XML 57 R16.htm IDEA: XBRL DOCUMENT
v3.25.0.1

Fair value measurements | 12 Months Ended
--- | ---
Dec. 29, 2024
Fair Value Disclosures [Abstract] |
Fair value measurements | Fair value measurements The Company uses forward foreign exchange contracts to manage its exposure to the variability of cash flows, primarily related to the foreign exchange rate changes of future intercompany products and third-party purchases of materials denominated in a foreign currency. The Company uses cross currency interest rate swaps to manage currency risk primarily related to borrowings. Both types of derivatives are designated as cash flow hedges. Additionally, the Company uses interest rate swaps as an instrument to manage interest rate risk related to fixed rate borrowings. These derivatives are designated as fair value hedges. The Company uses cross currency interest rate swaps and forward foreign exchange contracts designated as net investment hedges. Additionally, the Company uses forward foreign exchange contracts to offset its exposure to certain foreign currency assets and liabilities. These forward foreign exchange contracts are not designated as hedges and therefore, changes in the fair values of these derivatives are recognized in earnings, thereby offsetting the current earnings effect of the related foreign currency assets and liabilities. The Company does not enter into derivative financial instruments for trading or speculative purposes, or that contain credit risk related contingent features. The Company maintains credit support agreements (CSA) with certain derivative counterparties establishing collateral thresholds based on respective credit ratings and netting agreements. As of December 29, 2024 and December 31, 2023, the total amount of cash collateral paid by the Company under the CSA amounted to $2.2 billion and $4.0 billion net respectively, related to net investment and cash flow hedges. On an ongoing basis, the Company monitors counter-party credit ratings. The Company considers credit non-performance risk to be low, because the Company primarily enters into agreements with commercial institutions that have at least an investment grade credit rating. Refer to the table on significant financial assets and liabilities measured at fair value contained in this footnote for receivables and payables with these commercial institutions. As of December 29, 2024, the Company had notional amounts outstanding for forward foreign exchange contracts, cross currency interest rate swaps and interest rate swaps of $45.1 billion, $40.5 billion and $9.0 billion, respectively. As of December 31, 2023, the Company had notional amounts outstanding for forward foreign exchange contracts, cross currency interest rate swaps and interest rate swaps of $42.9 billion, $39.7 billion and $10.0 billion, respectively. All derivative instruments are recorded on the balance sheet at fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether the derivative is designated as part of a hedge transaction, and if so, the type of hedge transaction. Cash exchanged for derivatives is primarily in cash flows from operating activities. The designation as a cash flow hedge is made at the entrance date of the derivative contract. At inception, all derivatives are expected to be highly effective. Foreign exchange contracts designated as cash flow hedges are accounted for under the forward method and all gains/losses associated with these contracts will be recognized in the income statement when the hedged item impacts earnings. Changes in the fair value of these derivatives are recorded in accumulated other comprehensive income until the underlying transaction affects earnings, and are then reclassified to earnings in the same account as the hedged transaction. Gains and losses associated with interest rate swaps and changes in fair value of hedged debt attributable to changes in interest rates are recorded to interest expense in the period in which they occur. Gains and losses on net investment hedges are accounted through the currency translation account within accumulated other comprehensive income. The portion excluded from effectiveness testing is recorded through interest (income) expense using the spot method. On an ongoing basis, the Company assesses whether each derivative continues to be highly effective in offsetting changes of hedged items. If and when a derivative is no longer expected to be highly effective, hedge accounting is discontinued. The Company designated its Euro denominated notes with due dates ranging from 2024 to 2044 as a net investment hedge of the Company's investments in certain of its international subsidiaries that use the Euro as their functional currency in order to reduce the volatility caused by changes in exchange rates. As of December 29, 2024, the balance of deferred net loss on derivatives included in accumulated other comprehensive income was $1.7 billion after-tax. For additional information, see the Consolidated Statements of Comprehensive Income and Note 13. The Company expects that substantially all of the amounts related to forward foreign exchange contracts will be reclassified into earnings over the next 12 months as a result of transactions that are expected to occur over that period. The maximum length of time over which the Company is hedging transaction exposure is 18 months, excluding interest rate contracts and net investment hedges. The amount ultimately realized in earnings may differ as foreign exchange rates change. Realized gains and losses are ultimately determined by actual exchange rates at maturity of the derivative. The following table is a summary of the activity related to derivatives and hedges for the fiscal years ended December 29, 2024 and December 31, 2023, net of tax:
| December 29, 2024 |  | December 31, 2023
(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 | $— | — | — | 64 | — |  | — | — | — | 168 | —
Derivatives designated as hedging instruments | — | — | — | (64) | — |  | — | — | — | (168) | —
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 | $— | — | — | 148 | — |  | — | — | — | 130 | —
Amount of gain or (loss) recognized in AOCI | — | — | — | 148 | — |  | — | — | — | 130 | —
Gain (Loss) on cash flow hedging relationship: |  |  |  |  |  |  |  |  |  |  |
Forward foreign exchange contracts: |  |  |  |  |  |  |  |  |  |  |
Amount of gain or (loss) reclassified from AOCI into income | 2 | 426 | 33 | — | 6 |  | 7 | 186 | (37) | — | 8
Amount of gain or (loss) recognized in AOCI | (7) | (156) | 80 | — | 21 |  | 10 | 447 | (18) | — | 9
Cross currency interest rate swaps contracts: |  |  |  |  |  |  |  |  |  |  |
Amount of gain or (loss) reclassified from AOCI into income | — | — | — | 247 | — |  | — | — | — | 275 | —
Amount of gain or (loss) recognized in AOCI | $— | — | — | (597) | — |  | — | — | — | (156) | —
As of December 29, 2024 and December 31, 2023, 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 Adjustment Included in the Carrying Amount of the Hedged Liability
(Dollars in Millions) |  | December 29, 2024 |  | December 31, 2023 |  | December 29, 2024 |  | December 31, 2023
Long-term Debt |  | $7,935 |  | $8,862 |  | $(1,132) |  | $(1,216)
The following table is the effect of derivatives not designated as hedging instrument for the fiscal years ended December 29, 2024 and December 31, 2023:
(Dollars in Millions) |  | Location of Gain /(Loss) Recognized in Income on Derivative |  | Gain/(Loss) Recognized In Income on Derivative
Derivatives Not Designated as Hedging Instruments |  |  |  | December 29, 2024 |  | December 31, 2023
Foreign Exchange Contracts |  | Other (income) expense |  | $8 |  | (60)
The following table is the effect of net investment hedges for the fiscal years ended December 29, 2024 and December 31, 2023:
|  | 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) |  | December 29, 2024 |  | December 31, 2023 |  |  |  | December 29, 2024 |  | December 31, 2023
Debt |  | $282 |  | (131) |  | Interest (income) expense |  | — |  | —
Cross Currency interest rate swaps |  | $955 |  | 642 |  | Interest (income) expense |  | — |  | —
The Company holds equity investments with readily determinable fair values and equity investments without readily determinable fair values. The Company measures equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The following table is a summary of the activity related to equity investments for the fiscal years ended December 29, 2024 and December 31, 2023:
|  | December 31, 2023 |  |  |  |  |  | December 29, 2024
(Dollars in Millions) |  | 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 * |  | $4,473 |  | (17) |  | (4,005) |  | 451 |  | 451
Equity Investments without readily determinable value |  | $696 |  | (197) |  | 274 |  | 773 |  | 773
|  | January 1, 2023 |  |  |  |  |  | December 31, 2023
(Dollars in Millions) |  | 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 * |  | $576 |  | (368) |  | 4,265 |  | 4,473 |  | 4,473
Equity Investments without readily determinable value |  | $613 |  | 1 |  | 82 |  | 696 |  | 696
(1)Recorded in Other Income/Expense (2)Other includes impact of currency * The December 31, 2023 balance includes the 9.5% remaining stake in Kenvue. A debt-for-equity exchange was completed in the fiscal second quarter of 2024. On May 15, 2024, the Company issued $3.6 billion aggregate principal amount of commercial paper and received $3.6 billion of net cash proceeds to be used for general corporate purposes. On May 17, 2024, the Company completed a Debt-for-Equity Exchange of its remaining 182,329,550 shares of Kenvue Common Stock for the outstanding Commercial Paper. Upon completion of the Debt-for-Equity Exchange, the Commercial Paper was satisfied and discharged, and the Company no longer owns any shares of Kenvue Common Stock. This exchange resulted in a loss of approximately $0.4 billion recorded in Other (income) expense. For the fiscal years ended December 29, 2024 and December 31, 2023 for equity investments without readily determinable market values, $171 million and $1 million, respectively, of the changes in fair value reflected in net income were the result of impairments. There were impacts of $26 million and $27 million, respectively, of changes in the fair value reflected in net income due to changes in observable prices and gains on the disposal of investments. Fair value is the exit price that would be received to sell an asset or paid to transfer a liability. Fair value is a market-based measurement determined using assumptions that market participants would use in pricing an asset or liability. In accordance with ASC 820, a three-level hierarchy to prioritize the inputs used in measuring fair value. The levels within the hierarchy are described below with Level 1 having the highest priority and Level 3 having the lowest. The fair value of a derivative financial instrument (i.e., forward foreign exchange contracts, interest rate contracts) is the aggregation by currency of all future cash flows discounted to its present value at the prevailing market interest rates and subsequently converted to the U.S. Dollar at the current spot foreign exchange rate. The Company does not believe that fair values of these derivative instruments materially differ from the amounts that could be realized upon settlement or maturity, or that the changes in fair value will have a material effect on the Company’s results of operations, cash flows or financial position. The Company also holds equity investments which are classified as Level 1 and debt securities which are classified as Level 2. The Company holds acquisition related contingent liabilities based upon certain regulatory and commercial events, which are classified as Level 3, whose values are determined using discounted cash flow methodologies or similar techniques for which the determination of fair value requires significant judgment or estimations. The following three levels of inputs are used to measure fair value: Level 1 — Quoted prices in active markets for identical assets and liabilities. Level 2 — Significant other observable inputs. Level 3 — Significant unobservable inputs. The Company’s significant financial assets and liabilities measured at fair value as of the fiscal year ended December 29, 2024 and December 31, 2023 were as follows:
|  | 2024 |  | 2023
(Dollars in Millions) |  | Level 1 |  | Level 2 |  | Level 3 |  | Total |  | Total(1)
Derivatives designated as hedging instruments: |  |  |  |  |  |  |  |  |  |
Assets: |  |  |  |  |  |  |  |  |  |
Forward foreign exchange contracts |  | $— |  | 660 |  | — |  | 660 |  | 539
Interest rate contracts(2) |  | — |  | 1,484 |  | — |  | 1,484 |  | 988
Total |  | $— |  | 2,144 |  | — |  | 2,144 |  | 1,527
Liabilities: |  |  |  |  |  |  |  |  |  |
Forward foreign exchange contracts |  | — |  | 794 |  | — |  | 794 |  | 624
Interest rate contracts(2) |  | — |  | 3,753 |  | — |  | 3,753 |  | 5,338
Total |  | $— |  | 4,547 |  | — |  | 4,547 |  | 5,962
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |  |  |
Assets: |  |  |  |  |  |  |  |  |  |
Forward foreign exchange contracts |  | $— |  | 50 |  | — |  | 50 |  | 64
Liabilities: |  |  |  |  |  |  |  |  |  |
Forward foreign exchange contracts |  | — |  | 17 |  | — |  | 17 |  | 75
Available For Sale Other Investments: |  |  |  |  |  |  |  |  |  |
Equity investments(3) |  | 451 |  | — |  | — |  | 451 |  | 4,473
Debt securities(4) |  | — |  | 7,216 |  | — |  | 7,216 |  | 8,874
Other Liabilities |  |  |  |  |  |  |  |  |  |
Contingent Consideration(5) |  | $ |  |  |  | 1,217 |  | 1,217 |  | 1,092
Gross to Net Derivative Reconciliation |  | 2024 |  | 2023
(Dollars in Millions) |  |  |  |
Total Gross Assets |  | $2,194 |  | 1,591
Credit Support Agreements (CSA) |  | (2,172) |  | (1,575)
Total Net Asset |  | 22 |  | 16
Total Gross Liabilities |  | 4,564 |  | 6,037
Credit Support Agreements (CSA) |  | (4,412) |  | (5,604)
Total Net Liabilities |  | $152 |  | 433
Summarized information about changes in liabilities for contingent consideration is as follows:
| 2024 |  | 2023 |  | 2022
(Dollars in Millions) |  |  |  |  |
Beginning Balance | $1,092 |  | 1,120 |  | 533
Changes in estimated fair value | 88 |  | 29 |  | (194)
Additions(6) | 112 |  | — |  | 792
Payments/Other | (75) |  | (57) |  | (11)
Ending Balance(5) | $1,217 |  | 1,092 |  | 1,120
(1)2023 assets and liabilities are all classified as Level 2 with the exception of equity investments of $4,473 million, which are classified as Level 1 and contingent consideration of $1,092 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 as cash equivalents and current marketable securities. (5)Includes $1,217 million, $1,092 million and $1,116 million, classified as non-current other liabilities as of December 29, 2024, December 31, 2023 and January 1, 2023, respectively. Includes $4 million classified as current liabilities as of January 1, 2023. (6)In fiscal year 2024, the Company recorded $105 million of contingent consideration related to Proteologix. In fiscal year 2022, the Company recorded $704 million of contingent consideration related to Abiomed. See Notes 2 and 7 for financial assets and liabilities held at carrying amount on the Consolidated Balance Sheet.

X
- References No definition available. + Details
Name: | us-gaap_FairValueDisclosuresAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/exampleRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 107 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482078/820-10-55-107 Reference 2: http://www.xbrl.org/2003/role/exampleRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 100 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482078/820-10-55-100 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (c)(3) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2E -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2E Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (e) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (g) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Topic 940 -SubTopic 820 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147478119/940-820-50-1 + Details
Name: | us-gaap_FairValueDisclosuresTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration