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Financial Instruments (Tables)
 6 Months Ended
Jun. 28, 2015
Financial Instruments [Abstract]  
Information about Certain Financial Assets and Liabilities
The following table provides additional information about certain of our financial assets and liabilities:
(MILLIONS OF DOLLARS)
 
June 28,
2015

 
December 31,
2014

Selected financial assets measured at fair value on a recurring basis(a)
 
 
 
 
Trading funds and securities(b)
 
$
297

 
$
105

Available-for-sale debt securities(c)
 
40,150

 
39,762

Available-for-sale money market funds
 
894

 
2,174

Available-for-sale equity securities, excluding money market funds(c)
 
344

 
397

Derivative financial instruments in a receivable position(d):
 
 

 
 

Interest rate swaps
 
668

 
801

Foreign currency swaps
 
611

 
593

Foreign currency forward-exchange contracts
 
317

 
547

 
 
43,282

 
44,379

Other selected financial assets
 
 

 
 

Held-to-maturity debt securities, carried at amortized cost(c), (e)
 
2,133

 
7,255

Private equity securities, carried at equity-method or at cost(e), (f)
 
1,829

 
1,993

 
 
3,962

 
9,248

Total selected financial assets
 
$
47,244

 
$
53,627

Selected financial liabilities measured at fair value on a recurring basis(a)
 
 

 
 

Derivative financial instruments in a liability position(g):
 
 

 
 

Interest rate swaps
 
$
380

 
$
17

Foreign currency swaps
 
1,327

 
594

Foreign currency forward-exchange contracts
 
266

 
78

 
 
1,973

 
689

Other selected financial liabilities(h)
 
 

 
 

Short-term borrowings, carried at historical proceeds, as adjusted(e)
 
8,394

 
5,141

Long-term debt, carried at historical proceeds, as adjusted(i), (j)
 
26,729

 
31,541

 
 
35,123

 
36,682

Total selected financial liabilities
 
$
37,095

 
$
37,371

(a) 
We use a market approach in valuing financial instruments on a recurring basis. For additional information, see Note 1C. All of our financial assets and liabilities measured at fair value on a recurring basis use Level 2 inputs in the calculation of fair value, except less than 1% that use Level 1 inputs.
(b) 
As of June 28, 2015, trading funds and securities are composed of $90 million of trading equity funds, $120 million of trading debt funds, and $86 million of trading equity securities. As of December 31, 2014, trading securities of $105 million is composed of debt and equity securities. The trading equity securities as of June 28, 2015 and the trading debt and equity securities as of December 31, 2014 are held in trust for benefits attributable to the former Pharmacia Savings Plus Plan.
(c) 
Gross unrealized gains and losses are not significant.
(d) 
Designated as hedging instruments, except for certain contracts used as offsets; namely, foreign currency forward-exchange contracts with fair values of $76 million as of June 28, 2015; and foreign currency forward-exchange contracts with fair values of $159 million as of December 31, 2014.
(e) 
Short-term borrowings includes foreign currency short-term borrowings with fair values of $536 million as of June 28, 2015, which are used as hedging instruments. The differences between the estimated fair values and carrying values of held-to-maturity debt securities, private equity securities at cost and short-term borrowings not measured at fair value on a recurring basis were not significant as of June 28, 2015 or December 31, 2014. The fair value measurements of our held-to-maturity debt securities and our short-term borrowings are based on Level 2 inputs, using a market approach. The fair value measurements of our private equity securities carried at cost are based on Level 3 inputs.
(f) 
Our private equity securities represent investments in the life sciences sector.
(g) 
Designated as hedging instruments, except for certain contracts used as offsets; namely, foreign currency swaps with fair values of $208 million and foreign currency forward-exchange contracts with fair values of $95 million as of June 28, 2015; and foreign currency swaps with fair values of $121 million and foreign currency forward-exchange contracts with fair values of $54 million as of December 31, 2014.
(h) 
Some carrying amounts may include adjustments for discount or premium amortization or for the effect of hedging the interest rate fair value risk associated with certain financial liabilities by interest rate swaps.
(i) 
Includes foreign currency debt with fair value of $560 million as of December 31, 2014, which are used as hedging instruments.
(j) 
The fair value of our long-term debt (not including the current portion of long-term debt) was $30.8 billion as of June 28, 2015 and $36.6 billion as of December 31, 2014. The fair value measurements for our long-term debt are based on Level 2 inputs, using a market approach. Generally, the difference between the fair value of our long-term debt and the amount reported on the condensed consolidated balance sheet is due to a decline in relative market interest rates since the debt issuance.
Selected Financial Assets and Liabilities Presented in the Condensed Consolidated Balance Sheets
The following table provides the classification of these selected financial assets and liabilities in our condensed consolidated balance sheets:
(MILLIONS OF DOLLARS)
 
June 28,
2015

 
December 31,
2014

Assets
 
 
 
 
Cash and cash equivalents
 
$
1,412

 
$
1,389

Short-term investments
 
26,586

 
32,779

Long-term investments
 
17,650

 
17,518

Other current assets(a)
 
831

 
1,059

Other noncurrent assets(b)
 
765

 
881

 
 
$
47,244

 
$
53,627

Liabilities
 
 

 
 

Short-term borrowings, including current portion of long-term debt
 
$
8,394

 
$
5,141

Other current liabilities(c)
 
858

 
93

Long-term debt
 
26,729

 
31,541

Other noncurrent liabilities(d)
 
1,114

 
596

 
 
$
37,095

 
$
37,371


(a) 
As of June 28, 2015, derivative instruments at fair value include interest rate swaps ($16 million), foreign currency swaps ($520 million) and foreign currency forward-exchange contracts ($294 million) and, as of December 31, 2014, include interest rate swaps ($34 million), foreign currency swaps ($494 million) and foreign currency forward-exchange contracts ($531 million).
(b) 
As of June 28, 2015, derivative instruments at fair value include interest rate swaps ($652 million), foreign currency swaps ($91 million) and foreign currency forward-exchange contracts ($23 million) and, as of December 31, 2014, include interest rate swaps ($767 million), foreign currency swaps ($99 million) and foreign currency forward-exchange contracts ($15 million).
(c) 
As of June 28, 2015, derivative instruments at fair value include interest rate swaps ($4 million), foreign currency swaps ($589 million) and foreign currency forward-exchange contracts ($265 million) and, as of December 31, 2014, include interest rate swaps ($1 million), foreign currency swaps ($13 million) and foreign currency forward-exchange contracts ($78 million).
(d) 
As of June 28, 2015, derivative instruments at fair value include interest rate swaps ($376 million), foreign currency swaps ($737 million) and foreign currency forward-exchange contracts ($1 million) and, as of December 31, 2014, include interest rate swaps ($16 million) and foreign currency swaps ($581 million).
Contractual Maturities of Available-for-sale and Held-to-maturity Debt Securities
The following table provides the contractual maturities, or as necessary, the estimated maturities, of the available-for-sale and held-to-maturity debt securities:
 
 
Years
 
June 28,
2015

(MILLIONS OF DOLLARS)
 
Within 1

 
Over 1
to 5

 
Over 5
to 10

 
Over 10

 
Total

Available-for-sale debt securities
 
 
 
 
 
 
 
 
 
 
Western European, Asian and other government debt(a)
 
$
13,586

 
$
2,063

 
$
—

 
$
—

 
$
15,649

Corporate debt(b)
 
4,405

 
4,662

 
2,008

 
43

 
11,118

Western European, Scandinavian and other government agency debt(a)
 
2,264

 
324

 
—

 
—

 
2,588

U.S. government debt
 
377

 
1,713

 
66

 
—

 
2,155

Supranational debt(a)
 
1,596

 
526

 
—

 
—

 
2,122

Federal Home Loan Mortgage Corporation and Federal National Mortgage Association asset-backed securities
 
15

 
2,033

 
51

 
—

 
2,100

Government National Mortgage Association and other U.S. government guaranteed asset-backed securities
 
189

 
721

 
—

 
—

 
910

Other asset-backed debt(c)
 
893

 
959

 
3

 
—

 
1,855

Reverse repurchase agreements(d)
 
1,652

 
—

 
—

 
—

 
1,652

Held-to-maturity debt securities
 
 
 
 
 
 

 
 
 
 

Time deposits, corporate debt and other(a)
 
1,623

 
6

 
—

 
—

 
1,629

Western European government debt(a)
 
504

 
—

 
—

 
—

 
504

Total debt securities
 
$
27,105

 
$
13,008

 
$
2,128

 
$
43

 
$
42,284

(a) 
Issued by governments, government agencies or supranational entities, as applicable, all of which are investment-grade.
(b) 
Issued by a diverse group of corporations, largely consisting of financial institutions, virtually all of which are investment-grade.
(c) 
Includes loan-backed, receivable-backed, and mortgage-backed securities, all of which are investment-grade and in senior positions in the capital structure of the security. Loan-backed securities are collateralized by senior secured obligations of a diverse pool of companies or student loans, and receivable-backed securities are collateralized by credit cards receivables. Mortgage-backed securities are collateralized by diversified pools of residential and commercial mortgages.
(d) 
Involving U.S. securities.
Derivative Instruments, Gain (Loss)
The following table provides information about the gains/(losses) incurred to hedge or offset operational foreign exchange or interest rate risk:
 
 
Amount of
Gains/(Losses)
Recognized in OID(a), (b), (c)
 
Amount of
Gains/(Losses)
Recognized in OCI
(Effective Portion)(a), (d)
 
Amount of
Gains/(Losses)
Reclassified from
OCI into OID
(Effective Portion)(a), (d)
(MILLIONS OF DOLLARS)
 
June 28,
2015

 
June 29,
2014

 
June 28,
2015

 
June 29,
2014

 
June 28,
2015

 
June 29,
2014

Three Months Ended
 
 
 
 
 
 
 
 
 
 
 
 
Derivative Financial Instruments in Cash Flow Hedge Relationships:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign currency swaps
 
$
—

 
$
—

 
$
234

 
$
(3
)
 
$
240

 
$
2

Foreign currency forward-exchange contracts
 
—

 
—

 
204

 
4

 
502

 
(76
)
Derivative Financial Instruments in Net Investment Hedge Relationships:
 
 

 
 

 
 

 
 

 
 

 
 

Foreign currency swaps
 
—

 
—

 
—

 
(3
)
 
—

 
—

Foreign currency forward-exchange contracts
 
—

 
—

 
10

 
—

 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative Financial Instruments Not Designated as Hedges:
 
 

 
 

 
 

 
 

 
 

 
 

Foreign currency forward-exchange contracts
 
(73
)
 
32

 
—

 
—

 
—

 
—

Foreign currency swaps
 
(2
)
 
3

 
—

 
—

 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
Non-Derivative Financial Instruments in Net Investment Hedge Relationships:
 
 

 
 

 
 

 
 

 
 

 
 

Foreign currency short-term borrowings
 
—

 
—

 
21

 
—

 
—

 
—

Foreign currency long-term debt
 
—

 
—

 
—

 
(8
)
 
—

 
—

All other net
 
—

 
—

 
14

 
—

 
—

 
—

 
 
$
(75
)
 
$
35

 
$
483

 
$
(10
)
 
$
743

 
$
(74
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended
 
 

 
 

 
 

 
 

 
 

 
 

Derivative Financial Instruments in Cash Flow Hedge Relationships:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign currency swaps
 
$
—

 
$
—

 
$
(498
)
 
$
(18
)
 
$
(365
)
 
$
11

Foreign currency forward-exchange contracts
 
—

 
—

 
621

 
(39
)
 
875

 
(97
)
Derivative Financial Instruments in Net Investment Hedge Relationships:
 
 

 
 

 
 

 
 

 
 

 
 

Foreign currency swaps
 
—

 
—

 
—

 
(11
)
 
—

 
—

Foreign currency forward-exchange contracts
 
2

 
—

 
259

 
—

 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative Financial Instruments Not Designated as Hedges:
 
 

 
 

 
 

 
 

 
 

 
 

Foreign currency forward-exchange contracts
 
(113
)
 
—

 
—

 
—

 
—

 
—

Foreign currency swaps
 
(2
)
 
20

 
—

 
—

 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
Non-Derivative Financial Instruments in Net Investment Hedge Relationships:
 
 

 
 

 
 

 
 

 
 

 
 

Foreign currency short-term borrowings
 
—

 
—

 
19

 
—

 
—

 
—

Foreign currency long-term debt
 
—

 
—

 
—

 
(22
)
 
—

 
—

All other net
 
—

 
(3
)
 
14

 
—

 
—

 
—

 
 
$
(113
)
 
$
17

 
$
416

 
$
(90
)
 
$
510

 
$
(86
)
(a) 
OID = Other (income)/deductions—net, included in Other (income)/deductions—net in the condensed consolidated statements of income. OCI = Other comprehensive income/(loss), included in the condensed consolidated statements of comprehensive income.
(b) 
Also, includes gains and losses attributable to derivative instruments designated and qualifying as fair value hedges, as well as the offsetting gains and losses attributable to the hedged items in such hedging relationships.
(c) 
There was no significant ineffectiveness for any period presented.
(d) 
For derivative financial instruments in cash flow hedge relationships, the effective portion is included in Other comprehensive income/(loss)––Unrealized holding gains/(losses) on derivative financial instruments, net. For derivative financial instruments in net investment hedge relationships and for foreign currency debt designated as hedging instruments, the effective portion is included in Other comprehensive income/(loss)––Foreign currency translation adjustments, net.