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Other Deductions - Net (Tables)
 3 Months Ended
Mar. 31, 2013
Other Income and Expenses [Abstract]  
Schedule of Other Deductions-Net
The following table provides components of Other deductions––net:
 
 
Three Months Ended
(MILLIONS OF DOLLARS)
 
March 31,
2013

 
April 1,
2012

Interest income(a)
 
$
(95
)
 
$
(81
)
Interest expense(a)
 
391

 
390

Net interest expense
 
296

 
309

Royalty-related income
 
(71
)
 
(97
)
Gain associated with the transfer of certain product rights to an equity-method investment(b)
 
(490
)
 
—

Net gain on asset disposals
 
(26
)
 
(7
)
Certain legal matters, net(c)
 
(83
)
 
814

Certain asset impairment charges(d)
 
399

 
432

Costs associated with the separation of Zoetis(e)
 
17

 
32

Other, net
 
128

 
175

Other deductions––net
 
$
170

 
$
1,658

(a) 
Interest income increased in the first quarter of 2013 due to higher cash equivalents and investment balances. Interest expense was virtually unchanged in the first quarter of 2013 compared to the first quarter of 2012 as the impact of the Zoetis debt issuance on January 28, 2013 was offset by otherwise lower debt balances.
(b) 
Represents the gain associated with the transfer of certain product rights to our equity-method investment in China. For additional information, see Note 2D. Acquisitions, Divestitures, Collaborative Arrangement and Equity-Method Investment: Equity-Method Investment.
(c) 
In the first quarter of 2013, primarily includes an $80 million insurance recovery related to a certain litigation matter. In the first quarter of 2012, primarily relates to a $450 million charge in connection with an agreement-in-principle to settle a lawsuit by Brigham Young University related to Celebrex (which was ultimately settled for that amount), and charges for hormone-replacement therapy litigation. For additional information, see Note 12. Commitments and Contingencies.
(d) 
In the first quarter of 2013, includes intangible asset impairment charges of $395 million, of which $394 million relates to developed technology, for use in the development of bone and cartilage, acquired in connection with our acquisition of Wyeth. The intangible asset impairment charges for 2013 reflect, among other things, updated commercial forecasts. The impairment charges for the first quarter of 2013 are associated with the following: Specialty Care ($394 million) and Animal Health (Zoetis) ($1 million).

In the first quarter of 2012, includes intangible asset impairment charges of approximately $395 million, reflecting (i) $297 million of in-process research and development (IPR&D) assets that targeted autoimmune and inflammatory diseases, (ii) $45 million related to our Consumer Healthcare indefinite-lived brand, Robitussin, and (ii) $53 million of developed technology rights comprising the impairment of two assets. Substantially all of these impairment charges relate to intangible assets that were acquired as part of our acquisition of Wyeth. The intangible asset impairment charges reflect, among other things, the impact of new scientific findings for IPR&D and an increased competitive environment for Robitussin. The impairment charges for the first quarter of 2012 are associated with the following: Specialty Care ($316 million); Consumer Healthcare ($45 million); and Primary Care ($34 million).
(e) 
Costs incurred in connection with the IPO of an approximate 19.8% ownership interest in Zoetis. Includes expenditures for banking, legal, accounting and similar services. For additional information, see Note 2B. Acquisitions, Divestitures, Collaborative Arrangement and Equity-Method Investment: Divestitures.
Schedule of Additional Information About Intangible Assets Impaired
The following table provides additional information about one of the intangible assets that was impaired during the first quarter of 2013 in Other deductions––net:
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31,
 
 
Fair Value(a)
 
2013
(MILLIONS OF DOLLARS)
 
Amount

 
Level 1
 
Level 2
 
Level 3
 
Impairment
Intangible asset––Developed Technology(b)
 
$
564

 
$
—

 
$
—

 
$
564

 
$
394

(a) 
The fair value amount is presented as of the date of impairment, as this asset is not measured at fair value on a recurring basis. See also Note 1C. Basis of Presentation and Significant Accounting Policies: Fair Value.
(b) 
Reflects an intangible asset written down to its fair value of $564 million in the first quarter of 2013. Fair value was determined using the income approach, specifically the multi-period excess earnings method, also known as the discounted cash flow method. We started with a forecast of all the expected net cash flows associated with the asset and then we applied an asset-specific discount rate to arrive at a net present value amount. Some of the more significant estimates and assumptions inherent in this approach include: the amount and timing of the projected net cash flows, which includes the expected impact of competitive, legal and/or regulatory forces on the product; the discount rate, which seeks to reflect the various risks inherent in the projected cash flows; and the tax rate, which seeks to incorporate the geographic diversity of the projected cash flows.