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Fair Value Measurements (Tables)

3 Months Ended

Apr. 03, 2022

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 2022 and 2021, net of tax:

			April 3, 2022															April 4, 2021
(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 fair value hedging relationship:
Interest rate swaps contracts:
Hedged items			$	—		—			—			(531)			—			—			—			—			—			—
Derivatives designated as hedging instruments			—			—			—			531			—			—			—			—			—			—
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			—			—			—			45			—			—			—			—			40			—
Amount of gain or (loss) recognized in AOCI			—			—			—			45			—			—			—			—			40			—
Gain (Loss) on cash flow hedging relationship:
Forward foreign exchange contracts:
Amount of gain or (loss) reclassified from AOCI into income			(17)			(52)			23			—			(18)			17			34			(113)			—			3
Amount of gain or (loss) recognized in AOCI			22			(94)			33			—			(73)			(3)			(193)			(76)			—			17
Cross currency interest rate swaps contracts:
Amount of gain or (loss) reclassified from AOCI into income			—			—			—			120			—			—						—			92			—
Amount of gain or (loss) recognized in AOCI			$	—		—			—			(128)			—			—			—			—			(307)			—

The following table is the effect of net investment hedges for the fiscal first quarters ended in 2022 and 2021:

						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 3, 2022						April 4, 2021												April 3, 2022						April 4, 2021
Debt						$	68					209						Interest (income) expense						—						—
Cross Currency interest rate swaps						$	560					361						Interest (income) expense						—						—

Schedule of Derivative Financial Instruments and Classification on Consolidated Balance Sheet

As of April 3, 2022, and January 2, 2022, the following amounts were recorded on the Consolidated Balance Sheet related to cumulative basis adjustment for fair value hedges

Line item in the Consolidated Balance Sheet in which the hedged item is included

Carrying Amount of the Hedged Liability

Cumulative Amount of Fair Value Hedging Gain/ (Loss) Included in the Carrying Amount of the Hedged Liability

(Dollars in Millions)

April 3, 2022

January 2, 2022

April 3, 2022

January 2, 2022

Long-term Debt

9,313

9,793

(694)

(142)

Schedule of Effect of Derivatives not Designated as Hedging Instruments

The following table is the effect of derivatives not designated as hedging instruments for the fiscal first quarters ended 2022 and 2021:

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 3, 2022

April 4, 2021

Foreign Exchange Contracts

Other (income) expense

$

29

(16)

Summary of Activity Related to Equity Investments

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

(Dollars in Millions)						January 2, 2022																		April 3, 2022
						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						$	1,884					(402)						(30)						1,452						1,452
Equity Investments without readily determinable value						$	500					(5)						10						505						505

(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 3, 2022 and January 2, 2022 were as follows:

						April 3, 2022																								January 2, 2022
(Dollars in Millions)						Level 1						Level 2						Level 3						Total						Total(1)
Derivatives designated as hedging instruments:
Assets:
Forward foreign exchange contracts						$	—					742						—						742						540
Interest rate contracts (2)						—						975						—						975						796
Total						—						1,717						—						1,717						1,336
Liabilities:
Forward foreign exchange contracts						—						1,058						—						1,058						881
Interest rate contracts (2)						—						1,652						—						1,652						979
Total						—						2,710						—						2,710						1,860
Derivatives not designated as hedging instruments:
Assets:
Forward foreign exchange contracts						—						36						—						36						24
Liabilities:
Forward foreign exchange contracts						—						68						—						68						28
Other Investments:
Equity investments (3)						1,452						—						—						1,452						1,884
Debt securities (4)						—						19,583						—						19,583						19,727
Other Liabilities
Contingent consideration (5)						$	—					—						486						486						533

Gross to Net Derivative Reconciliation						April 3, 2022						January 2, 2022
(Dollars in Millions)
Total Gross Assets						$	1,753					1,360
Credit Support Agreement (CSA)						(1,655)						(1,285)
Total Net Asset						98						75
Total Gross Liabilities						2,778						1,888
Credit Support Agreement (CSA)						(2,709)						(1,855)
Total Net Liabilities						$	69					33

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

						April 3, 2022						April 4, 2021
(Dollars in Millions)
Beginning Balance						$	533					$	633
Changes in estimated fair value (6)						(47)						15
Additions						—						—
Payments						—						(48)
Ending Balance						$	486					$	600

(1)2021 assets and liabilities are all classified as Level 2 with the exception of equity investments of $1,884 million, which are classified as Level 1 and contingent consideration of $533 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 $469 million and $520 million, classified as non-current other liabilities as of April 3, 2022 and January 2, 2022, respectively. Includes $17 million and $13 million classified as current liabilities as of April 3, 2022 and January 2, 2022, respectively.

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

Marketable Securities

The Company's cash, cash equivalents and current marketable securities as of April 3, 2022 comprised:

(Dollars in Millions)			Carrying Amount												Gain/( Loss)						Estimated Fair Value						Cash & Cash Equivalents						Current Marketable Securities
Cash			$	3,128											—						3,128						3,128						—
Non-U.S. sovereign securities(1)			329												—						329						—						329
U.S. reverse repurchase agreements			1,449												—						1,449						1,449						—
Corporate debt securities(1)			3,557												(6)						3,551						540						3,017
Money market funds			1,579												—						1,579						1,579						—
Time deposits(1)			763												—						763						763						—
Subtotal			10,805												(6)						10,799						7,459						3,346
															Unrealized Loss
U.S. Gov't securities			19,354												(19)						19,335						2,968						16,367
Other sovereign securities			3												—						3						—						3
Corporate debt securities			246												(1)						245						36						209
Subtotal available for sale debt(2)			$	19,603											(20)						19,583						3,004						16,579
Total cash, cash equivalents and current marketable securities			$	30,408											(26)						30,382						10,463						19,925

(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 3, 2022 are as follows:

(Dollars in Millions)						Cost Basis						Fair Value
Due within one year						$	19,585					19,564
Due after one year through five years						19						19
Due after five years through ten years						—						—
Total debt securities						$	19,604					19,583

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 3, 2022:

(Dollars in Millions)						Carrying Amount						Estimated Fair Value
Financial Liabilities
Current Debt						$	4,297					4,298
Non-Current Debt
6.73% Debentures due 2023						250						266
3.375% Notes due 2023						802						820
0.650% Notes due 2024 (750MM Euro 1.1311)						824						829
5.50% Notes due 2024 (500 MM GBP 1.3485)						654						713
2.625% Notes due 2025						749						762
0.55% Notes due 2025						950						886
2.45% Notes due 2026						1,995						1,981
2.95% Notes due 2027						930						934
0.95% Notes due 2027						1,436						1,307
2.90% Notes due 2028						1,496						1,489
1.150% Notes due 2028 (750MM Euro 1.1311)						826						829
6.95% Notes due 2029						298						379
1.30% Notes due 2030						1,672						1,486
4.95% Debentures due 2033						498						590
4.375% Notes due 2033						855						959
1.650% Notes due 2035 (1.5B Euro 1.1311)						1,654						1,687
3.55% Notes due 2036						917						947
5.95% Notes due 2037						993						1,288
3.625% Notes due 2037						1,416						1,463
3.40% Notes due 2038						992						999
5.85% Debentures due 2038						697						901
4.50% Debentures due 2040						540						617
2.10% Notes due 2040						914						777
4.85% Notes due 2041						297						342
4.50% Notes due 2043						496						565
3.70% Notes due 2046						1,975						2,097
3.75% Notes due 2047						906						969
3.50% Notes due 2048						743						766
2.25% Notes due 2050						914						759
2.45% Notes due 2060						1,155						942
Other						7						7
Total Non-Current Debt						$	28,851					29,356

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