Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2024

Fair Value Disclosures [Abstract]

Summary of Derivative Activity

The following table is a summary of the activity related to derivatives and hedges for the fiscal first quarters ended March 31, 2024 and April 2, 2023, net of tax:

	March 31, 2024					April 2, 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	$—	—	—	8	—	—	—	—	169	—
Derivatives designated as hedging instruments	—	—	—	(8)	—	—	—	—	(169)	—
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	—	—	—	34	—	—	—	—	34	—
Amount of gain or (loss) recognized in AOCI	—	—	—	34	—	—	—	—	34	—
Gain (Loss) on cash flow hedging relationship:
Forward foreign exchange contracts:
Amount of gain or (loss) reclassified from AOCI into income	1	165	4	—	(2)	12	(146)	(13)	—	2
Amount of gain or (loss) recognized in AOCI	(3)	(19)	22	—	4	24	145	(36)	—	(14)
Cross currency interest rate swaps contracts:
Amount of gain or (loss) reclassified from AOCI into income	—	—	—	49	—	—	—	—	108	—
Amount of gain or (loss) recognized in AOCI	$—	—	—	(205)	—	—	—	—	417	—

The following table is the effect of net investment hedges for the fiscal first quarters ended in 2024 and 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)	March 31, 2024	April 2, 2023		March 31, 2024	April 2, 2023
Debt	$84	(77)	Interest (income) expense	—	—
Cross Currency interest rate swaps	$728	690	Interest (income) expense	—	—

Schedule of Derivative Financial Instruments and Classification on Consolidated Balance Sheet

As of March 31, 2024, and December 31, 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 Gain/ (Loss) Included in the Carrying Amount of the Hedged Liability
(Dollars in Millions)	March 31, 2024	December 31, 2023	March 31, 2024	December 31, 2023
Long-term Debt	$8,871	8,862	(1,205)	(1,216)

Schedule of Effect of Derivatives not Designated as Hedging Instruments

The following table is the effect of derivatives not designated as hedging instruments for the fiscal first quarters ended 2024 and 2023:

		Gain/(Loss) Recognized In Income on Derivative
(Dollars in Millions)	Location of Gain /(Loss) Recognized in Income on Derivative	Fiscal First Quarter Ended
Derivatives Not Designated as Hedging Instruments		March 31, 2024	April 2, 2023
Foreign Exchange Contracts	Other (income) expense	25	(31)

Summary of Activity Related to Equity Investments

The following table is a summary of the activity related to equity investments:

	December 31, 2023			March 31, 2024
(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*	$4,473	30	(17)	4,486	4,486
Equity Investments without readily determinable value	$696	23	(12)	707	707

(1)Recorded in Other (income)/expense, net

(2)Other includes impact of currency

* Includes the 9.5% remaining stake in Kenvue and the unfavorable change in the fair value of the investment.

Financial Assets and Liabilities at Fair Value

The Company’s significant financial assets and liabilities measured at fair value as of March 31, 2024 and December 31, 2023 were as follows:

	March 31, 2024				December 31, 2023
(Dollars in Millions)	Level 1	Level 2	Level 3	Total	Total(1)
Derivatives designated as hedging instruments:
Assets:
Forward foreign exchange contracts	$—	499	—	499	539
Interest rate contracts(2)	—	1,202	—	1,202	988
Total	—	1,701	—	1,701	1,527
Liabilities:
Forward foreign exchange contracts	—	401	—	401	624
Interest rate contracts(2)	—	3,543	—	3,543	5,338
Total	—	3,944	—	3,944	5,962
Derivatives not designated as hedging instruments:
Assets:
Forward foreign exchange contracts	—	21	—	21	64
Liabilities:
Forward foreign exchange contracts	—	36	—	36	75
Other Investments:
Equity investments(3)	4,486	—	—	4,486	4,473
Debt securities(4)	—	9,346	—	9,346	8,874
Other Liabilities
Contingent consideration(5)	$—	—	1,114	1,114	1,092

Gross to Net Derivative Reconciliation	March 31, 2024	December 31, 2023
(Dollars in Millions)
Total Gross Assets	$1,722	1,591
Credit Support Agreement (CSA)	(1,681)	(1,575)
Total Net Asset	41	16
Total Gross Liabilities	3,980	6,037
Credit Support Agreement (CSA)	(3,882)	(5,604)
Total Net Liabilities	$98	433

Summarized information about changes in liabilities for contingent consideration for the fiscal first quarters ended March 31, 2024 and April 2, 2023 is as follows:

	March 31, 2024	April 2, 2023
(Dollars in Millions)
Beginning Balance	$1,092	1,120
Changes in estimated fair value(6)	22	23
Additions	—	—
Payments	—	(1)
Ending Balance	$1,114	1,142

(1)2023 assets and liabilities are all classified as Level 2 with the exception of equity investments of $4,473 million, which are classified as Level 1 and contingent consideration of $1,092 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 within cash equivalents and current marketable securities.

(5)Classified as non-current other liabilities as of March 31, 2024 and December 31, 2023, respectively.

(6)Ongoing fair value adjustment amounts are primarily recorded in Research and Development expense.

Marketable Securities

The Company's cash, cash equivalents and current marketable securities as of March 31, 2024 comprised:

(Dollars in Millions)	Carrying Amount	Unrealized Gain	Estimated Fair Value	Cash & Cash Equivalents	Current Marketable Securities
Cash	$3,410	—	3,410	3,410	—
U.S. Gov't securities	96	—	96	96	—
Non-U.S. sovereign securities	324	—	324	324	—
U.S. reverse repurchase agreements	7,892	—	7,892	7,892	—
Corporate debt securities(1)	702	—	702	588	114
Money market funds	3,822	—	3,822	3,822	—
Time deposits(1)	626	—	626	626	—
Subtotal	16,872	—	16,872	16,758	114
U.S. Gov’t securities	9,064	—	9,064	8,665	399
U.S. Gov’t Agencies	41	2	43	—	43
Other sovereign securities	2	—	2	—	2
Corporate debt securities	237	—	237	50	187
Subtotal available for sale debt(2)	$9,344	2	9,346	8,715	631
Total cash, cash equivalents and current marketable securities	$26,216	2	26,218	25,473	745

(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 March 31, 2024 are as follows:

(Dollars in Millions)	Cost Basis	Fair Value
Due within one year	$9,331	9,333
Due after one year through five years	13	13
Due after five years through ten years	—	—
Total debt securities	$9,344	9,346

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 March 31, 2024:

(Dollars in Millions)	Carrying Amount	Estimated Fair Value
Financial Liabilities
Current Debt	$8,550	8,533
Non-Current Debt
0.55% Notes due 2025	974	940
2.46% Notes due 2026	1,998	1,917
2.95% Notes due 2027	907	958
0.95% Notes due 2027	1,434	1,337
2.90% Notes due 2028	1,497	1,422
1.150% Notes due 2028 (750MM Euro 1.0809)	807	751
6.95% Notes due 2029	298	339
1.30% Notes due 2030	1,633	1,466
4.95% Debentures due 2033	499	523
4.375% Notes due 2033	854	848
1.650% Notes due 2035 (1.5B Euro 1.0809)	1,610	1,430
3.587% Notes due 2036	862	893
5.95% Notes due 2037	994	1,110
3.625% Notes due 2037	1,354	1,333
3.40% Notes due 2038	993	858
5.85% Debentures due 2038	697	772
4.50% Debentures due 2040	541	530
2.10% Notes due 2040	844	688
4.85% Notes due 2041	297	301
4.50% Notes due 2043	496	481
3.73% Notes due 2046	1,978	1,675
3.75% Notes due 2047	825	829
3.50% Notes due 2048	743	598
2.25% Notes due 2050	816	629
2.45% Notes due 2060	1,064	743
Other	67	67
Total Non-Current Debt	$25,082	23,438