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Financial Instruments
 12 Months Ended
Dec. 31, 2021
Financial Instruments [Abstract]  
Financial Instruments Financial Instruments
A. Fair Value Measurements
Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis and Fair Value Hierarchy, using a Market Approach:
As of December 31, 2021As of December 31, 2020
(MILLIONS)TotalLevel 1Level 2TotalLevel 1Level 2
Financial assets:
Short-term investments
Classified as equity securities with readily determinable fair values:
Money market funds$5,365 $— $5,365 $567 $— $567 
Classified as available-for-sale debt securities:
Government and agency—non-U.S.17,318 — 17,318 7,719 — 7,719 
Government and agency—U.S.4,050 — 4,050 982 — 982 
Corporate and other647 — 647 1,008 — 1,008 
22,014 — 22,014 9,709 — 9,709 
Total short-term investments27,379 — 27,379 10,276 — 10,276 
Other current assets
Derivative assets:
Interest rate contracts4 — 4 18 — 18 
Foreign exchange contracts704 — 704 234 — 234 
Total other current assets709 — 709 251 — 251 
Long-term investments
Classified as equity securities with readily determinable fair values(a)
3,876 3,849 27 2,809 2,776 32 
Classified as available-for-sale debt securities:
Government and agency—non-U.S.465 — 465 6 — 6 
Government and agency—U.S.6 — 6 121 — 121 
Corporate and other50 — 50 — — — 
521 — 521 128 — 128 
Total long-term investments4,397 3,849 548 2,936 2,776 160 
Other noncurrent assets
Derivative assets:
Interest rate contracts16 — 16 117 — 117 
Foreign exchange contracts242 — 242 5 — 5 
Total derivative assets259 — 259 122 — 122 
Insurance contracts(b)
808 — 808 693 — 693 
Total other noncurrent assets1,067 — 1,067 814 — 814 
Total assets$33,552 $3,849 $29,703 $14,278 $2,776 $11,501 
Financial liabilities:
Other current liabilities
Derivative liabilities:
Foreign exchange contracts$476 $— $476 $501 $— $501 
Total other current liabilities476 — 476 501 — 501 
Other noncurrent liabilities
Derivative liabilities:
Foreign exchange contracts405 — 405 599 — 599 
Total other noncurrent liabilities405 — 405 599 — 599 
Total liabilities$881 $— $881 $1,100 $— $1,100 
(a)Long-term equity securities of $194 million as of December 31, 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).

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

The carrying value of Long-term debt, excluding the current portion was $36 billion as of December 31, 2021 and $37 billion as of December 31, 2020. The estimated fair value of such debt, using a market approach and Level 2 inputs, was $42 billion as of December 31, 2021 and $46 billion as of December 31, 2020.
The differences between the estimated fair values and carrying values of held-to-maturity debt securities, private equity securities, long-term receivables and short-term borrowings not measured at fair value on a recurring basis were not significant as of December 31, 2021 and 2020. The fair value measurements of our held-to-maturity debt securities and short-term borrowings are based on Level 2 inputs. The fair value measurements of our long-term receivables and private equity securities are based on Level 3 inputs.
B. Investments
Total Short-Term, Long-Term and Equity-Method Investments
The following summarizes our investments by classification type:
As of December 31,
(MILLIONS)20212020
Short-term investments
Equity securities with readily determinable fair values(a)
$5,365 $567 
Available-for-sale debt securities22,014 9,709 
Held-to-maturity debt securities1,746 161 
Total Short-term investments$29,125 $10,437 
Long-term investments
Equity securities with readily determinable fair values$3,876 $2,809 
Available-for-sale debt securities521 128 
Held-to-maturity debt securities34 37 
Private equity securities at cost(b)
623 432 
Total Long-term investments
$5,054 $3,406 
Equity-method investments16,472 16,856 
Total long-term investments and equity-method investments
$21,526 $20,262 
Held-to-maturity cash equivalents$268 $89 
(a)As of December 31, 2021 and 2020, includes money market funds primarily invested in U.S. Treasury and government debt.
(b)Represent investments in the life sciences sector.
Debt Securities
At December 31, 2021, our 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:
As of December 31, 2021As of December 31, 2020
Gross UnrealizedMaturities (in Years)Gross Unrealized
(MILLIONS)Amortized CostGainsLossesFair ValueWithin 1Over 1
to 5		Over 5Amortized CostGainsLossesFair Value
Available-for-sale debt securities
Government and agency––non-U.S.
$18,032 $13 $(263)$17,783 $17,318 $465 $— $7,593 $136 $(4)$7,725 
Government and agency––U.S.
4,056 — (1)4,055 4,050 6 — 1,104 — (1)1,103 
Corporate and other698 — (1)697 647 50 — 1,006 2 — 1,008 
Held-to-maturity debt securities
Time deposits and other
947 — — 947 917 18 11 283 — — 283 
Government and agency––non-U.S.
1,102 — — 1,102 1,097 4 1 5 — — 5 
Total debt securities$24,835 $14 $(265)$24,584 $24,029 $543 $13 $9,991 $138 $(5)$10,124 
Any expected credit losses to these portfolios would be immaterial to our financial statements.
Equity 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:
Year Ended December 31,
(MILLIONS)202120202019
Net (gains)/losses recognized during the period on equity securities(a)
$(1,344)$(540)$(454)
Less: Net (gains)/losses recognized during the period on equity securities sold during the period(80)(24)(25)
Net unrealized (gains)/losses during the reporting period on equity securities still held at the reporting date(b)
$(1,264)$(515)$(429)
(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 December 31, 2021, there were cumulative impairments and downward adjustments of $97 million and upward adjustments of $156 million. Impairments, downward and upward adjustments were not significant in 2021, 2020 and 2019.
C. Short-Term Borrowings
Short-term borrowings include:
As of December 31,
(MILLIONS)20212020
Commercial paper $— $556 
Current portion of long-term debt, principal amount1,636 2,004 
Other short-term borrowings, principal amount(a)
605 145 
Total short-term borrowings, principal amount
2,241 2,705 
Net unamortized discounts, premiums and debt issuance costs— (2)
Total Short-term borrowings, including current portion of long-term debt, carried at historical proceeds, as adjusted
$2,241 $2,703 
(a)Primarily includes cash collateral. See Note 7F.
The weighted-average effective interest rate on commercial paper outstanding was approximately 0.13% as of December 31, 2020.
As of December 31, 2021, we had access to a $7 billion committed U.S. revolving credit facility expiring in 2026, which may be used for general corporate purposes including to support our commercial paper borrowings. In addition to the U.S. revolving credit facility, our lenders have provided us an additional $360 million in lines of credit, of which $322 million expire within one year. Essentially all lines of credit were unused as of December 31, 2021.
D. Long-Term Debt
The following outlines our senior unsecured long-term debt and the weighted-average stated interest rate by maturity:
As of December 31,
(MILLIONS)20212020
Notes due 2022 (1.0% for 2020)(a)
$— $1,728 
Notes due 2023 (3.2% for 2021 and 2020)
2,550 2,550 
Notes due 2024 (3.9% for 2021 and 2020)
2,250 2,250 
Notes due 2025 (0.8% for 2021 and 2020)
750 750 
Notes due 2026 (2.9% for 2021 and 2020)
3,000 3,000 
Notes due 2027 (2.1% for 2021 and 2.0% for 2020)
1,051 1,121 
Notes due 2028-2032 (3.1% for 2021 and 3.4% for 2020)
6,660 5,660 
Notes due 2033-2037 (5.6% for 2021 and 2020)
4,250 4,250 
Notes due 2038-2042 (5.5% for 2021 and 2020)
6,079 6,086 
Notes due 2043-2047 (3.7% for 2021 and 2020)
4,858 4,878 
Notes due 2048-2050 (3.6% for 2021 and 2020)
3,500 3,500 
Total long-term debt, principal amount34,948 35,774 
Net fair value adjustments related to hedging and purchase accounting1,438 1,562 
Net unamortized discounts, premiums and debt issuance costs(195)(207)
Other long-term debt4 4 
Total long-term debt, carried at historical proceeds, as adjusted$36,195 $37,133 
Current portion of long-term debt, carried at historical proceeds, as adjusted (not included above (1.0% for 2021 and 2.6% for 2020))
$1,636 $2,002 
(a)Reclassified to the current portion of long-term debt.
Our long-term debt outlined in the above table is generally redeemable by us at any time at varying redemption prices plus accrued and unpaid interest.
Issuances
In August 2021, we issued the following senior unsecured notes at an effective interest rate of 1.79%:
(MILLIONS)Principal
Interest RateMaturity Date
As of
December 31, 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.
In May 2020, we completed a public offering of $4.0 billion aggregate principal amount of senior unsecured notes with a weighted-average effective interest rate of 2.11% and in March 2020, we completed a public offering of $1.25 billion aggregate principal amount of senior unsecured notes with a weighted-average effective interest rate of 2.67%.

In March 2019, we completed a public offering of $5.0 billion aggregate principal amount of senior unsecured notes with a weighted-average effective interest rate of 3.57%.
Retirements
In November 2020, we repurchased all $1.15 billion and $342 million principal amount outstanding of the 1.95% senior unsecured notes due June 2021 and 5.80% senior unsecured notes due August 2023 and recorded a total net loss of $36 million, in Other (income)/deductions––net. See Note 2B.
In March 2020, we repurchased at par all $1.065 billion principal amount outstanding of our senior unsecured notes due in 2047.
In January 2019, we repurchased all €1.1 billion ($1.3 billion) principal amount outstanding of the 5.75% euro-denominated debt due June 2021 at a redemption value of €1.3 billion ($1.5 billion). We recorded a net loss of $138 million in Other (income)/deductions––net, which included the related termination of cross currency swaps.
E. 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. Where foreign exchange risk is not offset by other exposures, we manage our foreign exchange risk principally through the use of derivative financial instruments and foreign currency debt. These financial instruments serve to mitigate the impact on net income as a result of remeasurement into another currency, or against the impact of translation into U.S. dollars of certain foreign exchange-denominated transactions.
The derivative financial instruments primarily hedge or offset exposures in the euro, U.K. pound, Japanese yen and Canadian dollar.
•We hedge a portion of our forecasted intercompany inventory sales denominated in euro, Japanese yen, Canadian dollar, Chinese renminbi, U.K. pound and Australian dollar for up to two years.
•Under certain market conditions, we may seek to protect against possible declines in the reported net investments of our foreign business entities.

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). For certain foreign exchange contracts, we exclude an amount from the assessment of hedge effectiveness and recognize the excluded amount through an amortization approach in earnings. The hedge relationships are 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 item. 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 into earnings in the same period or periods during which the hedged transaction affects earnings.
•We record in Other comprehensive income/(loss) ––Foreign currency translation adjustments, net 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 not designated as hedging instruments, we recognize the gains and losses immediately into earnings along with the earnings impact of the items they generally offset. These contracts take the opposite currency position of that reflected on the balance sheet to counterbalance the effect of any currency movement.
Interest Rate Risk

Our interest-bearing investments and borrowings are subject to interest rate risk. Depending on market conditions, we may change the profile of our outstanding debt or investments by entering into derivative financial instruments like interest rate swaps, either to hedge or offset the exposure to changes in the fair value of hedged items with fixed interest rates, or to convert variable rate debt or investments to fixed rates. The derivative financial instruments primarily hedge U.S. dollar fixed-rate debt.

We recognize the change in fair value on interest rate contracts that are designated as fair value hedges in earnings, as well as the offsetting earnings impact of the hedged risk attributable to the hedged item.
The following summarizes the fair value of the derivative financial instruments and notional amounts (including those reported as part of discontinued operations):
(MILLIONS)As of December 31, 2021As of December 31, 2020
Fair ValueFair Value
NotionalAssetLiabilityNotionalAssetLiability
Derivatives designated as hedging instruments:
Foreign exchange contracts(a)
$29,576 $787 $717 $24,369 $145 $1,005 
Interest rate contracts
2,250 21 — 1,950 135 — 
808 717 280 1,005 
Derivatives not designated as hedging instruments:
Foreign exchange contracts
$21,419 160 164 $15,063 94 95 
Total$968 $881 $373 $1,100 
(a)The notional amount of outstanding foreign exchange contracts hedging our intercompany forecasted inventory sales was $4.8 billion as of December 31, 2021 and $5.0 billion as of December 31, 2020.
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)
Year Ended December 31,
(MILLIONS)202120202021202020212020
Derivative Financial Instruments in Cash Flow Hedge Relationships:
      
Foreign exchange contracts(b)
$— $— $488 $(649)$(173)$(77)
Amount excluded from effectiveness testing and amortized into earnings(c)
— — 38 55 38 57 
Derivative Financial Instruments in Fair Value Hedge Relationships:
Interest rate contracts
(7)369 — — — — 
Hedged item
7 (369)— — — — 
Derivative Financial Instruments in Net Investment Hedge Relationships:
Foreign exchange contracts— — 468 (501)— — 
Amount excluded from effectiveness testing and amortized into earnings(c)
— — 52 181 109 154 
Non-Derivative Financial Instruments in Net Investment Hedge Relationships:(d)
Foreign currency short-term borrowings— — 78 8 — — 
Foreign currency long-term debt— — 86 (183)— — 
Derivative Financial Instruments Not Designated as Hedges:
Foreign exchange contracts(192)178 — — — — 
All other net(c)
— — 1 12 1 (1)
$(192)$178 $1,210 $(1,077)$(25)$133 
(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)The amounts reclassified from OCI into COS were:
•a net loss of $89 million in 2021; and
•a net gain of $172 million in 2020 (including a gain of $22 million reported in Discontinued operations––net of tax).
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 $362 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 21 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 as net investment hedges. The short-term borrowings carrying value as of December 31, 2021 was $1.1 billion. The long-term debt carrying values as of December 31, 2021 and December 31, 2020 were $844 million and $2.1 billion, respectively.
The following summarizes cumulative basis adjustments to our long-term debt in fair value hedges:
As of December 31, 2021As of 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 RelationshipsDiscontinued Hedging Relationships
Long-term debt$2,233 $16 $1,154 $2,016 $117 $1,149 
(a)Carrying amounts exclude the cumulative amount of fair value hedging adjustments.
F. Credit Risk

On an ongoing basis, we monitor and review the credit risk of our customers, financial institutions and exposures in our investment portfolio.

With respect to our trade accounts receivable, we monitor the creditworthiness of our customers to which we grant credit in the normal course of business. In general, there is no requirement for collateral from customers. For additional information on our trade accounts receivable and
allowance for credit losses, see Note 1H. A significant portion of our trade accounts receivable balances are due from wholesalers and governments. For additional information on our trade accounts receivables with significant customers, see Note 17C.

With respect to our investments, we monitor concentrations of credit risk associated with government, government agency, and corporate issuers of securities. Investments are placed in instruments that are investment grade and are primarily short in duration. Exposure limits are established to limit a concentration with any single credit counterparty. As of December 31, 2021, the largest investment exposures in our portfolio represent primarily sovereign debt instruments issued by the U.S., Canada, Japan, U.K., Germany, France, Australia, and Switzerland.

With respect to our derivative financial instrument agreements with financial institutions, we do not expect to incur a significant loss from failure of any counterparty. Derivative financial instruments are executed under International Swaps and Derivatives Association (ISDA) master agreements with credit-support annexes that contain zero threshold provisions requiring collateral to be exchanged daily depending on levels of exposure. As a result, there are no significant concentrations of credit risk with any individual financial institution. As of December 31, 2021, the aggregate fair value of these derivative financial instruments that are in a net payable position was $372 million, for which we have posted collateral of $382 million with a corresponding amount reported in Short-term investments. As of December 31, 2021, the aggregate fair value of our derivative financial instruments that are in a net receivable position was $477 million, for which we have received collateral of $581 million with a corresponding amount reported in Short-term borrowings, including current portion of long-term debt.