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Employee Benefits (Tables)

12 Months Ended

Dec. 31, 2020

Share-based Payment Arrangement, Noncash Expense [Abstract]

Activity under stock option plans

The following table summarizes activity and related information under our stock option plans. All option grants presented in the table had exercise prices not less than the fair value of the underlying common stock on the grant date:

						Shares (in millions)						Weighted- Average Exercise Price (in dollars)						Weighted-Average Remaining Contractual Term (years)						Aggregate Intrinsic Value (in millions)
Outstanding at December 31, 2019						19.5						$	61.35
Granted						3.3						$	71.63
Forfeited						(0.9)						$	72.64
Expired						(0.7)						$	81.68
Exercised						(4.6)						$	34.07
Outstanding at December 31, 2020						16.6						$	69.40					5.26						$	70
Exercisable at December 31, 2020						11.6						$	68.85					3.84						$	70
Expected to vest, net of estimated forfeitures at December 31, 2020						4.8						$	70.70					8.49						$	—

RSU and PSU activity

The following table summarizes our RSU and PSU activity and related information:

						RSUs												PSUs
(in millions, except per share amounts)						Shares						Weighted- Average Grant Date Fair Value Per Share						Shares (1)						Weighted- Average Grant Date Fair Value Per Share(1)
Outstanding at December 31, 2019						17.2						$	70.08					0.7						$	80.42
Granted						10.8						$	70.94					0.3						$	83.64
Vested						(6.4)						$	72.20					(0.2)						$	73.15
Forfeited						(2.1)						$	70.66					(0.2)						$	81.06
Outstanding at December 31, 2020						19.5						$	69.80					0.6						$	84.87

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(1)     Weighted-average grant-date fair value per share excludes shares related to grants that currently have no grant date as the performance objectives have not yet been defined.

Stock-based compensation expenses -included in consolidated statement of income

The following table summarizes total stock-based compensation expenses included on our Consolidated Statements of Income:

						Year Ended December 31,
(in millions)						2020						2019						2018
Cost of goods sold						$	109					$	48					$	61
Research and development expenses						462						289						379
Selling, general and administrative expenses						505						299						405
Stock-based compensation expense included in total costs and expenses(1)						1,076						636						845
Income tax effect(2)						(222)						2						(164)
Stock-based compensation expense, net of tax						$	854					$	638					$	681

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(1)     Pre-tax stock-based compensation expense for the year ended December 31, 2020 of $1,076 million included $643 million non-cash stock-based expense and $289 million and $144 million of accelerated post-acquisition stock-based expense related to the acquisitions of Immunomedics and Forty Seven, respectively. See Note 6. Acquisitions for additional information.

(2)     Income tax effect for the year ended December 31, 2019 included a $114 million income tax expense following the U.S. Court of Appeals decision in Altera Corp v. Commissioner, which requires related parties in an intercompany cost sharing arrangement to share expenses related to stock-based compensation.

Schedule of assumptions to calculate the estimated fair value of awards

We used the following assumptions to calculate the estimated fair value of the awards:

						Year Ended December 31,
						2020						2019						2018
Expected volatility:
Stock options						29		%				27		%				28		%
ESPP						28		%				27		%				28		%
Expected term in years:
Stock options						5.0						5.5						5.2
ESPP						0.5						0.5						0.5
Risk-free interest rate:
Stock options						0.8		%				2.3		%				2.5		%
ESPP						0.6		%				1.8		%				2.6		%
Expected dividend yield						4.0		%				3.6		%				2.8		%

X

- Definition

Tabular disclosure of the significant assumptions used during the year to estimate the fair value of stock options and ESPP, including, but not limited to: (a) expected term of share options and similar instruments, (b) expected volatility of the entity's shares, (c) expected dividends, (d) risk-free rate(s), and (e) discount for post-vesting restrictions.

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Tabular disclosure of allocation of amount expensed and capitalized for award under share-based payment arrangement to statement of income or comprehensive income and statement of financial position. Includes, but is not limited to, corresponding line item in financial statement.

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Tabular disclosure for stock option plans. Includes, but is not limited to, outstanding awards at beginning and end of year, grants, exercises, forfeitures, and weighted-average grant date fair value.

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