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FAIR VALUE MEASUREMENTS | 9 Months Ended
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Sep. 30, 2023
Fair Value Disclosures [Abstract] |
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS The following table summarizes the types of assets and liabilities measured at fair value on a recurring basis by level within the fair value hierarchy:
|  | September 30, 2023 |  | December 31, 2022
(in millions) |  | Level 1 |  | Level 2 |  | Level 3 |  | Total |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Available-for-sale debt securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. treasury securities |  | $ | 428 |  |  | $ | — |  |  | $ | — |  |  | $ | 428 |  |  | $ | 410 |  |  | $ | — |  |  | $ | — |  |  | $ | 410 |
U.S. government agencies securities |  | — |  |  | 152 |  |  | — |  |  | 152 |  |  | — |  |  | 35 |  |  | — |  |  | 35 |
Non-U.S. government securities |  | — |  |  | 10 |  |  | — |  |  | 10 |  |  | — |  |  | 34 |  |  | — |  |  | 34 |
Certificates of deposit |  | — |  |  | 97 |  |  | — |  |  | 97 |  |  | — |  |  | 54 |  |  | — |  |  | 54 |
Corporate debt securities |  | — |  |  | 1,334 |  |  | — |  |  | 1,334 |  |  | — |  |  | 1,427 |  |  | — |  |  | 1,427 |
Residential mortgage and asset-backed securities |  | — |  |  | 361 |  |  | — |  |  | 361 |  |  | — |  |  | 333 |  |  | — |  |  | 333 |
Equity securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Money market funds |  | 4,240 |  |  | — |  |  | — |  |  | 4,240 |  |  | 3,831 |  |  | — |  |  | — |  |  | 3,831 |
Equity investment in Galapagos NV (“Galapagos”) |  | 571 |  |  | — |  |  | — |  |  | 571 |  |  | 736 |  |  | — |  |  | — |  |  | 736 |
Equity investment in Arcus Biosciences, Inc. (“Arcus”) |  | 266 |  |  | — |  |  | — |  |  | 266 |  |  | 286 |  |  | — |  |  | — |  |  | 286 |
Other publicly traded equity securities |  | 257 |  |  | — |  |  | — |  |  | 257 |  |  | 175 |  |  | — |  |  | — |  |  | 175 |
Deferred compensation plan |  | 259 |  |  | — |  |  | — |  |  | 259 |  |  | 220 |  |  | — |  |  | — |  |  | 220 |
Foreign currency derivative contracts |  | — |  |  | 67 |  |  | — |  |  | 67 |  |  | — |  |  | 60 |  |  | — |  |  | 60 |
Total |  | $ | 6,021 |  |  | $ | 2,021 |  |  | $ | — |  |  | $ | 8,042 |  |  | $ | 5,658 |  |  | $ | 1,943 |  |  | $ | — |  |  | $ | 7,600 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Liability for MYR GmbH (“MYR”) contingent consideration |  | $ | — |  |  | $ | — |  |  | $ | 275 |  |  | $ | 275 |  |  | $ | — |  |  | $ | — |  |  | $ | 275 |  |  | $ | 275 |
Deferred compensation plan |  | 258 |  |  | — |  |  | — |  |  | 258 |  |  | 220 |  |  | — |  |  | — |  |  | 220 |
Foreign currency derivative contracts |  | — |  |  | 8 |  |  | — |  |  | 8 |  |  | — |  |  | 42 |  |  | — |  |  | 42 |
Total |  | $ | 258 |  |  | $ | 8 |  |  | $ | 275 |  |  | $ | 540 |  |  | $ | 220 |  |  | $ | 42 |  |  | $ | 275 |  |  | $ | 538 |
Level 2 Inputs Available-for-Sale Debt Securities For our available-for-sale debt securities, we estimate the fair values by reviewing trading activity and pricing as of the measurement date, and by taking into consideration valuations obtained from third-party pricing services. The pricing services utilize industry standard valuation models, including both income-based and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate the fair value. These inputs include reported trades and broker/dealer quotes on the same or similar securities, issuer credit spreads, benchmark securities, prepayment/default projections based on historical data and other observable inputs. Foreign Currency Derivative Contracts Our foreign currency derivative contracts have maturities of 18 months or less and all are with counterparties that have a minimum credit rating of A- or equivalent by S&P Global Ratings, Moody’s Investors Service, Inc. or Fitch Ratings, Inc. We estimate the fair values of these contracts by utilizing an income-based industry standard valuation model for which all significant inputs are observable, either directly or indirectly. These inputs include foreign currency exchange rates, Secured Overnight Financing Rate and swap rates. These inputs, where applicable, are observable at commonly quoted intervals. Senior Unsecured Notes The total estimated fair value of our senior unsecured notes, determined using Level 2 inputs based on their quoted market values, was approximately $20.9 billion and $21.9 billion as of September 30, 2023 and December 31, 2022, respectively, and the carrying value was $23.8 billion and $24.1 billion as of September 30, 2023 and December 31, 2022, respectively. Level 3 Inputs Contingent Consideration Liability In connection with our first quarter 2021 acquisition of MYR, we are subject to a potential contingent consideration payment of up to €300 million, subject to customary adjustments, which is revalued each reporting period using probability-weighted scenarios for U.S. Food and Drug Administration (“FDA”) approval of Hepcludex until the related contingency is resolved. The following table summarizes the change in fair value of our contingent consideration liability:
|  | Three Months Ended |  | Nine Months Ended |
|  | September 30, |  | September 30, |
(in millions) |  | 2023 |  | 2022 |  | 2023 |  | 2022 |
Beginning balance |  | $ | 288 |  |  | $ | 306 |  |  | $ | 275 |  |  | $ | 317 |  |
Changes in valuation assumptions(1) |  | (2) |  |  | (30) |  |  | 3 |  |  | (19) |  |
Effect of foreign exchange remeasurement(2) |  | (11) |  |  | (27) |  |  | (4) |  |  | (49) |  |
Ending balance |  | $ | 275 |  |  | $ | 249 |  |  | $ | 275 |  |  | $ | 249 |  |
________________________________ (1) Included in Research and development expenses on our Condensed Consolidated Statements of Income. The changes primarily related to increasing discount rates and updated probability rate estimates. (2) Included in Other income (expense), net on our Condensed Consolidated Statements of Income. Liability Related to Future Royalties We recorded a liability related to future royalties as part of our fourth quarter 2020 acquisition of Immunomedics, Inc. (“Immunomedics”), which is subsequently amortized using the effective interest method over the remaining estimated life. The fair value of the liability related to future royalties was $1.1 billion as of September 30, 2023 and December 31, 2022. The carrying value of the liability related to future royalties was $1.2 billion as of September 30, 2023 and $1.1 billion as of December 31, 2022. Nonrecurring Fair Value Measurements During the nine months ended September 30, 2022, we recorded a partial impairment charge of $2.7 billion related to certain acquired in-process research and development (“IPR&D”) assets. See Note 7. Intangible Assets for additional information. There were no indicators of impairment to IPR&D assets noted during the nine months ended September 30, 2023. Fair Value Level Transfers There were no transfers between Level 1, Level 2 and Level 3 in the periods presented.

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- 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/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482106/820-10-50-2 + Details
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