Financial Instruments (Tables)

9 Months Ended

Oct. 03, 2021

Fair Value Disclosures [Abstract]

Schedule of Financial Assets and Liabilities Measured At Fair Value On a Recurring Basis

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis and Fair Value Hierarchy, using a Market Approach:

	October 3, 2021						December 31, 2020
(MILLIONS)	Total		Level 1		Level 2		Total		Level 1		Level 2
Financial assets:
Short-term investments
Classified as equity securities with readily determinable fair values:
Money market funds	$	2,367	$	—	$	2,367	$	567	$	—	$	567
Classified as available-for-sale debt securities:
Government and agency—non-U.S.	16,826		—		16,826		7,719		—		7,719
Government and agency—U.S.	4,881		—		4,881		982		—		982
Corporate and other	1,181		—		1,181		1,008		—		1,008
	22,887		—		22,887		9,709		—		9,709
Total short-term investments	25,254		—		25,254		10,276		—		10,276
Other current assets
Derivative assets:
Interest rate contracts	6		—		6		18		—		18
Foreign exchange contracts	478		—		478		234		—		234
Total other current assets	484		—		484		251		—		251
Long-term investments
Classified as equity securities with readily determinable fair values(a)	4,165		4,141		25		2,809		2,776		32
Classified as available-for-sale debt securities:
Government and agency—non-U.S.	425		—		425		6		—		6
Government and agency—U.S.	9		—		9		121		—		121
Corporate and other	—		—		—		—		—		—
	434		—		434		128		—		128
Total long-term investments	4,600		4,141		459		2,936		2,776		160
Other noncurrent assets
Derivative assets:
Interest rate contracts	18		—		18		117		—		117
Foreign exchange contracts	219		—		219		5		—		5
Total derivative assets	236		—		236		122		—		122
Insurance contracts(b)	762		—		762		693		—		693
Total other noncurrent assets	998		—		998		814		—		814
Total assets	$	31,336	$	4,141	$	27,195	$	14,278	$	2,776	$	11,501
Financial liabilities:
Other current liabilities
Derivative liabilities:
Foreign exchange contracts	$	346	$	—	$	346	$	501	$	—	$	501
Total other current liabilities	346		—		346		501		—		501
Other noncurrent liabilities
Derivative liabilities:
Foreign exchange contracts	477		—		477		599		—		599
Total other noncurrent liabilities	477		—		477		599		—		599
Total liabilities	$	823	$	—	$	823	$	1,100	$	—	$	1,100

(a)Long-term equity securities of $191 million as of October 3, 2021 and $190 million as of December 31, 2020 were held in restricted trusts for U.S. non-qualified employee benefit plans.

(b)Includes life insurance policies held in restricted trusts for U.S. non-qualified employee benefit plans. The underlying invested assets in these contracts are marketable securities, which are carried at fair value, with changes in fair value recognized in Other (income)/deductions—net (see Note 4).

Schedule of Financial Liabilities Not Measured At Fair Value On a Recurring Basis

Carrying values and estimated fair values using a market approach:
	October 3, 2021				December 31, 2020
(MILLIONS)	Carrying Value		Estimated Fair Value at Level 2		Carrying Value		Estimated Fair Value at Level 2
Financial Liabilities
Long-term debt, excluding the current portion	$	36,250	$	42,228	$	37,133	$	45,533

Investments by Classification Type

The following summarizes our investments by classification type:
(MILLIONS)	October 3, 2021		December 31, 2020
Short-term investments
Equity securities with readily determinable fair values(a)	$	2,367	$	567
Available-for-sale debt securities	22,887		9,709
Held-to-maturity debt securities	2,476		161
Total Short-term investments	$	27,730	$	10,437
Long-term investments
Equity securities with readily determinable fair values	$	4,165	$	2,809
Available-for-sale debt securities	434		128
Held-to-maturity debt securities	32		37
Private equity securities at cost(b)	616		432
Total Long-term investments	$	5,248	$	3,406
Equity-method investments	16,349		16,856
Total long-term investments and equity-method investments	$	21,596	$	20,262
Held-to-maturity cash equivalents	$	467	$	89

(a)As of October 3, 2021 and December 31, 2020, includes money market funds primarily invested in U.S. Treasury and government debt.

(b)Represent investments in the life sciences sector.

Schedule of Held-to-maturity Securities

At October 3, 2021, our debt investment portfolio consisted of debt securities issued across diverse governments, corporate and financial institutions, which are investment-grade. The contractual or estimated maturities, are as follows:
	October 3, 2021														December 31, 2020
			Gross Unrealized						Maturities (in Years)								Gross Unrealized
(MILLIONS)	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.	$	17,414	$	16	$	(179)	$	17,251	$	16,826	$	425	$	—	$	7,593	$	136	$	(4)	$	7,725
Government and agency––U.S.	4,890		—		(1)		4,889		4,881		9		—		1,104		—		(1)		1,103
Corporate and other	1,185		—		(4)		1,181		1,181		—		—		1,006		2		—		1,008
Held-to-maturity debt securities
Time deposits and other	986		—		—		986		959		16		11		283		—		—		283
Government and agency––non-U.S.	1,988		—		—		1,988		1,984		4		1		5		—		—		5
Total debt securities	$	26,463	$	16	$	(183)	$	26,297	$	25,830	$	454	$	12	$	9,991	$	138	$	(5)	$	10,124

Schedule of Available-for-sale Securities

At October 3, 2021, our debt investment portfolio consisted of debt securities issued across diverse governments, corporate and financial institutions, which are investment-grade. The contractual or estimated maturities, are as follows:
	October 3, 2021														December 31, 2020
			Gross Unrealized						Maturities (in Years)								Gross Unrealized
(MILLIONS)	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.	$	17,414	$	16	$	(179)	$	17,251	$	16,826	$	425	$	—	$	7,593	$	136	$	(4)	$	7,725
Government and agency––U.S.	4,890		—		(1)		4,889		4,881		9		—		1,104		—		(1)		1,103
Corporate and other	1,185		—		(4)		1,181		1,181		—		—		1,006		2		—		1,008
Held-to-maturity debt securities
Time deposits and other	986		—		—		986		959		16		11		283		—		—		283
Government and agency––non-U.S.	1,988		—		—		1,988		1,984		4		1		5		—		—		5
Total debt securities	$	26,463	$	16	$	(183)	$	26,297	$	25,830	$	454	$	12	$	9,991	$	138	$	(5)	$	10,124

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

At October 3, 2021, our debt investment portfolio consisted of debt securities issued across diverse governments, corporate and financial institutions, which are investment-grade. The contractual or estimated maturities, are as follows:
	October 3, 2021														December 31, 2020
			Gross Unrealized						Maturities (in Years)								Gross Unrealized
(MILLIONS)	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.	$	17,414	$	16	$	(179)	$	17,251	$	16,826	$	425	$	—	$	7,593	$	136	$	(4)	$	7,725
Government and agency––U.S.	4,890		—		(1)		4,889		4,881		9		—		1,104		—		(1)		1,103
Corporate and other	1,185		—		(4)		1,181		1,181		—		—		1,006		2		—		1,008
Held-to-maturity debt securities
Time deposits and other	986		—		—		986		959		16		11		283		—		—		283
Government and agency––non-U.S.	1,988		—		—		1,988		1,984		4		1		5		—		—		5
Total debt securities	$	26,463	$	16	$	(183)	$	26,297	$	25,830	$	454	$	12	$	9,991	$	138	$	(5)	$	10,124

Schedule of Gains and Losses on Investment Securities

The following presents the calculation of the portion of unrealized (gains)/losses that relates to equity securities, excluding equity-method investments, held at the reporting date:
	Three Months Ended				Nine Months Ended
(MILLIONS)	October 3, 2021		September 27, 2020		October 3, 2021		September 27, 2020
Net (gains)/losses recognized during the period on equity securities(a)	$	(400)	$	70	$	(1,601)	$	(408)
Less: Net (gains)/losses recognized during the period on equity securities sold during the period	(78)		2		(83)		(16)
Net unrealized (gains)/losses during the reporting period on equity securities still held at the reporting date(b)	$	(322)	$	68	$	(1,518)	$	(391)

(a)Reported in Other (income)/deductions––net. See Note 4.

(b)Included in net unrealized gains are observable price changes on equity securities without readily determinable fair values. As of October 3, 2021, there were cumulative impairments and downward adjustments of $95 million and upward adjustments of $151 million. Impairments, downward and upward adjustments were not significant in the third quarter and first nine months of 2021 and 2020.

Schedule of Short-term Borrowings

Short-term borrowings include:
(MILLIONS)	October 3, 2021		December 31, 2020
Commercial paper	$	100	$	556
Current portion of long-term debt, principal amount	2,664		2,004
Other short-term borrowings, principal amount(a)	866		145
Total short-term borrowings, principal amount	3,630		2,705
Net unamortized discounts, premiums and debt issuance costs	(1)		(2)
Total Short-term borrowings, including current portion of long-term debt, carried at historical proceeds, as adjusted	$	3,629	$	2,703

(a)Includes cash collateral. See Note 7F.

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

In the third quarter of 2021, we issued the following senior unsecured notes at an effective interest rate of 1.79%:
(MILLIONS)		Principal
Interest Rate	Maturity Date	As of October 3, 2021
1.750%(a)	August 18, 2031	$	1,000

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

The following summarizes the aggregate principal amount of our senior unsecured long-term debt, and adjustments to report our aggregate long-term debt:
(MILLIONS)	October 3, 2021		December 31, 2020
Total long-term debt, principal amount	$	34,975	$	35,774
Net fair value adjustments related to hedging and purchase accounting	1,470		1,562
Net unamortized discounts, premiums and debt issuance costs	(200)		(207)
Other long-term debt	4		4
Total long-term debt, carried at historical proceeds, as adjusted	$	36,250	$	37,133
Current portion of long-term debt, carried at historical proceeds, as adjusted (not included above)	$	2,663	$	2,002

Schedule of Derivative Instruments

The following summarizes the fair value of the derivative financial instruments and notional amounts (including those reported as part of discontinued operations):
	October 3, 2021						December 31, 2020
			Fair Value						Fair Value
(MILLIONS)	Notional		Asset		Liability		Notional		Asset		Liability
Derivatives designated as hedging instruments:
Foreign exchange contracts(a)	$	27,798	$	568	$	743	$	24,369	$	145	$	1,005
Interest rate contracts	1,250		24		—		1,950		135		—
			592		743				280		1,005
Derivatives not designated as hedging instruments:
Foreign exchange contracts	$	24,150	129		81		$	15,063	94		95
Total			$	720	$	823			$	373	$	1,100

(a)The notional amount of outstanding foreign exchange contracts hedging our intercompany forecasted inventory sales was $4.9 billion as of October 3, 2021 and $5.0 billion as of December 31, 2020.

Schedule of Derivative Assets

The following summarizes the fair value of the derivative financial instruments and notional amounts (including those reported as part of discontinued operations):
	October 3, 2021						December 31, 2020
			Fair Value						Fair Value
(MILLIONS)	Notional		Asset		Liability		Notional		Asset		Liability
Derivatives designated as hedging instruments:
Foreign exchange contracts(a)	$	27,798	$	568	$	743	$	24,369	$	145	$	1,005
Interest rate contracts	1,250		24		—		1,950		135		—
			592		743				280		1,005
Derivatives not designated as hedging instruments:
Foreign exchange contracts	$	24,150	129		81		$	15,063	94		95
Total			$	720	$	823			$	373	$	1,100

(a)The notional amount of outstanding foreign exchange contracts hedging our intercompany forecasted inventory sales was $4.9 billion as of October 3, 2021 and $5.0 billion as of December 31, 2020.

Schedule of Derivative Liabilities

The following summarizes the fair value of the derivative financial instruments and notional amounts (including those reported as part of discontinued operations):
	October 3, 2021						December 31, 2020
			Fair Value						Fair Value
(MILLIONS)	Notional		Asset		Liability		Notional		Asset		Liability
Derivatives designated as hedging instruments:
Foreign exchange contracts(a)	$	27,798	$	568	$	743	$	24,369	$	145	$	1,005
Interest rate contracts	1,250		24		—		1,950		135		—
			592		743				280		1,005
Derivatives not designated as hedging instruments:
Foreign exchange contracts	$	24,150	129		81		$	15,063	94		95
Total			$	720	$	823			$	373	$	1,100

(a)The notional amount of outstanding foreign exchange contracts hedging our intercompany forecasted inventory sales was $4.9 billion as of October 3, 2021 and $5.0 billion as of December 31, 2020.

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

The following summarizes information about the gains/(losses) incurred to hedge or offset operational foreign exchange or interest rate risk exposures (including those reported as part of discontinued operations):
	Gains/(Losses) Recognized in OID(a)				Gains/(Losses) Recognized in OCI(a)				Gains/(Losses) Reclassified from OCI into OID and COS(a)
	Three Months Ended
(MILLIONS)	Oct. 3, 2021		Sept. 27, 2020		Oct. 3, 2021		Sept. 27, 2020		Oct. 3, 2021		Sept. 27, 2020
Derivative Financial Instruments in Cash Flow Hedge Relationships:
Foreign exchange contracts(b)	$	—	$	—	$	204	$	(379)	$	(59)	$	(149)
Amount excluded from effectiveness testing and amortized into earnings(c)	—		—		10		7		10		7
Derivative Financial Instruments in Fair Value Hedge Relationships:
Interest rate contracts	(5)		(9)		—		—		—		—
Hedged item	5		9		—		—		—		—
Derivative Financial Instruments in Net Investment Hedge Relationships:
Foreign exchange contracts	—		—		177		(257)		—		—
The portion of foreign exchange contracts excluded from the assessment of hedge effectiveness(c)	—		—		19		9		26		38
Non-Derivative Financial Instruments in Net Investment Hedge Relationships:(d)
Foreign currency short-term borrowings	—		—		25		—		—		—
Foreign currency long-term debt	—		—		19		(72)		—		—
Derivative Financial Instruments Not Designated as Hedges:
Foreign exchange contracts	(74)		255		—		—		—		—
All other net(c)	—		—		—		—		—		—
	$	(74)	$	255	$	453	$	(692)	$	(21)	$	(104)

	Gains/(Losses) Recognized in OID(a)				Gains/(Losses) Recognized in OCI(a)				Gains/(Losses) Reclassified from OCI into OID and COS(a)
	Nine Months Ended
(MILLIONS)	Oct. 3, 2021		Sept. 27, 2020		Oct. 3, 2021		Sept. 27, 2020		Oct. 3, 2021		Sept. 27, 2020
Derivative Financial Instruments in Cash Flow Hedge Relationships:
Foreign exchange contracts(b)	$	—	$	—	$	147	$	(721)	$	(314)	$	(23)
Amount excluded from effectiveness testing and amortized into earnings(c)	—		—		31		49		28		48
Derivative Financial Instruments in Fair Value Hedge Relationships:
Interest rate contracts	(6)		383		—		—		—		—
Hedged item	6		(383)		—		—		—		—
Derivative Financial Instruments in Net Investment Hedge Relationships:
Foreign exchange contracts	—		—		332		(17)		—		—
The portion of foreign exchange contracts excluded from the assessment of hedge effectiveness(c)	—		—		54		185		82		122
Non-Derivative Financial Instruments in Net Investment Hedge Relationships:(d)
Foreign currency short-term borrowings	—		—		52		8		—		—
Foreign currency long-term debt	—		—		66		(69)		—		—
Derivative Financial Instruments Not Designated as Hedges:
Foreign exchange contracts	(97)		205		—		—		—		—
All other net(c)	—		—		1		12		1		(1)
	$	(97)	$	205	$	683	$	(553)	$	(204)	$	147

(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)The amounts reclassified from OCI into COS were:

•a net loss of $18 million in the third quarter of 2021;

•a net loss of $94 million in the first nine months of 2021;

•a net gain of $34 million in the third quarter of 2020; and

•a net gain of $184 million in the first nine months of 2020.

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 $202 million within the next 12 months into income. The maximum length of time over which we are hedging our exposure to the variability in future foreign exchange cash flows is approximately 22 years and relates to foreign currency debt.

(c)The amounts reclassified from OCI were reclassified into OID.

(d)Short-term borrowings and long-term debt include foreign currency borrowings which are used in net investment hedges. The short-term borrowings carrying value as of October 3, 2021 was $1.2 billion. The long-term debt carrying values as of October 3, 2021 and December 31, 2020 were $862 million and $2.1 billion, respectively.

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

The following summarizes cumulative basis adjustments for fair value hedges to our long-term debt:
	October 3, 2021						December 31, 2020
			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)	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 debt	$	1,241	$	18	$	1,178	$	2,016	$	117	$	1,149

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