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Derivative instruments (Tables)

9 Months Ended

Sep. 30, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of notional amounts and interest rates for cross-currency swaps

The notional amounts and interest rates of our cross-currency swaps as of September 30, 2023, were as follows (notional amounts in millions):

						Foreign currency												U.S. dollars
Hedged notes						Notional amounts						Interest rates						Notional amounts						Interest rates
2.00% 2026 euro Notes						€	750					2.0		%				$	833					3.9		%
5.50% 2026 pound sterling Notes						£	475					5.5		%				$	747					6.0		%
4.00% 2029 pound sterling Notes						£	700					4.0		%				$	1,111					4.6		%

Unrealized gain (loss) recognized in Other Comprehensive Income for our derivative instruments designated as cash flow hedges

Gains and losses recognized in AOCI for our derivative instruments designated as cash flow hedges were as follows (in millions):

						Three months ended September 30,												Nine months ended September 30,
Derivatives in cash flow hedging relationships						2023						2022						2023						2022
Foreign currency forward contracts						$	198					$	324					$	222					$	654
Cross-currency swap contracts						(22)						(279)						(36)						(486)
Forward interest rate contracts						—						—						(31)						—
Total unrealized gains						$	176					$	45					$	155					$	168

Derivatives in fair value hedging relationships

The hedged liabilities and related cumulative-basis adjustments for fair value hedges of those liabilities were recorded in the Condensed Consolidated Balance Sheets as follows (in millions):

						Carrying amounts of hedged liabilities(1)												Cumulative amounts of fair value hedging adjustments related to the carrying amounts of the hedged liabilities(2)
Condensed Consolidated Balance Sheets locations						September 30, 2023						December 31, 2022						September 30, 2023						December 31, 2022
Current portion of long-term debt						$	1,426					$	82					$	27					$	82
Long-term debt						$	4,621					$	6,017					$	(521)					$	(519)

____________

(1)     Current portion of long-term debt includes $75 million and $82 million of carrying value with discontinued hedging relationships as of September 30, 2023 and December 31, 2022, respectively. Long-term debt includes $303 million and $357 million of carrying value with discontinued hedging relationships as of September 30, 2023 and December 31, 2022, respectively.

(2)    Current portion of long-term debt includes $75 million and $82 million of hedging adjustments on discontinued hedging relationships as of September 30, 2023 and December 31, 2022, respectively. Long-term debt includes $203 million and $257 million of hedging adjustments on discontinued hedging relationships as of September 30, 2023 and December 31, 2022, respectively.

Summary of amounts of income and expense line items

The following tables summarize the amounts recorded in income and expense line items and the effects thereon from fair value and cash flow hedging, including discontinued hedging relationships (in millions):

						Three months ended September 30, 2023																		Nine months ended September 30, 2023
						Product sales						Other income (expense), net						Interest expense, net						Product sales						Other income (expense), net						Interest expense, net
Total amounts recorded in income and (expense) line items presented in the Condensed Consolidated Statements of Income						$	6,548					$	685					$	(759)					$	19,077					$	2,431					$	(2,054)
The effects of cash flow and fair value hedging:
Gains (losses) on cash flow hedging relationships reclassified out of AOCI:
Foreign currency forward contracts						$	33					$	—					$	—					$	121					$	—					$	—
Cross-currency swap contracts						$	—					$	(86)					$	—					$	—					$	(57)					$	—
Gains (losses) on fair value hedging relationships—interest rate swap agreements:
Hedged items(1)						$	—					$	—					$	58					$	—					$	—					$	63
Derivatives designated as hedging instruments						$	—					$	—					$	(37)					$	—					$	—					$	5

						Three months ended September 30, 2022																		Nine months ended September 30, 2022
						Product sales						Other income (expense), net						Interest expense, net						Product sales						Other income (expense), net						Interest expense, net
Total amounts recorded in income and (expense) line items presented in the Condensed Consolidated Statements of Income						$	6,237					$	100					$	(368)					$	18,249					$	(747)					$	(991)
The effects of cash flow and fair value hedging:
Gains (losses) on cash flow hedging relationships reclassified out of AOCI:
Foreign currency forward contracts						$	69					$	—					$	—					$	149					$	—					$	—
Cross-currency swap contracts						$	—					$	(198)					$	—					$	—					$	(461)					$	—
Gains (losses) on fair value hedging relationships—interest rate swap agreements:
Hedged items(1)						$	—					$	—					$	240					$	—					$	—					$	734
Derivatives designated as hedging instruments						$	—					$	—					$	(220)					$	—					$	—					$	(670)

__________

(1)    Gains on hedged items do not exactly offset losses on the related designated hedging instruments due to amortization of the cumulative amounts of fair value hedging adjustments included in the carrying amount of the hedged debt for discontinued hedging relationships and the recognition of gains on terminated hedges when the corresponding hedged item was paid down in the period.

Fair values of derivatives included in the Condensed Consolidated Balance Sheets

The fair values of derivatives included in the Condensed Consolidated Balance Sheets were as follows (in millions):

						Derivative assets												Derivative liabilities
September 30, 2023						Condensed Consolidated Balance Sheets locations						Fair values						Condensed Consolidated Balance Sheets locations						Fair values
Derivatives designated as hedging instruments:
Foreign currency forward contracts						Other current assets/ Other noncurrent assets						$	347					Accrued liabilities/ Other noncurrent liabilities						$	29
Cross-currency swap contracts						Other current assets/ Other noncurrent assets						—						Accrued liabilities/ Other noncurrent liabilities						513
Interest rate swap contracts						Other current assets/ Other noncurrent assets						—						Accrued liabilities/ Other noncurrent liabilities						772
Forward interest rate contracts						Other current assets/ Other noncurrent assets						—						Accrued liabilities/ Other noncurrent liabilities						—
Total derivatives designated as hedging instruments												347												1,314
Total derivatives												$	347											$	1,314

						Derivative assets												Derivative liabilities
December 31, 2022						Condensed Consolidated Balance Sheets locations						Fair values						Condensed Consolidated Balance Sheets locations						Fair values
Derivatives designated as hedging instruments:
Foreign currency forward contracts						Other current assets/ Other noncurrent assets						$	287					Accrued liabilities/ Other noncurrent liabilities						$	76
Cross-currency swap contracts						Other current assets/ Other noncurrent assets						54						Accrued liabilities/ Other noncurrent liabilities						541
Interest rate swap contracts						Other current assets/ Other noncurrent assets						—						Accrued liabilities/ Other noncurrent liabilities						776
Forward interest rate contracts						Other current assets/ Other noncurrent assets						—						Accrued liabilities/ Other noncurrent liabilities						5
Total derivatives designated as hedging instruments												341												1,398
Total derivatives												$	341											$	1,398

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Tabular disclosure of gain (loss) on derivative and nonderivative instruments designated and qualifying as cash flow hedge recorded in accumulated other comprehensive income (AOCI) and reclassified into earnings.

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Tabular disclosure of the location and fair value amounts of derivative instruments (and nonderivative instruments that are designated and qualify as hedging instruments) reported in the statement of financial position.

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Tabular disclosure of derivative instruments (including nonderivative instruments that are designated and qualify as hedging instruments) of (a) the location and amount of gains and losses reported in the statement of financial performance and (b) the location and fair value amounts of the instruments reported in the statement of financial position.

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Tabular disclosure for fair value hedging instruments of (a) the location and amount of gains and losses reported in the statement of financial performance and (b) the location and fair value amounts of the instruments reported in the statement of financial position.

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-SubTopic 10
-Section 50
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