Financial Instruments (Tables)

3 Months Ended

Mar. 29, 2020

Financial Instruments [Abstract]

Schedule of 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 Notes to Consolidated Financial Statements––Note 1E. Basis of Presentation and Significant Accounting Policies: Fair Value in our 2019 Financial Report:
	March 29, 2020						December 31, 2019
(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	$	4,190	$	—	$	4,190	$	705	$	—	$	705
Classified as available-for-sale debt securities:
Government and agency—non-U.S.	1,989		—		1,989		4,863		—		4,863
Government and agency—U.S.	16		—		16		811		—		811
Corporate and other	806		—		806		1,013		—		1,013
	2,812		—		2,812		6,687		—		6,687
Total short-term investments	7,002		—		7,002		7,392		—		7,392
Other current assets
Derivative assets:
Interest rate contracts	15		—		15		53		—		53
Foreign exchange contracts	688		—		688		413		—		413
Total other current assets	702		—		702		465		—		465
Long-term investments
Classified as equity securities with readily determinable fair values(a)	1,603		1,581		22		1,902		1,863		39
Classified as available-for-sale debt securities:
Government and agency—U.S.	285		—		285		303		—		303
Corporate and other	11		—		11		11		—		11
	296		—		296		315		—		315
Total long-term investments	1,899		1,581		318		2,216		1,863		354
Other noncurrent assets
Derivative assets:
Interest rate contracts	134		—		134		266		—		266
Foreign exchange contracts	356		—		356		261		—		261
Total derivative assets	490		—		490		526		—		526
Insurance contracts(b)	530		—		530		575		—		575
Total other noncurrent assets	1,020		—		1,020		1,102		—		1,102
Total assets	$	10,623	$	1,581	$	9,042	$	11,176	$	1,863	$	9,313
Financial liabilities measured at fair value on a recurring basis:
Other current liabilities
Derivative liabilities:
Foreign exchange contracts	$	109	$	—	$	109	$	114	$	—	$	114
Total other current liabilities	109		—		109		114		—		114
Other noncurrent liabilities
Derivative liabilities:
Foreign exchange contracts	1,139		—		1,139		604		—		604
Total other noncurrent liabilities	1,139		—		1,139		604		—		604
Total liabilities	$	1,248	$	—	$	1,248	$	718	$	—	$	718

^(a)  As of March 29, 2020, long-term equity securities of $155 million and as of December 31, 2019, long-term equity securities of $176 million were 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).

Schedule of Financial 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:
	March 29, 2020						December 31, 2019
	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	$	36,281	$	40,062	$	40,062	$	35,955	$	40,842	$	40,842

Investments by Classification Type

The following table represents our investments by classification type:
(MILLIONS OF DOLLARS)	March 29, 2020		December 31, 2019
Short-term investments
Equity securities with readily determinable fair values(a)	$	4,190	$	705
Available-for-sale debt securities	2,812		6,687
Held-to-maturity debt securities	1,198		1,133
Total Short-term investments	$	8,199	$	8,525
Long-term investments
Equity securities with readily determinable fair values	$	1,603	$	1,902
Available-for-sale debt securities	296		315
Held-to-maturity debt securities	40		42
Private equity securities at cost	757		756
Total Long-term investments	$	2,696	$	3,014
Equity-method investments	15,524		17,133
Total long-term investments and equity-method investments	$	18,220	$	20,147
Held-to-maturity cash equivalents	$	401	$	163

^(a) 

As of March 29, 2020 and December 31, 2019, equity securities with readily determinable fair values included money market funds primarily invested in U.S. Treasury and government debt.

Schedule of Held-to-maturity Securities

At March 29, 2020, our investment securities portfolio consisted of debt securities that were virtually all investment-grade. Information on investments in debt securities at March 29, 2020 and December 31, 2019 is as follows, including, as of March 29, 2020, the contractual maturities, or as necessary, the estimated maturities, of the available-for-sale and held-to-maturity debt securities:
	March 29, 2020																	December 31, 2019
			Gross Unrealized							Maturities (in Years)										Gross Unrealized
(MILLIONS OF DOLLARS)	Amortized Cost		Gains		Losses			Fair Value		Within 1		Over 1 to 5		Over 5		Total		Amortized Cost		Gains		Losses			Fair Value
Available-for-sale debt securities
Government and agency––non-U.S.	$	2,056	$	—	$	(67	)	$	1,989	$	1,989	$	—	$	—	$	1,989	$	4,895	$	6	$	(38	)	$	4,863
Government and agency––U.S.	305		—		(4		)	302		16		285		—		302		1,120		—		(6		)	1,114
Corporate and other(a)	823		—		(6		)	817		807		11		—		817		1,027		—		(2		)	1,025
Held-to-maturity debt securities
Time deposits and other	624		—		—			624		589		8		28		624		535		—		—			535
Government and agency––non-U.S.	1,014		—		—			1,014		1,010		—		4		1,014		803		—		—			803
Total debt securities	$	4,823	$	1	$	(77	)	$	4,746	$	4,410	$	304	$	32	$	4,746	$	8,380	$	6	$	(47	)	$	8,340

^(a) 

Primarily issued by a diverse group of corporations.

Schedule of Available-for-sale Securities

At March 29, 2020, our investment securities portfolio consisted of debt securities that were virtually all investment-grade. Information on investments in debt securities at March 29, 2020 and December 31, 2019 is as follows, including, as of March 29, 2020, the contractual maturities, or as necessary, the estimated maturities, of the available-for-sale and held-to-maturity debt securities:
	March 29, 2020																	December 31, 2019
			Gross Unrealized							Maturities (in Years)										Gross Unrealized
(MILLIONS OF DOLLARS)	Amortized Cost		Gains		Losses			Fair Value		Within 1		Over 1 to 5		Over 5		Total		Amortized Cost		Gains		Losses			Fair Value
Available-for-sale debt securities
Government and agency––non-U.S.	$	2,056	$	—	$	(67	)	$	1,989	$	1,989	$	—	$	—	$	1,989	$	4,895	$	6	$	(38	)	$	4,863
Government and agency––U.S.	305		—		(4		)	302		16		285		—		302		1,120		—		(6		)	1,114
Corporate and other(a)	823		—		(6		)	817		807		11		—		817		1,027		—		(2		)	1,025
Held-to-maturity debt securities
Time deposits and other	624		—		—			624		589		8		28		624		535		—		—			535
Government and agency––non-U.S.	1,014		—		—			1,014		1,010		—		4		1,014		803		—		—			803
Total debt securities	$	4,823	$	1	$	(77	)	$	4,746	$	4,410	$	304	$	32	$	4,746	$	8,380	$	6	$	(47	)	$	8,340

^(a) 

Primarily issued by a diverse group of corporations.

Contractual Maturities of Available-for-sale and Held-to-maturity Debt Securities

At March 29, 2020, our investment securities portfolio consisted of debt securities that were virtually all investment-grade. Information on investments in debt securities at March 29, 2020 and December 31, 2019 is as follows, including, as of March 29, 2020, the contractual maturities, or as necessary, the estimated maturities, of the available-for-sale and held-to-maturity debt securities:
	March 29, 2020																	December 31, 2019
			Gross Unrealized							Maturities (in Years)										Gross Unrealized
(MILLIONS OF DOLLARS)	Amortized Cost		Gains		Losses			Fair Value		Within 1		Over 1 to 5		Over 5		Total		Amortized Cost		Gains		Losses			Fair Value
Available-for-sale debt securities
Government and agency––non-U.S.	$	2,056	$	—	$	(67	)	$	1,989	$	1,989	$	—	$	—	$	1,989	$	4,895	$	6	$	(38	)	$	4,863
Government and agency––U.S.	305		—		(4		)	302		16		285		—		302		1,120		—		(6		)	1,114
Corporate and other(a)	823		—		(6		)	817		807		11		—		817		1,027		—		(2		)	1,025
Held-to-maturity debt securities
Time deposits and other	624		—		—			624		589		8		28		624		535		—		—			535
Government and agency––non-U.S.	1,014		—		—			1,014		1,010		—		4		1,014		803		—		—			803
Total debt securities	$	4,823	$	1	$	(77	)	$	4,746	$	4,410	$	304	$	32	$	4,746	$	8,380	$	6	$	(47	)	$	8,340

^(a) 

Primarily issued by a diverse group of corporations.

Schedule of Gains and Losses on Investment 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:
	Three Months Ended
(MILLIONS OF DOLLARS)	March 29, 2020			March 31, 2019
Net (gains)/losses recognized during the period on equity securities(a)	$	255		$	(111	)
Less: Net gains recognized during the period on equity securities sold during the period	(19		)	(5		)
Net unrealized (gains)/losses during the reporting period on equity securities still held at the reporting date(b)	$	274		$	(106	)

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

^(b)  

Included in net unrealized (gains)/losses are observable price changes on equity securities without readily determinable fair values. Since January 1, 2018, there were cumulative impairments and downward adjustments of $58 million and upward adjustments of $60 million. Impairments, downward and upward adjustments were not significant in the first quarter of 2020 and 2019.

Schedule of Short-term Borrowings

Short-term borrowings include:
(MILLIONS OF DOLLARS)	March 29, 2020			December 31, 2019
Commercial paper	$	14,908		$	13,915
Current portion of long-term debt, principal amount	334			1,458
Other short-term borrowings, principal amount(a)	800			860
Total short-term borrowings, principal amount	16,042			16,233
Net fair value adjustments related to hedging and purchase accounting	3			5
Net unamortized discounts, premiums and debt issuance costs	(38		)	(43		)
Total Short-term borrowings, including current portion of long-term debt, carried at historical proceeds, as adjusted	$	16,007		$	16,195

^(a) 

Other short-term borrowings primarily include cash collateral. For additional information, see Note 7E.

Schedule of Principal Amounts of Senior Unsecured Long-Term Debt and Adjustments

The following table provides the aggregate principal amount of our senior unsecured long-term debt, and adjustments to report our aggregate long-term debt:
(MILLIONS OF DOLLARS)	March 29, 2020			December 31, 2019
Total long-term debt, principal amount	$	34,778		$	34,820
Net fair value adjustments related to hedging and purchase accounting	1,671			1,305
Net unamortized discounts, premiums and debt issuance costs	(173		)	(176		)
Other long-term debt	5			5
Total long-term debt, carried at historical proceeds, as adjusted	$	36,281		$	35,955
Current portion of long-term debt, carried at historical proceeds, as adjusted (not included above)	$	337		$	1,462

In the first quarter of 2020, we issued the following senior unsecured notes:
(MILLIONS OF DOLLARS)		Principal
Interest Rate	Maturity Date	As of March 29, 2020
2.625% notes(a)	April 1, 2030	$	1,250
Total long-term debt issued in the first quarter of 2020(b)		$	1,250

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

^(b) 

The effective interest rate for the notes at issuance was 2.67%.

Schedule of Derivative Instruments

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)	March 29, 2020						December 31, 2019
			Fair Value						Fair Value
	Notional		Asset		Liability		Notional		Asset		Liability
Derivatives designated as hedging instruments:
Foreign exchange contracts(a)	$	23,877	$	955	$	1,150	$	25,193	$	591	$	662
Interest rate contracts	1,995		148		—		6,645		318		—
			1,103		1,150				909		662
Derivatives not designated as hedging instruments:
Foreign exchange contracts	$	13,402	89		97		$	19,623	82		55
Total			$	1,192	$	1,248			$	992	$	718

^(a) 

The notional amount of outstanding foreign currency forward-exchange contracts hedging our intercompany forecasted inventory sales was $5.3 billion as of March 29, 2020 and $5.9 billion as of December 31, 2019.

Schedule of Derivative Assets

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)	March 29, 2020						December 31, 2019
			Fair Value						Fair Value
	Notional		Asset		Liability		Notional		Asset		Liability
Derivatives designated as hedging instruments:
Foreign exchange contracts(a)	$	23,877	$	955	$	1,150	$	25,193	$	591	$	662
Interest rate contracts	1,995		148		—		6,645		318		—
			1,103		1,150				909		662
Derivatives not designated as hedging instruments:
Foreign exchange contracts	$	13,402	89		97		$	19,623	82		55
Total			$	1,192	$	1,248			$	992	$	718

^(a) 

The notional amount of outstanding foreign currency forward-exchange contracts hedging our intercompany forecasted inventory sales was $5.3 billion as of March 29, 2020 and $5.9 billion as of December 31, 2019.

Schedule of Derivative Liabilities

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)	March 29, 2020						December 31, 2019
			Fair Value						Fair Value
	Notional		Asset		Liability		Notional		Asset		Liability
Derivatives designated as hedging instruments:
Foreign exchange contracts(a)	$	23,877	$	955	$	1,150	$	25,193	$	591	$	662
Interest rate contracts	1,995		148		—		6,645		318		—
			1,103		1,150				909		662
Derivatives not designated as hedging instruments:
Foreign exchange contracts	$	13,402	89		97		$	19,623	82		55
Total			$	1,192	$	1,248			$	992	$	718

^(a) 

The notional amount of outstanding foreign currency forward-exchange contracts hedging our intercompany forecasted inventory sales was $5.3 billion as of March 29, 2020 and $5.9 billion as of December 31, 2019.

Information about Gains/(Losses) Incurred to Hedge or Offset Operational Foreign Exchange or Interest Rate Risk

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)
(MILLIONS OF DOLLARS)	March 29, 2020			March 31, 2019			March 29, 2020			March 31, 2019		March 29, 2020			March 31, 2019
Three Months Ended
Derivative Financial Instruments in Cash Flow Hedge Relationships:
Foreign exchange contracts(c)	$	—		$	—		$	(529	)	$	210	$	(46	)	$	209
Amount excluded from effectiveness testing recognized in earnings based on an amortization approach(d)	—			—			29			56		27			54
Derivative Financial Instruments in Fair Value Hedge Relationships:
Interest rate contracts	386			329			—			—		—			—
Hedged item	(386		)	(329		)	—			—		—			—
Foreign exchange contracts	—			—			—			—		—			—
Hedged item	—			—			—			—		—			—
Derivative Financial Instruments in Net Investment Hedge Relationships:
Foreign exchange contracts	—			—			384			23		—			—
The portion on foreign exchange contracts excluded from the assessment of hedge effectiveness(d)	—			—			147			41		41			24
Non-Derivative Financial Instruments in Net Investment Hedge Relationships:
Foreign currency short-term borrowings(e)	—			—			8			35		—			—
Foreign currency long-term debt(e)	—			—			45			38		—			—
Derivative Financial Instruments Not Designated as Hedges:
Foreign exchange contracts	(59		)	(120		)	—			—		—			—
All other net(d)	—			—			(1		)	1		—			—
	$	(59	)	$	(120	)	$	83		$	404	$	23		$	286

^(a)  OID = Other (income)/deductions—net, included in Other (income)/deductions—net in the condensed consolidated statements of income. COS = Cost of Sales, included in Cost of sales in the condensed consolidated statements of income. OCI = Other comprehensive income/(loss), included in the condensed 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 $70 million in the first quarter of 2020 and a net gain of $44 million in the first quarter of 2019. The remaining amounts were reclassified from OCI into OID. Based on quarter-end foreign exchange rates that are subject to change, we expect to reclassify a pre-tax gain of $220 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)  The amounts reclassified from OCI were reclassified into OID.

^(e) 

Long-term debt includes foreign currency long-term borrowings with carrying values of $1.9 billion as of March 29, 2020, which are used as hedging instruments in net investment hedges.

Schedule of Total Amount of Each Income and Expense Line in which Results of Fair Value Hedges are Recorded

The following table provides the amounts recorded in our condensed consolidated balance sheet related to cumulative basis adjustments for fair value hedges:
	March 29, 2020						December 31, 2019
			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	$	—	$	—
Long-term debt	2,027		134		1,196		7,092		266		690

^(a) 

Carrying amounts exclude the cumulative amount of fair value hedging adjustments.