset	75		31

Total Gross Liabilities	1,888		2,309
Credit Support Agreement (CSA)	(1,855)		(2,172)
Total Net Liabilities	$	33	137

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


	2021		2020	2019
(Dollars in Millions)
Beginning Balance	$	633	1,715	397
Changes in estimated fair value (6)	(52)		(1,089)	151
Additions	—		106	1,246
Payments	(48)		(99)	(79)
Ending Balance	$	533	633	1,715

(1)2020 assets and liabilities are all classified as Level 2 with the exception of equity investments of $1,481 million, which are classified as Level 1 and contingent consideration of $633 million, classified as Level 3.

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

(3)Classified as non-current other assets.

(4)Classified as cash equivalents and current marketable securities.

(5)Includes $520 million, $594 million and $1,631 million, classified as non-current other liabilities as of January 2, 2022, January 3, 2021 and December 29, 2019, respectively. Includes $13 million, $39 million and $84 million classified as current liabilities as of January 2, 2022, January 3, 2021 and December 29, 2019, respectively.

(6)Ongoing fair value adjustment amounts are recorded primarily in Research and Development expense. The Company recorded a contingent consideration reversal of $1,148 million in 2020 related to the timing of certain developmental milestones associated with the Auris Health acquisition. The reversal of the contingent consideration was recorded in Other income and expense.