Fair value measurements (Tables)

12 Months Ended

Dec. 31, 2023

The following table is a summary of the activity related to derivatives and hedges for the fiscal years ended December 31, 2023 and January 1, 2023, net of tax:



	December 31, 2023					January 1, 2023
(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	$—	—	—	(930)	—	—	—	—	(1,098)	—
Derivatives designated as hedging instruments	—	—	—	930	—	—	—	—	1,098	—

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	$—	—	—	130	—	—	—	—	140	—
Amount of gain or (loss) recognized in AOCI	—	—	—	130	—	—	—	—	140	—

Gain (Loss) on cash flow hedging relationship:
Forward foreign exchange contracts:
Amount of gain or (loss) reclassified from AOCI into income	7	186	(37)	—	8	(72)	(271)	149	—	(23)



Amount of gain or (loss) recognized in AOCI	10	447	(18)	—	9	5	319	61	—	(113)

Cross currency interest rate swaps contracts:
Amount of gain or (loss) reclassified from AOCI into income	—	—	—	275	—	—	—	—	425	—

Amount of gain or (loss) recognized in AOCI	$—	—	—	(156)	—	—	—	—	42	—

As of December 31, 2023 and January 1, 2023, 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)

December 31, 2023

January 1, 2023

December 31, 2023

January 1, 2023

Long-term Debt

$8,862

$8,665

$(1,216)

$(1,435)

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 December 31, 2023 and January 1, 2023:

(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

December 31, 2023

January 1, 2023

Foreign Exchange Contracts

Other (income) expense

$(60)

Schedule of Effect of Net Investment Hedges

The following table is the effect of net investment hedges for the fiscal years ended December 31, 2023 and January 1, 2023:


	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)	December 31, 2023	January 1, 2023		December 31, 2023	January 1, 2023
Debt	$(131)	197	Interest (income) expense	—	—
Cross Currency interest rate swaps	$642	766	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 December 31, 2023 and January 1, 2023:


	January 1, 2023			December 31, 2023
(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 *	$576	(368)	4,265	4,473	4,473

Equity Investments without readily determinable value	$613	1	82	696	696


	January 2, 2022			January 1, 2023
(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	$1,884	(538)	(770)	576	576

Equity Investments without readily determinable value	$413	93	107	613	613

(1)Recorded in Other Income/Expense

(2)Other includes impact of currency

* Includes the 9.5% remaining stake in Kenvue and the $0.4 billion unfavorable change in fair value of the investment between separation date and the end of the fiscal year.

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 December 31, 2023 and January 1, 2023 were as follows:


	2023				2022
(Dollars in Millions)	Level 1	Level 2	Level 3	Total	Total(1)
Derivatives designated as hedging instruments:
Assets:
Forward foreign exchange contracts	$—	539	—	539	629
Interest rate contracts (2)	—	988	—	988	1,534

Total	$—	1,527	—	1,527	2,163
Liabilities:
Forward foreign exchange contracts	—	624	—	624	511
Interest rate contracts (2)	—	5,338	—	5,338	2,778


Total	$—	5,962	—	5,962	3,289
Derivatives not designated as hedging instruments:
Assets:
Forward foreign exchange contracts	$—	64	—	64	38
Liabilities:
Forward foreign exchange contracts	—	75	—	75	68
Available For Sale Other Investments:
Equity investments(3)	4,473	—	—	4,473	576
Debt securities(4)	—	8,874	—	8,874	10,487
Other Liabilities
Contingent Consideration(5)	$		1,092	1,092	1,120


Gross to Net Derivative Reconciliation	2023	2022
(Dollars in Millions)
Total Gross Assets	$1,591	2,201
Credit Support Agreements (CSA)	(1,575)	(2,176)
Total Net Asset	16	25

Total Gross Liabilities	6,037	3,357
Credit Support Agreements (CSA)	(5,604)	(3,023)
Total Net Liabilities	$433	334

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


	2023	2022	2021
(Dollars in Millions)
Beginning Balance	$1,120	533	633
Changes in estimated fair value	29	(194)	(52)
Additions (6)	—	792	—
Payments/Other	(57)	(11)	(48)
Ending Balance (5)	$1,092	1,120	533

(1)2022 assets and liabilities are all classified as Level 2 with the exception of equity investments of $576 million, which are classified as Level 1 and contingent consideration of $1,120 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 $1,092 million, $1,116 million and $520 million, classified as non-current other liabilities as of December 31, 2023, January 1, 2023 and January 2, 2022, respectively. Includes $4 million and $13 million classified as current liabilities as of January 1, 2023 and January 2, 2022, respectively.

(6)In fiscal year 2022, the Company recorded $704 million of contingent consideration related to Abiomed.