Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

At March 31, 2017, the Company was a party to 26 pay-floating, receive-fixed interest rate swap contracts designated as fair value hedges of fixed-rate notes in which the notional amounts match the amount of the hedged fixed-rate notes as detailed in the table below.



($ in millions)	March 31, 2017
Debt Instrument	Par Value of Debt		Number of Interest Rate Swaps Held	Total Swap Notional Amount
1.30% notes due 2018	$	1,000	4	$	1,000
5.00% notes due 2019	1,250		3	550
1.85% notes due 2020	1,250		5	1,250
3.875% notes due 2021	1,150		5	1,150
2.40% notes due 2022	1,000		4	1,000
2.35% notes due 2022	1,250		5	1,250

Fair Value of Derivatives on a Gross Basis Segregated between those Derivatives that are Designated as Hedging Instruments and those that are Not Designated as Hedging Instruments

Presented in the table below is the fair value of derivatives on a gross basis segregated between those derivatives that are designated as hedging instruments and those that are not designated as hedging instruments:



		March 31, 2017						December 31, 2016
		Fair Value of Derivative				U.S. Dollar Notional		Fair Value of Derivative				U.S. Dollar Notional
($ in millions)	Balance Sheet Caption	Asset		Liability		U.S. Dollar Notional		Asset		Liability		U.S. Dollar Notional
Derivatives Designated as Hedging Instruments
Interest rate swap contracts	Other assets	$	11	$	—	$	2,700	$	20	$	—	$	2,700
Interest rate swap contracts	Other noncurrent liabilities	—		35		3,500		—		29		3,500
Foreign exchange contracts	Other current assets	330		—		5,049		616		—		6,063
Foreign exchange contracts	Other assets	56		—		1,815		129		—		2,075
Foreign exchange contracts	Accrued and other current liabilities	—		21		915		—		1		48
Foreign exchange contracts	Other noncurrent liabilities	—		1		20		—		1		12
		$	397	$	57	$	13,999	$	765	$	31	$	14,398
Derivatives Not Designated as Hedging Instruments
Foreign exchange contracts	Other current assets	$	232	$	—	$	8,037	$	230	$	—	$	8,210
Foreign exchange contracts	Accrued and other current liabilities	—		89		6,479		—		103		2,931
		$	232	$	89	$	14,516	$	230	$	103	$	11,141
		$	629	$	146	$	28,515	$	995	$	134	$	25,539

Information on Derivative Positions Subject to Master Netting Arrangements as if they were Presented on a Net Basis

The following table provides information on the Company’s derivative positions subject to these master netting arrangements as if they were presented on a net basis, allowing for the right of offset by counterparty and cash collateral exchanged per the master agreements and related credit support annexes:



	March 31, 2017						December 31, 2016
($ in millions)	Asset			Liability			Asset			Liability
Gross amounts recognized in the consolidated balance sheet	$	629		$	146		$	995		$	134
Gross amount subject to offset in master netting arrangements not offset in the consolidated balance sheet	(144		)	(144		)	(131		)	(131		)
Cash collateral received	(222		)	—			(529		)	—
Net amounts	$	263		$	2		$	335		$	3

Location and Pretax Gain or Loss Amounts for Derivatives

The table below provides information on the location and pretax gain or loss amounts for derivatives that are: (i) designated in a fair value hedging relationship, (ii) designated in a foreign currency cash flow hedging relationship and (iii) not designated in a hedging relationship:



	Three Months Ended March 31,
($ in millions)	2017			2016
Derivatives designated in a fair value hedging relationship
Interest rate swap contracts
Amount of loss (gain) recognized in Other (income) expense, net on derivatives ⁽¹⁾	$	15		$	(150	)
Amount of (gain) loss recognized in Other (income) expense, net on hedged item ⁽¹⁾	(16		)	147
Derivatives designated in foreign currency cash flow hedging relationships
Foreign exchange contracts
Amount of gain reclassified from AOCI to Sales	(94		)	(143		)
Amount of loss recognized in OCI on derivatives	263			167
Derivatives not designated in a hedging relationship
Foreign exchange contracts
Amount of (gain) loss recognized in Other (income) expense, net on derivatives ⁽²⁾	(47		)	24

⁽¹⁾There was $1 million and $3 million of ineffectiveness on the hedge during the first quarter of 2017 and 2016, respectively.

⁽²⁾ These derivative contracts mitigate changes in the value of remeasured foreign currency denominated monetary assets and liabilities attributable to changes in foreign currency exchange rates.

Information on Available-for-sale Investments

Information on investments in debt and equity securities is as follows:



	March 31, 2017									December 31, 2016
	Fair Value		Amortized Cost		Gross Unrealized					Fair Value		Amortized Cost		Gross Unrealized
($ in millions)	Fair Value		Amortized Cost		Gains		Losses			Fair Value		Amortized Cost		Gains		Losses
Corporate notes and bonds	$	10,445	$	10,455	$	19	$	(29	)	$	10,577	$	10,601	$	15	$	(39	)
U.S. government and agency securities	2,011		2,021		1		(11		)	2,232		2,244		1		(13		)
Asset-backed securities	1,410		1,411		2		(3		)	1,376		1,380		1		(5		)
Commercial paper	773		773		—		—			4,330		4,330		—		—
Mortgage-backed securities	712		717		—		(5		)	796		801		1		(6		)
Foreign government bonds	560		561		1		(2		)	519		521		—		(2		)
Equity securities	356		278		79		(1		)	349		281		71		(3		)
	$	16,267	$	16,216	$	102	$	(51	)	$	20,179	$	20,158	$	89	$	(68	)

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

Financial assets and liabilities measured at fair value on a recurring basis are summarized below:



	Fair Value Measurements Using								Fair Value Measurements Using
	Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
($ in millions)	March 31, 2017								December 31, 2016
Assets
Investments
Corporate notes and bonds	$	—	$	10,287	$	—	$	10,287	$	—	$	10,389	$	—	$	10,389
U.S. government and agency securities	66		1,647		—		1,713		29		1,890		—		1,919
Asset-backed securities⁽¹⁾	—		1,312		—		1,312		—		1,257		—		1,257
Commercial paper	—		773		—		773		—		4,330		—		4,330
Mortgage-backed securities ⁽¹⁾	—		595		—		595		—		628		—		628
Foreign government bonds	—		559		—		559		—		518		—		518
Equity securities	198		—		—		198		201		—		—		201
	264		15,173		—		15,437		230		19,012		—		19,242
Other assets
U.S. government and agency securities	—		298		—		298		—		313		—		313
Corporate notes and bonds	—		158		—		158		—		188		—		188
Mortgage-backed securities ⁽¹⁾	—		117		—		117		—		168		—		168
Asset-backed securities⁽¹⁾	—		98		—		98		—		119		—		119
Foreign government bonds	—		1		—		1		—		1		—		1
Equity securities	158		—		—		158		148		—		—		148
	158		672		—		830		148		789		—		937
Derivative assets ⁽²⁾
Purchased currency options	—		354		—		354		—		644		—		644
Forward exchange contracts	—		264		—		264		—		331		—		331
Interest rate swaps	—		11		—		11		—		20		—		20
	—		629		—		629		—		995		—		995
Total assets	$	422	$	16,474	$	—	$	16,896	$	378	$	20,796	$	—	$	21,174
Liabilities
Other liabilities
Contingent consideration	$	—	$	—	$	925	$	925	$	—	$	—	$	891	$	891
Derivative liabilities ⁽²⁾
Forward exchange contracts	—		110		—		110		—		93		—		93
Interest rate swaps	—		35		—		35		—		29		—		29
Written currency options	—		1		—		1		—		12		—		12
	—		146		—		146		—		134		—		134
Total liabilities	$	—	$	146	$	925	$	1,071	$	—	$	134	$	891	$	1,025

⁽¹⁾

Primarily all of the asset-backed securities are highly-rated (Standard & Poor’s rating of AAA and Moody’s Investors Service rating of Aaa), secured primarily by auto loan, credit card and student loan receivables, with weighted-average lives of primarily 5 years or less. Mortgage-backed securities represent AAA-rated securities issued or unconditionally guaranteed as to payment of principal and interest by U.S. government agencies.


⁽²⁾	The fair value determination of derivatives includes the impact of the credit risk of counterparties to the derivatives and the Company’s own credit risk, the effects of which were not significant.

Information About the Changes in Liabilities for Contingent Consideration

Summarized information about the changes in liabilities for contingent consideration is as follows:



	Three Months Ended March 31,
($ in millions)	2017		2016
Fair value January 1	$	891	$	590
Changes in fair value⁽¹⁾	34		10
Additions	—		77
Payments	—		(25		)
Fair value March 31	$	925	$	652

⁽¹⁾ Recorded in Research and development expenses, Materials and production costs and Other (income) expense, net. Includes cumulative translation adjustments.