XML 46 R16.htm IDEA: XBRL DOCUMENT

Financial Instruments

12 Months Ended

Dec. 31, 2023

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, 2023						As of December 31, 2022
(MILLIONS)	Total		Level 1		Level 2		Total		Level 1		Level 2
Financial assets:
Short-term investments
Equity securities with readily determinable fair values:
Money market funds	$	5,124	$	—	$	5,124	$	1,588	$	—	$	1,588

Available-for-sale debt securities:
Government and agency—non-U.S.	817		—		817		15,915		—		15,915
Government and agency—U.S.	2,601		—		2,601		1,313		—		1,313
Corporate and other	982		—		982		1,514		—		1,514
	4,400		—		4,400		18,743		—		18,743
Total short-term investments	9,524		—		9,524		20,331		—		20,331
Other current assets
Derivative assets:

Foreign exchange contracts	298		—		298		714		—		714
Total other current assets	298		—		298		714		—		714
Long-term investments
Equity securities with readily determinable fair values(a)	2,779		2,772		7		2,836		2,823		13

Available-for-sale debt securities:
Government and agency—non-U.S.	124		—		124		280		—		280

Corporate and other	26		—		26		72		—		72
	150		—		150		352		—		352
Total long-term investments	2,929		2,772		156		3,188		2,823		365
Other noncurrent assets
Derivative assets:
Interest rate contracts	144		—		144		—		—		—
Foreign exchange contracts	258		—		258		364		—		364
Total derivative assets	402		—		402		364		—		364
Insurance contracts(b)	790		—		790		665		—		665
Total other noncurrent assets	1,191		—		1,191		1,028		—		1,028
Total assets	$	13,943	$	2,772	$	11,170	$	25,261	$	2,823	$	22,439

Financial liabilities:
Other current liabilities
Derivative liabilities:
Interest rate contracts	$	16	$	—	$	16	$	10	$	—	$	10
Foreign exchange contracts	404		—		404		694		—		694
Total other current liabilities	420		—		420		704		—		704
Other noncurrent liabilities
Derivative liabilities:
Interest rate contracts	275		—		275		321		—		321
Foreign exchange contracts	725		—		725		864		—		864
Total other noncurrent liabilities	1,000		—		1,000		1,185		—		1,185
Total liabilities	$	1,420	$	—	$	1,420	$	1,889	$	—	$	1,889

(a)Long-term equity securities of $130 million as of December 31, 2023 and $143 million as of December 31, 2022 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 $62 billion as of December 31, 2023 and $33 billion as of December 31, 2022. The estimated fair value of such debt, using a market approach and Level 2 inputs, was $61 billion as of December 31, 2023 and $30 billion as of December 31, 2022.

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, 2023 and 2022. 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)	2023		2022
Short-term investments
Equity securities with readily determinable fair values(a)	$	5,124	$	1,588
Available-for-sale debt securities	4,400		18,743
Held-to-maturity debt securities	313		1,985
Total Short-term investments	$	9,837	$	22,316

Long-term investments
Equity securities with readily determinable fair values(b)	$	2,779	$	2,836
Available-for-sale debt securities	150		352
Held-to-maturity debt securities	47		48
Private equity securities at cost(b)	755		800
Total Long-term investments	$	3,731	$	4,036
Equity-method investments	11,637		11,033
Total long-term investments and equity-method investments	$	15,368	$	15,069
Held-to-maturity cash equivalents	$	207	$	679

(a)Represent money market funds primarily invested in U.S. Treasury and government debt.

(b)Represent investments in the life sciences sector.

Debt Securities


Our investment portfolio consists of investment-grade debt securities issued across diverse governments, corporate and financial institutions:
	As of December 31, 2023														As of December 31, 2022
			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.	$	953	$	2	$	(14)	$	941	$	817	$	124	$	—	$	15,946	$	297	$	(48)	$	16,195
Government and agency––U.S.	2,601		—		—		2,601		2,601		—		—		1,313		—		—		1,313
Corporate and other	1,006		4		(2)		1,007		982		26		—		1,584		7		(4)		1,586
Held-to-maturity debt securities
Time deposits and other	561		—		—		561		519		31		11		1,171		—		—		1,171
Government and agency––non-U.S.	4		—		—		4		—		4		1		1,542		—		—		1,542
Total debt securities	$	5,126	$	6	$	(16)	$	5,115	$	4,919	$	185	$	12	$	21,556	$	304	$	(53)	$	21,807

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)	2023		2022		2021
Net (gains)/losses recognized during the period on equity securities(a)	$	(1,590)	$	1,273	$	(1,344)
Less: Net (gains)/losses recognized during the period on equity securities sold during the period	(1,754)		(126)		(80)
Net unrealized (gains)/losses during the reporting period on equity securities still held at the reporting date(b)	$	165	$	1,400	$	(1,264)

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

(b)Included in net unrealized (gains)/losses are observable price changes on equity securities without readily determinable fair values. As of December 31, 2023, there were cumulative impairments and downward adjustments of $259 million and upward adjustments of $213 million. Impairments, downward and upward adjustments were not material to our operations in 2023, 2022 and 2021.

C. Short-Term Borrowings


Short-term borrowings include:
	As of December 31,
(MILLIONS)	2023		2022
Commercial paper, principal amount(a)	$	7,965	$	—
Current portion of long-term debt, principal amount	2,250		2,550
Other short-term borrowings, principal amount(b)	252		385
Total short-term borrowings, principal amount	10,467		2,935
Net fair value adjustments related to hedging and purchase accounting	5		11
Net unamortized discounts, premiums and debt issuance costs	(121)		(1)
Total Short-term borrowings, including current portion of long-term debt, carried at historical proceeds, as adjusted	$	10,350	$	2,945

(a)Issued in the fourth quarter of 2023 as part of the financing for our acquisition of Seagen (see Note 2A). The weighted-average effective interest rate on commercial paper outstanding was approximately 5.37% as of December 31, 2023.

(b)Primarily includes cash collateral. See Note 7F.

As of December 31, 2023, we had access to a total of $15 billion in committed U.S. revolving credit facilities, consisting of an $8 billion facility maturing in October 2024 and a $7 billion facility maturing in October 2028, which may be used for general corporate purposes including to support our global commercial paper borrowings. In addition to the U.S. revolving credit facilities, our lenders have provided us an additional $305 million in lines of credit, of which $274 million expire within one year. Essentially all lines of credit were unused as of December 31, 2023.

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)	2023		2022
Notes due 2024 (3.9% for 2022)(a)	$	—	$	2,250
Notes due 2025 (3.9% for 2023 and 0.8% for 2022)	3,750		750
Notes due 2026 (3.7% for 2023 and 2.9% for 2022)	6,000		3,000
Notes due 2027 (2.1% for 2023 and 2022)	1,029		1,000
Notes due 2028 (4.6% for 2023 and 4.8% for 2022)	5,660		1,660
Notes due 2029 (3.5% for 2023 and 2022)	1,750		1,750
Notes due 2030-2034 (4.1% for 2023 and 2.9% for 2022)	12,000		4,000
Notes due 2035-2039 (5.8% for 2023 and 2022)	8,048		8,017
Notes due 2040-2044 (4.1% for 2023 and 3.6% for 2022)	7,995		4,903
Notes due 2045-2049 (4.1% for 2023 and 2022)	3,500		3,500
Notes due 2050-2063 (5.0% for 2023 and 2.7% for 2022)	11,250		1,250
Total long-term debt, principal amount	60,982		32,080
Net fair value adjustments related to hedging and purchase accounting	1,039		959
Net unamortized discounts, premiums and debt issuance costs	(483)		(175)
Other long-term debt	—		20
Total long-term debt, carried at historical proceeds, as adjusted	$	61,538	$	32,884
Current portion of long-term debt, carried at historical proceeds, as adjusted (not included above (3.9% for 2023 and 3.7% for 2022))	$	2,254	$	2,560

*Our long-term debt is generally redeemable by us at any time at varying redemption prices plus accrued and unpaid interest.

(a)Reclassified to the current portion of long-term debt.

Issuances


In May 2023, we issued, through our wholly-owned finance subsidiary, PIE, the following senior unsecured notes as part of the financing for our acquisition of Seagen(a), (b):
(MILLIONS)		Principal
Interest Rate	Maturity Date	December 31, 2023
4.65%	May 19, 2025	$	3,000
4.45%	May 19, 2026	3,000
4.45%	May 19, 2028	4,000
4.65%	May 19, 2030	3,000
4.75%	May 19, 2033	5,000
5.11%	May 19, 2043	3,000
5.30%	May 19, 2053	6,000
5.34%	May 19, 2063	4,000
Total long-term debt issued in 2023(c)		$	31,000

(a)The notes are fully and unconditionally guaranteed on a senior unsecured basis by Pfizer Inc. PIE was formed to finance a portion of the consideration for the acquisition of Seagen and has no assets or operations, and will have no assets or operations, other than as related to the issuance, administration and repayment of the notes and any other debt securities that it may issue in the future.

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

(c)The weighted average effective interest rate for the notes at issuance was 4.93%.

In August 2021, we completed a public offering of $1.0 billion principal amount of senior unsecured notes due 2031 at an effective interest rate of 1.79%.

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, Canadian dollar, and Chinese renminbi, and include a portion of our forecasted foreign exchange-denominated intercompany inventory sales hedged up to two years. 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:
(MILLIONS)	As of December 31, 2023						As of December 31, 2022
			Fair Value						Fair Value
	Notional		Asset		Liability		Notional		Asset		Liability
Derivatives designated as hedging instruments:
Foreign exchange contracts(a)	$	18,750	$	403	$	916	$	26,603	$	838	$	1,196
Interest rate contracts	6,750		144		290		2,250		—		331
			546		1,206				838		1,527

Derivatives not designated as hedging instruments:
Foreign exchange contracts	$	25,609	154		214		$	29,814	240		362

Total			$	700	$	1,420			$	1,078	$	1,889

(a)The notional amount of outstanding foreign exchange contracts hedging our intercompany forecasted inventory sales was $4.9 billion as of December 31, 2023 and $4.4 billion as of December 31, 2022.


The following summarizes information about the gains/(losses) incurred to hedge or offset operational foreign exchange or interest rate risk exposures:
	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)	2023		2022		2023		2022		2023		2022
Derivative Financial Instruments in Cash Flow Hedge Relationships:
Interest rate contracts	$	—	$	—	$	68	$	—	$	1	$	—
Foreign exchange contracts(b)	—		—		380		1,296		236		1,916
Amount excluded from effectiveness testing and amortized into earnings(c)	—		—		178		148		177		145

Derivative Financial Instruments in Fair Value Hedge Relationships:
Interest rate contracts	196		(337)		—		—		—		—
Hedged item	(196)		337		—		—		—		—



Derivative Financial Instruments in Net Investment Hedge Relationships:
Foreign exchange contracts	—		—		(393)		816		—		—
Amount excluded from effectiveness testing and amortized into earnings(c)	—		—		137		73		136		129

Non-Derivative Financial Instruments in Net Investment Hedge Relationships(d):
Foreign currency short-term borrowings	—		—		—		26		—		—
Foreign currency long-term debt	—		—		(29)		51		—		—

Derivative Financial Instruments Not Designated as Hedges:
Foreign exchange contracts	164		(1,153)		—		—		—		—

	$	164	$	(1,153)	$	341	$	2,409	$	549	$	2,190

(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 gain of $253 million in 2023 and a net gain of $375 million in 2022. 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 $11 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 19 years and relates to foreign currency debt.

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

(d)Long-term debt includes foreign currency borrowings which are used as net investment hedges; the related carrying values as of December 31, 2023 and December 31, 2022 were $824 million and $795 million, respectively.


The following summarizes cumulative basis adjustments to our long-term debt in fair value hedges:
	As of December 31, 2023						As of December 31, 2022
			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


Short-term borrowings, including current portion of long-term debt	$	—	$	—	$	4	$	—	$	—	$	10
Long-term debt	$	7,196	$	(131)	$	957	$	2,235	$	(321)	$	1,042

(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 1 G. 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, 2023, the largest investment exposures in our portfolio consisted primarily of U.S. government money market funds, as well as sovereign debt instruments issued by the U.S.

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 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, 2023, the aggregate fair value of these derivative financial instruments that are in a net payable position was $768 million, for which we have posted collateral of $771 million with a corresponding amount reported in Short-term investments. As of December 31, 2023, the aggregate fair value of our derivative financial instruments that are in a net receivable position was $225 million, for which we have received collateral of $221 million with a corresponding amount reported in Short-term borrowings, including current portion of long-term debt.