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Fair Value Measurements (Tables)

3 Months Ended

Apr. 04, 2021

Fair Value Disclosures [Abstract]

Summary of Derivative Activity

The following table is a summary of the activity related to derivatives and hedges for the fiscal first quarters ended in 2021 and 2020, net of tax:

			April 4, 2021															March 29, 2020
(Dollars in Millions)			Sales			Cost of Products Sold			R&D Expense			Interest (Income) Expense			Other (Income) Expense			Sales			Cost of Products Sold			R&D Expense			Interest (Income) Expense			Other (Income) Expense
The effects of fair value, net investment and cash flow hedging:
Gain (Loss) on net investment hedging relationship:
Cross currency interest rate swaps contracts:
Amount of gain or (loss) recognized in income on derivative amount excluded from effectiveness testing			—			—			—			40			—			—			—			—			40			—
Amount of gain or (loss) recognized in AOCI			—			—			—			40			—			—			—			—			40			—
Gain (Loss) on cash flow hedging relationship:
Forward foreign exchange contracts:
Amount of gain or (loss) reclassified from AOCI into income			17			34			(113)			—			3			9			(173)			(110)			—			(2)
Amount of gain or (loss) recognized in AOCI			(3)			(193)			(76)			—			17			11			302			(110)			—			(36)
Cross currency interest rate swaps contracts:
Amount of gain or (loss) reclassified from AOCI into income			—			—			—			92			—			—						—			98			—
Amount of gain or (loss) recognized in AOCI			$	—		—			—			(307)			—			—			—			—			625			—

The following table is the effect of net investment hedges for the fiscal first quarters ended in 2021 and 2020

						Gain/(Loss) Recognized In Accumulated OCI												Location of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income Into Income						Gain/(Loss) Reclassified From Accumulated OCI Into Income
(Dollars in Millions)						April 4, 2021						March 29, 2020												April 4, 2021						March 29, 2020
Debt						$	209					46						Interest (income) expense						—						—
Cross Currency interest rate swaps						$	361					827						Interest (income) expense						—						—

Schedule of Effect of Derivatives not Designated as Hedging Instruments

Gain/(Loss) Recognized In Income on Derivative

(Dollars in Millions)

Location of Gain /(Loss) Recognized in Income on Derivative

Fiscal First Quarter Ended

Derivatives Not Designated as Hedging Instruments

April 4, 2021

March 29, 2020

Foreign Exchange Contracts

Other (income) expense

$

(16)

89

Summary of Activity Related to Equity Investments

The following table is a summary of the activity related to equity investments:

(Dollars in Millions)						January 3, 2021																		April 4, 2021
						Carrying Value						Changes in Fair Value Reflected in Net Income (1)						Sales/ Purchases/Other (2)						Carrying Value						Non Current Other Assets
Equity Investments with readily determinable value						$	1,481					(36)						7						1,452						1,452
Equity Investments without readily determinable value						$	738					(55)						81						764						764

(1) Recorded in Other Income/Expense

(2) Other includes impact of currency

Financial Assets and Liabilities at Fair Value

The Company’s significant financial assets and liabilities measured at fair value as of April 4, 2021 and January 3, 2021 were as follows:

						April 4, 2021																								January 3, 2021
(Dollars in Millions)						Level 1						Level 2						Level 3						Total						Total(1)
Derivatives designated as hedging instruments:
Assets:
Forward foreign exchange contracts						$	—					561						—						561						849
Interest rate contracts (2)						—						522						—						522						240
Total						—						1,083						—						1,083						1,089
Liabilities:
Forward foreign exchange contracts						—						565						—						565						702
Interest rate contracts (2)						—						540						—						540						1,569
Total						—						1,105						—						1,105						2,271
Derivatives not designated as hedging instruments:
Assets:
Forward foreign exchange contracts						—						51						—						51						49
Liabilities:
Forward foreign exchange contracts						—						43						—						43						38
Other Investments:
Equity investments (3)						1,452						—						—						1,452						1,481
Debt securities(4)						—						14,493						—						14,493						14,042
Other Liabilities
Contingent consideration (5)						$	—					—						600						600						633

Gross to Net Derivative Reconciliation						April 4, 2021						January 3, 2021
(Dollars in Millions)
Total Gross Assets						$	1,134					1,138
Credit Support Agreement (CSA)						(1,028)						(1,107)
Total Net Asset						106						31
Total Gross Liabilities						1,148						2,309
Credit Support Agreement (CSA)						(1,130)						(2,172)
Total Net Liabilities						$	18					137

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

						April 4, 2021						March 29, 2020
(Dollars in Millions)
Beginning Balance						$	633					$	1,715
Changes in estimated fair value (6)						15						(977)
Additions						—						106
Payments						(48)						(60)
Ending Balance						$	600					$	784

(1)2020 assets and liabilities are all classified as Level 2 with the exception of equity investments of $1,481 million, which are classified as Level 1 and contingent consideration of $633 million, classified as Level 3.

(2) Includes cross currency interest rate swaps and interest rate swaps.

(3)    Classified as non-current other assets.

(4)    Classified within cash equivalents and current marketable securities.

(5)    Includes $589 million and $594 million, classified as non-current other liabilities as of April 4, 2021 and January 3, 2021, respectively. Includes $11 million and $39 million classified as current liabilities as of April 4, 2021 and January 3, 2021, respectively.

(6) Ongoing fair value adjustment amounts are primarily recorded in Research and Development expense.

The Company recorded a contingent consideration reversal of $983 million in 2020 related to the timing of certain developmental milestones associated with the Auris Health acquisition. The reversal of the contingent consideration was recorded in Other income and expense, net.

Marketable Securities

The Company's cash, cash equivalents and current marketable securities as of April 4, 2021 comprised:

(Dollars in Millions)			Carrying Amount						Unrecognized Gain						Unrecognized Loss						Estimated Fair Value						Cash & Cash Equivalents						Current Marketable Securities
Cash			$	2,247					—						—						2,247						2,247
Non-U.S. sovereign securities(1)			400						—						—						400						—						400
U.S. reverse repurchase agreements			1,199						—						—						1,199						1,199						—
Other reverse repurchase agreements			—						—						—						—						—
Corporate debt securities(1)			3,239						—						—						3,239						1,890						1,349
Money market funds			2,094						—						—						2,094						2,094
Time deposits(1)			947						—						—						947						947
Subtotal			10,126						—						—						10,126						8,377						1,749
									Unrealized Gain						Unrealized Loss
U.S. Gov't securities			14,228						1						—						14,229						4,268						9,961
Other sovereign securities			8						—						—						8						1						7
Corporate debt securities			256						—						—						256						25						231
Subtotal available for sale debt(2)			$	14,492					1						—						14,493						4,294						10,199
Total cash, cash equivalents and current marketable securities			$	24,618					1						—						24,619						12,671						11,948

(1) Held to maturity investments are reported at amortized cost and gains or losses are reported in earnings.

(2) Available for sale debt securities are reported at fair value with unrealized gains and losses reported net of taxes in other comprehensive income.

Schedule of Available for Sale Securities Maturities

The contractual maturities of the available for sale securities as of April 4, 2021 are as follows:

(Dollars in Millions)						Cost Basis						Fair Value
Due within one year						$	14,486					14,487
Due after one year through five years						6						6
Due after five years through ten years						—						—
Total debt securities						$	14,492					14,493

Financial Liabilities not Measured at Fair Value

Financial Instruments not measured at Fair Value:

The following financial liabilities are held at carrying amount on the consolidated balance sheet as of April 4, 2021:

(Dollars in Millions)						Carrying Amount						Estimated Fair Value
Financial Liabilities
Current Debt						$	3,350					3,380
Non-Current Debt
6.73% Debentures due 2023						250						292
3.375% Notes due 2023						802						868
2.05% Notes due 2023						499						515
0.650% Notes due 2024 (750MM Euro 1.1757)						880						904
5.50% Notes due 2024 (500 MM GBP 1.3799)						687						808
2.625% Notes due 2025						749						797
0.55% Notes due 2025						996						982
2.45% Notes due 2026						1,994						2,115
2.95% Notes due 2027						997						1,084
0.95% Notes due 2027						1,494						1,445
2.90% Notes due 2028						1,495						1,616
1.150% Notes due 2028 (750MM Euro 1.1757)						876						955
6.95% Notes due 2029						297						416
1.30% Notes due 2030						1,743						1,642
4.95% Debentures due 2033						498						639
4.375% Notes due 2033						855						1,046
1.650% Notes due 2035 (1.5B Euro 1.1757)						1,749						2,035
3.55% Notes due 2036						990						1,117
5.95% Notes due 2037						992						1,422
3.625% Notes due 2037						1,488						1,694
3.40% Notes due 2038						991						1,097
5.85% Debentures due 2038						696						992
4.50% Debentures due 2040						539						676
2.10% Notes due 2040						986						907
4.85% Notes due 2041						297						385
4.50% Notes due 2043						496						628
3.70% Notes due 2046						1,974						2,257
3.75% Notes due 2047						992						1,146
3.50% Notes due 2048						742						827
2.25% Notes due 2050						984						883
2.45% Notes due 2060						1,228						1,104
Other						7						6
Total Non-Current Debt						$	30,263					33,300

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