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Fair Value Measurements (Tables)
 6 Months Ended
Jul. 01, 2012
Fair Value Disclosures [Abstract]  
Summary of designated derivatives
The following table is a summary of the activity related to derivatives designated as hedges for the fiscal second quarters in 2012 and 2011:

 
 
 
 
 
 
 
 
 
 
 
Gain/ (Loss)
recognized in
Accumulated
OCI(1)
 
Gain/(Loss) reclassified from
Accumulated OCI
into income(1)
 
Gain/ (Loss)
recognized in
Other
income/expense(2)
 
 
Fiscal Second Quarters Ended
(Dollars in Millions)
 
2012
 
2011
 
2012
 
2011
 
2012
 
2011
Cash Flow Hedges by Income Statement Caption
 
 
 
 
 
 
 
 
 
 
 
 
Sales to customers(A)
 
$
(42
)
 
—

 
(10
)
 
—

 
(1
)
 
—

Cost of products sold(A)
 
(97
)
 
12

 
(13
)
 
(44
)
 
1

 
6

Research and development expense(A)
 
30

 
28

 
11

 
18

 
—

 
(2
)
Interest (income)/Interest expense, net(B)
 
(41
)
 
(31
)
 
(6
)
 
(16
)
 
—

 
—

Other (income)expense, net(A)
 
39

 
(7
)
 
9

 
2

 
(1
)
 
—

Total
 
$
(111
)
 
2

 
(9
)
 
(40
)
 
(1
)
 
4


The following table is a summary of the activity related to derivatives designated as hedges for the first fiscal six months in 2012 and 2011:

 
 
 
 
 
 
 
 
 
 
 
Gain/ (Loss)
recognized in
Accumulated
OCI(1)
 
Gain/ (Loss) reclassified from
Accumulated OCI
into income(1)
 
Gain/ (Loss)
recognized in
other
income/expense(2)
 
 
Fiscal Six Months Ended
(Dollars in Millions)
 
2012
 
2011
 
2012
 
2011
 
2012
 
2011
Cash Flow Hedges by Income Statement Caption
 
 
 
 
 
 
 
 
 
 
 
 
Sales to customers(A)
 
$
(14
)
 
27

 
(30
)
 
(10
)
 
—

 
(2
)
Cost of products sold(A)
 
(39
)
 
92

 
(34
)
 
(106
)
 
—

 
3

Research and development expense(A)
 
11

 
(8
)
 
13

 
19

 
—

 
(2
)
Interest (income)/Interest expense, net(B)
 
(42
)
 
(40
)
 
(9
)
 
(18
)
 
—

 
—

Other (income)expense, net(A)
 
(1
)
 
(59
)
 
8

 
(3
)
 
(1
)
 
2

Total
 
$
(85
)
 
12

 
(52
)
 
(118
)
 
(1
)
 
1

 
 
 
 
 
 
 
 
 
 
 
 
 

All amounts shown in the tables above are net of tax.
(1) Effective portion
(2) Ineffective portion
(A) Foreign exchange contracts
(B) Cross currency interest rate swaps
Financial assets and liabilities at fair value

The Company’s significant financial assets and liabilities measured at fair value as of July 1, 2012 and January 1, 2012 were as follows:
 
 
July 1, 2012
 
 
 
January 1, 2012
(Dollars in Millions)
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Total(1)
Derivatives designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
 
$
—

 
449

 
—

 
449

 
442

Cross currency interest rate swaps(2)
 
—

 
17

 
—

 
17

 
15

Total
 
—

 
466

 
—

 
466

 
457

Liabilities:
 
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
 
—

 
403

 
—

 
403

 
452

Cross currency interest rate swaps(3)
 
—

 
699

 
—

 
699

 
594

Total
 
—

 
1,102

 
—

 
1,102

 
1,046

Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
 
—

 
22

 
—

 
22

 
29

Swiss Franc Option*
 
—

 
—

 
—

 
—

 
17

Total
 
—

 
22

 
—

 
22

 
46

Liabilities:
 
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
 
—

 
41

 
—

 
41

 
34

Other Investments(4)
 
$
1,675

 
—

 
—

 
1,675

 
1,563


*    Currency option related to the acquisition of Synthes, Inc., which expired in January 2012.
(1)
As of January 1, 2012, these assets and liabilities are classified as Level 2 with the exception of Other Investments of $1,563 million which are classified as Level 1.
(2)
Includes $14 million and $15 million of non-current assets for July 1, 2012 and January 1, 2012, respectively.
(3)
Includes $699 million and $594 million of non-current liabilities for July 1, 2012 and January 1, 2012, respectively.
(4)
Classified as non-current other assets.
Financial assets and liabilities not measured at fair value

Financial Instruments not measured at Fair Value:

The following financial assets and liabilities are held at carrying amount on the consolidated balance sheet as of July 1, 2012:
(Dollars in Millions)
 
Carrying Amount

 
Estimated Fair Value

Financial Assets
 
 
 
 
Current Investments
 
 
 
 
Cash
 
$
3,459

 
3,459

Government securities and obligations
 
10,857

 
10,857

Corporate debt securities
 
529

 
529

Money market funds
 
1,620

 
1,620

Time deposits
 
450

 
450

Total cash, cash equivalents and current marketable securities
 
$
16,915

 
16,915

 
 
 
 
 
Fair value of government securities and obligations and corporate debt securities was estimated using quoted broker prices and significant other observable inputs.
Financial Liabilities
 
 
 
 
 
 
 
 
 
Current Debt
 
$
6,040

 
6,040

Non-Current Debt
 
 
 
 
3 month LIBOR+0.09% FRN due 2014
 
750

 
750

1.20% Notes due 2014
 
999

 
1,014

2.15% Notes due 2016
 
898

 
950

5.55% Debentures due 2017
 
1,000

 
1,223

5.15% Debentures due 2018
 
898

 
1,091

4.75% Notes due 2019 (1B Euro 1.2434)
 
1,237

 
1,475

3% Zero Coupon Convertible Subordinated Debentures due in 2020
 
203

 
194

2.95% Debentures due 2020
 
541

 
576

3.55% Notes due 2021
 
446

 
503

6.73% Debentures due 2023
 
250

 
345

5.50% Notes due 2024 (500 GBP 1.5539)
 
772

 
993

6.95% Notes due 2029
 
294

 
436

4.95% Debentures due 2033
 
500

 
597

5.95% Notes due 2037
 
995

 
1,391

5.85% Debentures due 2038
 
700

 
958

4.50% Debentures due 2040
 
539

 
631

4.85% Notes due 2041
 
298

 
370

Other
 
205

 
202

Total Non-Current Debt
 
$
11,525

 
13,699