XML 217 R17.htm IDEA: XBRL DOCUMENT

Financial Instruments

12 Months Ended

Dec. 31, 2019

A. Fair Value Measurements

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis



The following table presents the financial assets and liabilities measured at fair value using a market approach on a recurring basis by balance sheet categories and fair value hierarchy level as defined in Note 1E:
	December 31, 2019						December 31, 2018
(MILLIONS OF DOLLARS)	Total		Level 1		Level 2		Total		Level 1		Level 2
Financial assets measured at fair value on a recurring basis:
Short-term investments
Classified as equity securities with readily determinable fair values:
Money market funds	$	705	$	—	$	705	$	1,571	$	—	$	1,571
Equity^(a)	—		—		—		29		17		11
	705		—		705		1,600		17		1,583
Classified as available-for-sale debt securities:
Government and agency—non-U.S.	4,863		—		4,863		9,609		—		9,609
Government and agency—U.S.	811		—		811		3,437		—		3,437
Corporate and other	1,013		—		1,013		2,045		—		2,045
	6,687		—		6,687		15,091		—		15,091
Total short-term investments	7,392		—		7,392		16,691		17		16,674
Other current assets
Derivative assets:
Interest rate contracts	53		—		53		97		—		97
Foreign exchange contracts	413		—		413		477		—		477
Total other current assets	465		—		465		574		—		574
Long-term investments
Classified as equity securities with readily determinable fair values^(a)	1,902		1,863		39		1,273		1,243		30
Classified as available-for-sale debt securities:
Government and agency—non-U.S.	—		—		—		94		—		94
Government and agency—U.S.	303		—		303		345		—		345
Corporate and other	11		—		11		52		—		52
	315		—		315		491		—		491
Total long-term investments	2,216		1,863		354		1,764		1,243		521
Other noncurrent assets
Derivative assets:
Interest rate contracts	266		—		266		335		—		335
Foreign exchange contracts	261		—		261		232		—		232
Total derivative assets	526		—		526		566		—		566
Insurance contracts^(b)	575		—		575		515		—		515
Total other noncurrent assets	1,102		—		1,102		1,082		—		1,082
Total assets	$	11,176	$	1,863	$	9,313	$	20,110	$	1,260	$	18,850

Financial liabilities measured at fair value on a recurring basis:
Other current liabilities
Derivative liabilities:
Interest rate contracts	$	—	$	—	$	—	$	5	$	—	$	5
Foreign exchange contracts	114		—		114		78		—		78
Total other current liabilities	114		—		114		82		—		82
Other noncurrent liabilities
Derivative liabilities:
Interest rate contracts	—		—		—		378		—		378
Foreign exchange contracts	604		—		604		564		—		564
Total other noncurrent liabilities	604		—		604		942		—		942
Total liabilities	$	718	$	—	$	718	$	1,024	$	—	$	1,024

^(a)

As of December 31, 2019, long-term equity securities of $176 million are held in restricted trusts for benefits attributable to various U.S. non-qualified employee benefit plans. As of December 31, 2018, short-term equity securities of $11 million and long-term equity securities of $132 million are held in restricted trusts for benefits attributable to various U.S. non-qualified employee benefit plans.

^(b)

Other noncurrent assets include life insurance policies held in restricted trusts attributable to the funding of various U.S. non-qualified employee benefit plans. The underlying invested assets in these insurance contracts are marketable securities, which are carried at fair value, with changes in fair value recognized in Other (income)/deductions––net in the consolidated statements of income (see Note 4).

Financial Assets and Liabilities Not Measured at Fair Value on a Recurring Basis



The following table presents the financial liabilities not measured at fair value on a recurring basis, including the carrying values and estimated fair values using a market approach:
	December 31, 2019						December 31, 2018
	Carrying Value		Estimated Fair Value				Carrying Value		Estimated Fair Value
(MILLIONS OF DOLLARS)			Total		Level 2				Total		Level 2
Financial Liabilities
Long-term debt, excluding the current portion	$	35,955	$	40,842	$	40,842	$	32,909	$	35,260	$	35,260

The differences between the estimated fair values and carrying values of held-to-maturity debt securities, restricted stock and private equity securities, and short-term borrowings not measured at fair value on a recurring basis were not significant as of December 31, 2019 or December 31, 2018. The fair value measurements of our held-to-maturity debt securities and our short-term borrowings are based on Level 2 inputs. The fair value measurements of our private equity securities, which represent investments in the life sciences sector, are based on Level 3 inputs using a market approach.

In addition, as of December 31, 2019 and 2018, we had long-term receivables whose fair value is based on Level 3 inputs. As of December 31, 2019 and 2018, the differences between the estimated fair values and carrying values of these receivables were not significant.

Total Short-Term and Long-Term Investments and Equity-Method Investments



The following table represents our investments by classification type:
	As of December 31,
(MILLIONS OF DOLLARS)	2019		2018
Short-term investments
Equity securities with readily determinable fair values^(a)	$	705	$	1,600
Available-for-sale debt securities	6,687		15,091
Held-to-maturity debt securities	1,133		1,003
Total Short-term investments	$	8,525	$	17,694

Long-term investments
Equity securities with readily determinable fair values	$	1,902	$	1,273
Available-for-sale debt securities	315		491
Held-to-maturity debt securities	42		59
Private equity securities at cost	756		763
Total Long-term investments	$	3,014	$	2,586
Equity-method investments	17,133		181
Total long-term investments and equity-method investments	$	20,147	$	2,767
Held-to-maturity cash equivalents	$	163	$	199


^(a)	As of December 31, 2019 and December 31, 2018, equity securities with readily determinable fair values included money market funds primarily invested in U.S. Treasury and government debt.

Fair Value Methodology

The following inputs and valuation techniques were used to estimate the fair value of our financial assets and liabilities:


•	Available-for-sale debt securities—third-party matrix-pricing model that uses significant inputs derived from or corroborated by observable market data and credit-adjusted interest rate yield curves.


•	Equity securities with readily determinable fair values—quoted market prices and observable net asset value prices.

•

Derivative assets and liabilities—third-party matrix-pricing model that uses significant inputs derived from or corroborated by observable market data. Where applicable, these models discount future cash flow amounts using market-based observable inputs, including interest rate yield curves, and forward and spot prices for currencies. The credit risk impact to our derivative financial instruments was not significant.


•	Money market funds—observable net asset value prices.

We periodically review the methodologies, inputs and outputs of third-party pricing services for reasonableness. Our procedures can include, for example, referencing other third-party pricing models, monitoring key observable inputs (like LIBOR interest rates) and selectively performing test-comparisons of values with actual sales of financial instruments.

B. Investments

Debt Securities



At December 31, 2019, the investment securities portfolio consisted of debt securities that were virtually all investment-grade. Information on investments in debt securities at December 31, 2019 and December 31, 2018 is as follows, including, as of December 31, 2019, the contractual maturities, or as necessary, the estimated maturities, of the available-for-sale and held-to-maturity debt securities:
	December 31, 2019															December 31, 2018
			Gross Unrealized							Maturities (in Years)								Gross Unrealized
(MILLIONS OF DOLLARS)	Amortized Cost		Gains		Losses			Fair Value		Within 1		Over 1 to 5		Over 5		Amortized Cost		Gains		Losses			Fair Value
Available-for-sale debt securities
Government and agency––non-U.S.	$	4,895	$	6	$	(38	)	$	4,863	$	4,863	$	—	$	—	$	9,754	$	7	$	(58	)	$	9,703
Government and agency––U.S.	1,120		—		(6		)	1,114		811		303		—		3,804		—		(23		)	3,782
Corporate and other^(a)	1,027		—		(2		)	1,025		1,014		11		—		2,101		—		(4		)	2,097
Held-to-maturity debt securities
Time deposits and other	535		—		—			535		498		7		30		668		—		—			668
Government and agency––non-U.S.	803		—		—			803		798		—		4		592		—		—			592
Total debt securities	$	8,380	$	6	$	(47	)	$	8,340	$	7,984	$	322	$	35	$	16,920	$	8	$	(85	)	$	16,842


^(a)	Primarily issued by a diverse group of corporations.

Equity Securities



The following table presents the net unrealized (gains) and losses for the period that relate to equity securities, excluding equity method investments, still held at the reporting date, calculated as follows:
(MILLIONS OF DOLLARS)	December 31, 2019			December 31, 2018
Net gains recognized during the period on equity securities^(a)	$	(454	)	$	(586	)
Less: Net gains recognized during the period on equity securities sold during the period	(25		)	(109		)
Net unrealized gains during the reporting period on equity securities still held at the reporting date	$	(429	)	$	(477	)

^(a)

The net gains on equity securities are reported in Other (income)/deductions––net. For additional information, see Note 4.

C. Short-Term Borrowings



Short-term borrowings include:
	As of December 31,
(MILLIONS OF DOLLARS)	2019			2018
Commercial paper	$	13,915		$	3,100
Current portion of long-term debt, principal amount^(a)	1,458			4,781
Other short-term borrowings, principal amount^(b)	860			966
Total short-term borrowings, principal amount	16,233			8,847
Net fair value adjustments related to hedging and purchase accounting	5			(5		)
Net unamortized discounts, premiums and debt issuance costs	(43		)	(11		)
Total Short-term borrowings, including current portion of long-term debt, carried at historical proceeds, as adjusted	$	16,195		$	8,831


^(a)	For additional information, see Note 7D.


^(b)	Other short-term borrowings primarily include cash collateral. For additional information, see Note 7F.

The weighted-average effective interest rate on commercial paper outstanding was approximately 1.92% as of December 31, 2019 and 2.42% as of December 31, 2018.

As of December 31, 2019, we had access to a total of $15 billion in U.S. revolving credit facilities consisting of a $7 billion facility expiring in 2024 and an $8 billion facility expiring in September 2020, which may be used to support our commercial paper borrowings. In addition to the U.S. revolving credit facilities, our lenders have provided us an additional $537 million in lines of credit, of which $508 million expire within one year. Of these total lines of credit, $15.5 billion were unused as of December 31, 2019.

D. Long-Term Debt

New Issuances



In the first quarter of 2019, we issued the following senior unsecured notes:
(MILLIONS OF DOLLARS)		Principal
Interest Rate	Maturity Date	As of December 31, 2019
2.800% notes^(a)	March 11, 2022	$	500
2.950% notes^(a)	March 15, 2024	750
3.450% notes^(a)	March 15, 2029	1,750
3.900% notes^(a)	March 15, 2039	750
4.000% notes^(a)	March 15, 2049	1,250
Total long-term debt issued in the first quarter of 2019^(b)		$	5,000


^(a)	Fixed rate notes may be redeemed by us at any time, in whole, or in part, at varying redemption prices plus accrued and unpaid interest.


^(b)	The weighted-average effective interest rate for the notes at issuance was 3.57%.

In September 2018, we completed a public offering of $5.0 billion aggregate principal amount of senior unsecured notes with a weighted-average effective interest rate of 3.56%.

In March 2017, we completed a public offering of $1.065 billion principal amount of senior unsecured notes due 2047 with an interest rate of 4.20%, and also in March 2017, we completed a public offering of €4.0 billion principal amount of senior unsecured notes with a weighted-average effective interest rate of 0.23%.

Retirements

In January 2019, we repurchased all €1.1 billion ($1.3 billion, at exchange rates on settlement) principal amount outstanding of the 5.75% euro-denominated debt that was due June 2021 before the maturity date at a redemption value of €1.3 billion ($1.5 billion, at exchange rates on settlement). As a result, in the first quarter of 2019, we recorded a net loss of approximately $138 million, which included the related termination of cross-currency swaps, and is reported in Other (income)/deductions––net in the consolidated statements of income (see Note 4).

In December 2017, we exchanged approximately £833 million and repurchased £197 million principal amount of the outstanding 6.50% debt before the maturity date at a redemption value of £1.7 billion, leaving £470 million principal amount of the 6.50% debt due 2038 outstanding. Also, in December 2017, we repurchased approximately €834 million principal amount of the outstanding 5.75% debt before the maturity date at a redemption value of €1.0 billion, leaving approximately €1.2 billion of the 5.75% euro-denominated debt due 2021 outstanding as of December 31, 2017. As a result, we recorded a net loss of approximately $846 million and $153 million upon the exchange and early retirement of the U.K. pound-denominated debt and the early retirement of the euro-denominated debt, respectively, for a net loss on early retirement of debt of $999 million, which included the related termination of cross-currency swaps, and that were recorded in Other (income)/deductions––net in the consolidated statement of income (see Note 4).



The following table provides the components of our senior unsecured long-term debt, including the weighted-average stated interest rate for 2019 and 2018 by maturity:
	As of December 31,
(MILLIONS OF DOLLARS)	2019			2018
Notes due 2020 (1.2%)^(a)	$	—		$	1,474
Notes due 2021 (0.7% and 3.4%)	3,153			4,459
Notes due 2022 (1.0% and 0.3%)	1,624			1,145
Notes due 2023 (3.7% and 3.8%)	2,892			2,892
Notes due 2024 (3.9% and 4.4%)	2,250			1,500
Notes due 2026-2029 (3.3%)	7,453			5,718
Notes due 2034 (6.5%)	750			750
Notes due 2036-2040 (5.8% and 6.0%)	8,566			7,796
Notes due 2043-2044 (3.5%)	3,568			3,509
Notes due 2046-2049 (4.1% and 4.2%)	4,565			3,315
Total long-term debt, principal amount	34,820			32,558
Net fair value adjustments related to hedging and purchase accounting	1,305			479
Net unamortized discounts, premiums and debt issuance costs	(176		)	(136		)
Other long-term debt	5			7
Total long-term debt, carried at historical proceeds, as adjusted	$	35,955		$	32,909
Current portion of long-term debt, carried at historical proceeds (not included above (1.2% and 1.3%))	$	1,462		$	4,776


^(a)	At December 31, 2019, the debt issuances have been reclassified to the current portion of long-term debt.

Our long-term debt, provided in the above table, is generally redeemable by us at any time at varying redemption prices plus accrued and unpaid interest.

E. Other Noncurrent Liabilities

Mylotarg (gemtuzumab ozogamicin)

In April 2018, the EU approved Mylotarg for the treatment of acute myeloid leukemia. In connection with the EU approval, we incurred an obligation to make guaranteed fixed annual payments over a ten-year period aggregating $301 million related to an R&D arrangement. We recorded the estimated net present value of $240 million as a liability and an intangible asset in Developed technology rights as of the approval date. In June 2018, we entered into a transaction with the obligee to buyout the remaining liability for the fixed annual payments for a lump sum payment of $224 million. As a result of the buyout transaction, the liability was extinguished and we recognized a non-cash $17 million pre-tax gain in Other (income)/deductions––net in the second quarter of 2018 (see Note 4).

Bosulif (bosutinib)

In December 2017, the FDA approved Bosulif for the treatment of patients with newly-diagnosed chronic-phase Ph+ CML. In connection with the U.S. approval, we incurred an obligation to make guaranteed fixed annual payments over a ten-year period aggregating $416 million related to an R&D arrangement. We recorded the estimated net present value of $364 million as of the approval date as an intangible asset in Developed technology rights. In August 2018, we entered into a transaction with the obligee to buyout a portion of the remaining liability for the fixed annual payments for a lump sum payment of $71 million. As a result of the buyout transaction, the liability was reduced and we recognized a non-cash $9 million pre-tax gain in Other (income)/deductions––net in the third quarter of 2018. The present value of the remaining future payments as of December 31, 2019 is $191 million, of which $22 million is recorded in Other current liabilities and $169 million is recorded in Other noncurrent liabilities.

Besponsa (inotuzumab ozogamicin)

In August 2017, the FDA approved Besponsa and in June 2017, the EU approved Besponsa as monotherapy for the treatment of adults with relapsed or refractory CD22-positive B-cell precursor acute lymphoblastic leukemia. In connection with the U.S. approval, we incurred an obligation to make guaranteed fixed annual payments over a nine-year period aggregating $296 million related to an R&D arrangement. We recorded the estimated net present value of $248 million as of the approval date as an intangible asset in Developed technology rights. The present value of the remaining future payments as of December 31, 2019 is $242 million, of which $7 million is recorded in Other current liabilities and $235 million is recorded in Other noncurrent liabilities. In connection with the EU approval, we incurred an obligation to make guaranteed fixed annual payments over a nine-year period aggregating $148 million related to an R&D arrangement. We recorded the estimated net present value of $123 million as of the approval date as an intangible asset in Developed technology rights. The present value of the remaining future payments as of December 31, 2019 is $122 million, of which $3 million is recorded in Other current liabilities and $119 million is recorded in Other noncurrent liabilities.

As of December 31, 2019 and 2018, the differences between the estimated fair values, using a market approach in the Level 2 fair value hierarchy, and carrying values of these obligations were not significant.

F. Derivative Financial Instruments and Hedging Activities

Foreign Exchange Risk

A significant portion of our revenues, earnings and net investments in foreign affiliates is exposed to changes in foreign exchange rates. We manage our foreign exchange risk, in part, through operational means, including managing same-currency revenues in relation to same-currency costs and same-currency assets in relation to same-currency liabilities. We also manage our foreign exchange risk, depending on market conditions, through fair value, cash flow, and net investment hedging programs through the use of derivative financial instruments and foreign currency debt. These financial instruments serve to protect net income against the impact of remeasurement into another currency, or against the impact of translation into U.S. dollars of certain foreign exchange-denominated transactions.

All derivative financial instruments used to manage foreign currency risk are measured at fair value and are reported as assets or liabilities on the consolidated balance sheet. The derivative financial instruments primarily hedge or offset exposures in the euro, U.K. pound, Japanese yen, Chinese renminbi and Swedish krona. Changes in fair value are reported in earnings or in Other comprehensive income/(loss), depending on the nature and purpose of the financial instrument (hedge or offset relationship) and the effectiveness of the hedge relationships, as follows:

•

Generally, we recognize the gains and losses on foreign exchange contracts that are designated as fair value hedges in earnings upon the recognition of the change in fair value of the hedged risk. For certain foreign exchange contracts, we exclude an amount from the assessment of hedge effectiveness and recognize that excluded amount through an amortization approach. We also recognize the offsetting foreign exchange impact attributable to the hedged item in earnings.

•

Generally, we record in Other comprehensive income/(loss) gains or losses on foreign exchange contracts that are designated as cash flow hedges and reclassify those amounts, as appropriate, into earnings in the same period or periods during which the hedged transaction affects earnings. For certain foreign exchange contracts, we exclude an amount from the assessment of hedge effectiveness and recognize that excluded amount through an amortization approach.

•

We record in Other comprehensive income/(loss) the foreign exchange gains and losses related to foreign exchange-denominated debt and foreign exchange contracts designated as a hedge of our net investments in foreign subsidiaries and reclassify those amounts into earnings upon the sale or substantial liquidation of our net investments. For foreign exchange contracts, we exclude an amount from the assessment of hedge effectiveness and recognize that excluded amount through an amortization approach.

•

For certain foreign exchange contracts not designated as hedging instruments, we recognize the gains and losses on foreign currency exchange contracts that are used to offset the same foreign currency assets or liabilities immediately into earnings along with the earnings impact of the items they generally offset. These contracts essentially take the opposite currency position of that reflected in the month-end balance sheet to counterbalance the effect of any currency movement.

As a part of our cash flow hedging program, we designate foreign exchange contracts to hedge a portion of our forecasted euro, Japanese yen, Chinese renminbi, Canadian dollar, U.K. pound and Australian dollar-denominated intercompany inventory sales expected to occur no more than two years from the date of each hedge.

For 2017, any ineffectiveness was recognized immediately into earnings. There was no significant ineffectiveness for 2017.

Interest Rate Risk

Our interest-bearing investments and borrowings are subject to interest rate risk. With respect to our investments, we strive to maintain a predominantly floating-rate basis position, but our strategy may change based on prevailing market conditions. We currently borrow primarily on a long-term, fixed-rate basis. From time to time, depending on market conditions, we will change the profile of our outstanding debt by entering into derivative financial instruments like interest rate swaps. We entered into derivative financial instruments to hedge or offset the fixed interest rates on the hedged item, matching the amount and timing of the hedged item. The derivative financial instruments primarily hedge U.S. dollar fixed-rate debt.

All derivative contracts used to manage interest rate risk are measured at fair value and reported as assets or liabilities on the consolidated balance sheet. Changes in fair value are reported in earnings, as follows:


•	We recognize the gains and losses on interest rate contracts that are designated as fair value hedges in earnings upon the recognition of the change in fair value of the hedged risk. We also recognize the offsetting earnings impact of fixed-rate debt attributable to the hedged risk in earnings.

For 2017, any ineffectiveness was recognized immediately into earnings. There was no significant ineffectiveness for 2017.



The following table provides the fair value of the derivative financial instruments and the related notional amounts presented between those derivatives that are designated as hedging instruments and those that are not designated as hedging instruments:
(MILLIONS OF DOLLARS)	December 31, 2019						December 31, 2018
			Fair Value						Fair Value
	Notional		Asset		Liability		Notional		Asset		Liability
Derivatives designated as hedging instruments:
Foreign exchange contracts^(a)	$	25,193	$	591	$	662	$	22,984	$	654	$	586
Interest rate contracts	6,645		318		—		11,145		432		383
			909		662				1,085		968

Derivatives not designated as hedging instruments:
Foreign exchange contracts	$	19,623	82		55		$	15,154	55		55

Total			$	992	$	718			$	1,140	$	1,024


^(a)	The notional amount of outstanding foreign currency forward-exchange contracts hedging our intercompany forecasted inventory sales was $5.9 billion as of December 31, 2019 and $5.8 billion as of December 31, 2018.



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)						Amount of Gains/(Losses) Recognized in OCI^{(a), (b)}						Amount of Gains/(Losses) Reclassified from OCI into OID and COS^{(a), (b)}
	As of December 31,
(MILLIONS OF DOLLARS)	2019			2018			2019			2018			2019			2018
Derivative Financial Instruments in Cash Flow Hedge Relationships:
Foreign exchange contracts^(c)	$	—		$	—		$	339		$	80		$	525		$	(182	)
Amount excluded from effectiveness testing recognized in earnings based on an amortization approach^(d)	—			—			136			140			140			153

Derivative Financial Instruments in Fair Value Hedge Relationships:
Interest rate contracts	900			(348		)	—			—			—			—
Hedged item	(900		)	348			—			—			—			—
Foreign exchange contracts	—			5			—			—			—			—
Hedged item	—			(5		)	—			—			—			—

Derivative Financial Instruments in Net Investment Hedge Relationships:
Foreign exchange contracts	—			—			(313		)	175			—			—
The portion on foreign exchange contracts excluded from the assessment of hedge effectiveness^(d)	—			—			188			77			144			68

Non-Derivative Financial Instruments in Net Investment Hedge Relationships:
Foreign currency short-term borrowings^(e)	—			—			34			68			—			—
Foreign currency long-term debt^(e)	—			—			36			149			—			—

Derivative Financial Instruments Not Designated as Hedges:
Foreign exchange contracts	(172		)	136			—			—			—			—
All other net^(d)	—			—			—			(1		)	(1		)	2
	$	(172	)	$	136		$	421		$	688		$	808		$	41


^(a)	OID = Other (income)/deductions—net, included in Other (income)/deductions—net in the consolidated statements of income. COS = Cost of Sales, included in Cost of sales in the consolidated statements of income. OCI = Other comprehensive income/(loss), included in the consolidated statements of comprehensive income.

^(b)

For derivative financial instruments in cash flow hedge relationships, the gains and losses are 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 gains and losses are included in Other comprehensive income/(loss)––Foreign currency translation adjustments, net.

^(c)

The amounts reclassified from OCI into COS were a net gain of $247 million in 2019 and a net loss of $13 million in 2018. The remaining amounts were reclassified from OCI into OID. Based on year-end foreign exchange rates that are subject to change, we expect to reclassify a pre-tax gain of $145 million within the next 12 months into Cost of sales. The maximum length of time over which we are hedging future foreign exchange cash flow relates to our $1.8 billion U.K. pound debt maturing in 2043.


^(d)	These amounts were reclassified from OCI into OID.


^(e)	Short-term borrowings include foreign currency short-term borrowings with carrying values of $1.1 billion as of December 31, 2019, which are used as hedging instruments in net investment hedges. Long-term debt includes foreign currency long-term borrowings with carrying values of $2.0 billion as of December 31, 2019, which are used as hedging instruments in net investment hedges.



The following table provides the amounts recorded in our consolidated balance sheet related to cumulative basis adjustments for fair value hedges:
	December 31, 2019						December 31, 2018
			Cumulative Amount of Fair Value Hedging Adjustment Increase/(Decrease) to Carrying Amount						Cumulative Amount of Fair Value Hedging Adjustment Increase/(Decrease) to Carrying Amount
(MILLIONS OF DOLLARS)	Carrying Amount of Hedged Assets/Liabilities^(a)		Active Hedging Relationships		Discontinued Hedging Relationships		Carrying Amount of Hedged Assets/Liabilities^(a)		Active Hedging Relationships			Discontinued Hedging Relationships
Long-term investments	$	45	$	—	$	—	$	45	$	(1	)	$	—
Short-term borrowings, including current portion of long-term debt	—		—		—		1,499		(5		)	—
Long-term debt	7,092		266		690		9,952		(45		)	129


^(a)	Carrying amounts exclude the cumulative amount of fair value hedging adjustments.

Certain of our derivative financial instruments are covered by associated credit-support agreements that have credit-risk-related contingent features designed to reduce both counterparties’ exposure to risk of defaulting on amounts owed by the other party. As of December 31, 2019, the aggregate fair value of these derivative financial instruments that are in a net liability position was $449 million, for which we have posted collateral of $470 million in the normal course of business. If there had been a downgrade to below an A rating by S&P or the equivalent rating by Moody’s, we would not have been required to post any additional collateral to our counterparties.

As of December 31, 2019, we received cash collateral of $835 million from various counterparties. The collateral primarily supports the approximate fair value of our derivative contracts. With respect to the collateral received, the obligations are reported in Short-term borrowings, including current portion of long-term debt.

G. Credit Risk

On an ongoing basis, we review the creditworthiness of counterparties to our foreign exchange and interest rate agreements and do not expect to incur a significant loss from failure of any counterparties to perform under the agreements. There are no significant concentrations of credit risk related to our financial instruments with any individual counterparty. For additional information about concentrations of credit risk related to certain significant customers, see Note 17C. As of December 31, 2019, we had amounts due from a well-diversified, high quality group of banks ($1.4 billion) from around the world. For details about our investments, see Note 7B above.

In general, there is no requirement for collateral from customers. However, derivative financial instruments are executed under credit-support agreements that provide for the ability to request to receive cash collateral, depending on levels of exposure, our credit rating and the credit rating of the counterparty, see Note 7F above.