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Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Summary of Interest Rate Swaps Held

At September 30, 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)	September 30, 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:

		September 30, 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								Asset				Liability
Derivatives Designated as Hedging Instruments
Interest rate swap contracts	Other assets	$	15			$	—			$	2,700			$	20			$	—			$	2,700
Interest rate swap contracts	Accrued and other current liabilities	—				3				1,000				—				—				—
Interest rate swap contracts	Other noncurrent liabilities	—				23				2,500				—				29				3,500
Foreign exchange contracts	Other current assets	83				—				4,385				616				—				6,063
Foreign exchange contracts	Other assets	46				—				1,979				129				—				2,075
Foreign exchange contracts	Accrued and other current liabilities	—				88				1,574				—				1				48
Foreign exchange contracts	Other noncurrent liabilities	—				1				25				—				1				12
		$	144			$	115			$	14,163			$	765			$	31			$	14,398
Derivatives Not Designated as Hedging Instruments
Foreign exchange contracts	Other current assets	$	77			$	—			$	3,927			$	230			$	—			$	8,210
Foreign exchange contracts	Accrued and other current liabilities	—				112				6,383				—				103				2,931
		$	77			$	112			$	10,310			$	230			$	103			$	11,141
		$	221			$	227			$	24,473			$	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:

	September 30, 2017								December 31, 2016
($ in millions)	Asset				Liability				Asset				Liability
Gross amounts recognized in the consolidated balance sheet	$	221			$	227			$	995			$	134
Gross amount subject to offset in master netting arrangements not offset in the consolidated balance sheet	(137		)		(137		)		(131		)		(131		)
Cash collateral received	(8		)		—				(529		)		—
Net amounts	$	76			$	90			$	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   September 30,								Nine Months Ended   September 30,
($ in millions)	2017				2016				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)	$	8			$	59			$	2			$	(139	)
Amount of (gain) loss recognized in Other (income) expense, net on hedged item (1)	(9		)		(60		)		(5		)		135
Derivatives designated in foreign currency cash flow hedging relationships
Foreign exchange contracts
Amount of gain reclassified from AOCI to Sales	(13		)		(44		)		(157		)		(251		)
Amount of loss recognized in OCI on derivatives	88				69				520				311
Derivatives not designated in a hedging relationship
Foreign exchange contracts
Amount of loss (gain) recognized in Other (income) expense, net on derivatives (2)	119				29				70				(87		)

⁽¹⁾ There was $1 million of ineffectiveness on the hedge during both the third quarter of 2017 and 2016, and $3 million and $4 million, respectively, of ineffectiveness on the hedge during the first nine months 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:

	September 30, 2017																December 31, 2016
	Fair Value				Amortized Cost				Gross Unrealized								Fair Value				Amortized Cost				Gross Unrealized
($ in millions)									Gains				Losses												Gains				Losses
Corporate notes and bonds	$	10,259			$	10,242			$	31			$	(14	)		$	10,577			$	10,601			$	15			$	(39	)
U.S. government and agency securities	1,924				1,934				—				(10		)		2,232				2,244				1				(13		)
Asset-backed securities	1,473				1,473				2				(2		)		1,376				1,380				1				(5		)
Mortgage-backed securities	704				708				1				(5		)		796				801				1				(6		)
Commercial paper	695				695				—				—				4,330				4,330				—				—
Foreign government bonds	640				642				—				(2		)		519				521				—				(2		)
Equity securities	539				309				233				(3		)		349				281				71				(3		)
	$	16,234			$	16,003			$	267			$	(36	)		$	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)	September 30, 2017																December 31, 2016
Assets
Investments
Corporate notes and bonds	$	—			$	10,110			$	—			$	10,110			$	—			$	10,389			$	—			$	10,389
U.S. government and agency securities	68				1,622				—				1,690				29				1,890				—				1,919
Asset-backed securities (1)	—				1,395				—				1,395				—				1,257				—				1,257
Commercial paper	—				695				—				695				—				4,330				—				4,330
Foreign government bonds	—				639				—				639				—				518				—				518
Mortgage-backed securities (1)	—				603				—				603				—				628				—				628
Equity securities	368				—				—				368				201				—				—				201
	436				15,064				—				15,500				230				19,012				—				19,242
Other assets (2)
U.S. government and agency securities	—				234				—				234				—				313				—				313
Corporate notes and bonds	—				149				—				149				—				188				—				188
Mortgage-backed securities (1)	—				101				—				101				—				168				—				168
Asset-backed securities (1)	—				78				—				78				—				119				—				119
Foreign government bonds	—				1				—				1				—				1				—				1
Equity securities	171				—				—				171				148				—				—				148
	171				563				—				734				148				789				—				937
Derivative assets (3)
Purchased currency options	—				119				—				119				—				644				—				644
Forward exchange contracts	—				87				—				87				—				331				—				331
Interest rate swaps	—				15				—				15				—				20				—				20
	—				221				—				221				—				995				—				995
Total assets	$	607			$	15,848			$	—			$	16,455			$	378			$	20,796			$	—			$	21,174
Liabilities
Other liabilities
Contingent consideration	$	—			$	—			$	945			$	945			$	—			$	—			$	891			$	891
Derivative liabilities (3)
Forward exchange contracts	—				201				—				201				—				93				—				93
Interest rate swaps	—				26				—				26				—				29				—				29
Written currency options	—				—				—				—				—				12				—				12
	—				227				—				227				—				134				—				134
Total liabilities	$	—			$	227			$	945			$	1,172			$	—			$	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⁾  Investments included in other assets are restricted for the payment of benefits under employee benefit plans.

⁽³⁾  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:

	Nine Months Ended September 30,
($ in millions)	2017				2016
Fair value January 1	$	891			$	590
Changes in fair value (1)	151				29
Additions	3				300
Payments	(100		)		(25		)
Fair value September 30 (2)	$	945			$	894

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

⁽²⁾ Includes $234 million recorded as a current liability for amounts expected to be paid within the next 12 months.

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Tabular disclosure of the fair value measurement of liabilities using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets), and gains or losses recognized in other comprehensive income (loss) and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs) by class of liability.

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-Publisher FASB
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Tabular disclosure of the location and amount of derivative instruments and nonderivative instruments designated as hedging instruments reported before netting adjustments, and the amount of gain (loss) on derivative instruments and nonderivative instruments designated and qualified as hedging instruments.

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Tabular disclosure of interest rate derivatives, including, but not limited to, the fair value of the derivatives, statement of financial position location, and statement of financial performance location of these instruments.

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