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Derivative instruments (Tables)

6 Months Ended

Jun. 30, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of notional amounts and interest rates for cross-currency swaps

The notional amounts and interest rates of our cross-currency swaps as of June 30, 2020, were as follows (notional amounts in millions):


	Foreign currency						U.S. dollars
Hedged notes	Notional amounts		Interest rates		Notional amounts		Interest rates

1.25% 2022 euro Notes	€	1,250	1.3	%	$	1,388	3.2	%
0.41% 2023 Swiss franc Bonds	CHF	700	0.4	%	$	704	3.4	%
2.00% 2026 euro Notes	€	750	2.0	%	$	833	3.9	%
5.50% 2026 pound sterling Notes	£	475	5.5	%	$	747	6.0	%
4.00% 2029 pound sterling Notes	£	700	4.0	%	$	1,111	4.5	%

Unrealized gain (loss) recognized in Other Comprehensive Income for our derivative instruments designated as cash flow hedges

The unrealized gains and losses recognized in AOCI for our derivative instruments designated as cash flow hedges were as follows (in millions):


	Three months ended June 30,						Six months ended June 30,
Derivatives in cash flow hedging relationships	2020		2019		2020		2019
Foreign currency contracts	$	(101)	$	(16)	$	138	$	69
Cross-currency swap contracts	71		(80)		(330)		(135)

Total unrealized losses	$	(30)	$	(96)	$	(192)	$	(66)

Derivatives in fair value hedging relationships

The hedged liabilities and related cumulative-basis adjustments for fair value hedges of those liabilities were recorded in the Condensed Consolidated Balance Sheets as follows (in millions):


	Carrying amounts of hedged liabilities⁽¹⁾						Cumulative amounts of fair value hedging adjustments related to the carrying amounts of the hedged liabilities⁽²⁾
Condensed Consolidated Balance Sheets locations	June 30, 2020		December 31, 2019		June 30, 2020		December 31, 2019
Current portion of long-term debt	$	89	$	903	$	89	$	4
Long-term debt	$	7,816	$	8,814	$	589	$	292

^____________

⁽¹⁾ Current portion of long-term debt includes $89 million of carrying value with discontinued hedging relationships as of June 30, 2020. Long-term debt includes $569 million and $136 million of carrying value with discontinued hedging relationships as of June 30, 2020 and December 31, 2019, respectively.

⁽²⁾ Current portion of long-term debt includes $89 million of hedging adjustments on discontinued hedging relationships as of June 30, 2020. Long-term debt includes $469 million and $36 million of hedging adjustments on discontinued hedging relationships as of June 30, 2020 and December 31, 2019, respectively.

Summary of amounts of income and expense line items

The following tables summarize the amounts recorded in income and expense line items and the effects thereon from fair value and cash flow hedging, including discontinued hedging relationships (in millions):



	Three months ended June 30, 2020										Six months ended June 30, 2020
	Product sales		Interest and other income, net		Interest (expense), net		Product sales		Interest and other income, net		Interest (expense), net
Total amounts recorded in income and (expense) line items presented in the Condensed Consolidated Statements of Income	$	5,908	$	3	$	(296)	$	11,802	$	14	$	(642)
The effects of cash flow and fair value hedging:
Gains (losses) on cash flow hedging relationships reclassified out of AOCI:
Foreign currency contracts	$	68	$	—	$	—	$	117	$	—	$	—
Cross-currency swap contracts	$	—	$	51	$	—	$	—	$	(82)	$	—

(Losses) gains on fair value hedging relationships—interest rate swap agreements:
Hedged items⁽¹⁾	$	—	$	—	$	(30)	$	—	$	—	$	180
Derivatives designated as hedging instruments	$	—	$	—	$	53	$	—	$	—	$	(137)



	Three months ended June 30, 2019										Six months ended June 30, 2019
	Product sales		Interest and other income, net		Interest (expense), net		Product sales		Interest and other income, net		Interest (expense), net
Total amounts recorded in income and (expense) line items presented in the Condensed Consolidated Statements of Income	$	5,574	$	218	$	(332)	$	10,860	$	403	$	(675)
The effects of cash flow and fair value hedging:
Gains (losses) on cash flow hedging relationships reclassified out of AOCI:
Foreign currency contracts	$	22	$	—	$	—	$	36	$	—	$	—
Cross-currency swap contracts	$	—	$	14	$	—	$	—	$	(28)	$	—

(Losses) gains on fair value hedging relationships—interest rate swap agreements:
Hedged items⁽¹⁾	$	—	$	—	$	(218)	$	—	$	—	$	(348)
Derivatives designated as hedging instruments	$	—	$	—	$	218	$	—	$	—	$	351

^__________

⁽¹⁾ (Losses) gains on hedged items do not completely offset gains (losses) on the related designated hedging instruments due to amortization of the cumulative amounts of fair value hedging adjustments included in the carrying amount of the hedged debt for discontinued hedging relationships and the recognition of gains on terminated hedges where the corresponding hedged item was paid down in the period.

Fair values of derivatives included in the Condensed Consolidated Balance Sheets

The fair values of derivatives included in the Condensed Consolidated Balance Sheets were as follows (in millions):


	Derivative assets				Derivative liabilities
June 30, 2020	Condensed Consolidated Balance Sheets locations	Fair values		Condensed Consolidated Balance Sheets locations	Fair values
Derivatives designated as hedging instruments:
Foreign currency contracts	Other current assets/ Other assets	$	236	Accrued liabilities/ Other noncurrent liabilities	$	26
Cross-currency swap contracts	Other current assets/ Other assets	27		Accrued liabilities/ Other noncurrent liabilities	604
Interest rate swap contracts	Other current assets/ Other assets	121		Accrued liabilities/ Other noncurrent liabilities	2

Total derivatives designated as hedging instruments		384			632
Derivatives not designated as hedging instruments:
Foreign currency contracts	Other current assets	—		Accrued liabilities	—
Total derivatives not designated as hedging instruments		—			—
Total derivatives		$	384		$	632


	Derivative assets				Derivative liabilities
December 31, 2019	Condensed Consolidated Balance Sheets locations	Fair values		Condensed Consolidated Balance Sheets locations	Fair values
Derivatives designated as hedging instruments:
Foreign currency contracts	Other current assets/ Other assets	$	223	Accrued liabilities/ Other noncurrent liabilities	$	31
Cross-currency swap contracts	Other current assets/ Other assets	66		Accrued liabilities/ Other noncurrent liabilities	315

Interest rate swap contracts	Other current assets/ Other assets	259		Accrued liabilities/ Other noncurrent liabilities	—
Total derivatives designated as hedging instruments		548			346
Derivatives not designated as hedging instruments:
Foreign currency contracts	Other current assets	1		Accrued liabilities	—
Total derivatives not designated as hedging instruments		1			—
Total derivatives		$	549		$	346