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Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives (Tables) | 9 Months Ended
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Oct. 01, 2017
Restructuring and Related Activities [Abstract] |
Schedule of Components of Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives |
The following table provides the components of costs associated with acquisitions and cost-reduction/productivity initiatives:
|  | Three Months Ended |  | Nine Months Ended
(MILLIONS OF DOLLARS) |  | October 1, 2017 |  |  | October 2, 2016 |  |  | October 1, 2017 |  |  | October 2, 2016 |
Restructuring charges(a): |  |  |  |  |  |  |  |  |  |  |  |
Employee terminations |  | $ | (20 | ) |  | $ | 347 |  |  | $ | 9 |  |  | $ | 464 |
Asset impairments(b) |  | 101 |  |  | 27 |  |  | 126 |  |  | 45 |
Exit costs |  | 10 |  |  | 29 |  |  | 16 |  |  | 64 |
Total restructuring charges |  | 91 |  |  | 404 |  |  | 150 |  |  | 574 |
Transaction costs(c) |  | (14 | ) |  | 54 |  |  | 4 |  |  | 114 |
Integration costs(d) |  | 73 |  |  | 74 |  |  | 224 |  |  | 300 |
Restructuring charges and certain acquisition-related costs |  | 149 |  |  | 531 |  |  | 377 |  |  | 988 |
Additional depreciation––asset restructuring recorded in our condensed consolidated statements of income as follows(e): |  |  |  |  |  |  |  |  |  |  |  |
Cost of sales |  | 39 |  |  | 46 |  |  | 74 |  |  | 145 |
Research and development expenses |  | — |  |  | 1 |  |  | — |  |  | 5 |
Total additional depreciation––asset restructuring |  | 39 |  |  | 47 |  |  | 74 |  |  | 151 |
Implementation costs recorded in our condensed consolidated statements of income as follows(f): |  |  |  |  |  |  |  |  |  |  |  |
Cost of sales |  | 26 |  |  | 46 |  |  | 77 |  |  | 127 |
Selling, informational and administrative expenses |  | 22 |  |  | 23 |  |  | 46 |  |  | 56 |
Research and development expenses |  | 9 |  |  | 8 |  |  | 26 |  |  | 17 |
Other (income)/deductions––net |  | — |  |  | 1 |  |  | — |  |  | 2 |
Total implementation costs |  | 57 |  |  | 78 |  |  | 150 |  |  | 202 |
Total costs associated with acquisitions and cost-reduction/productivity initiatives |  | $ | 245 |  |  | $ | 655 |  |  | $ | 601 |  |  | $ | 1,341 |
(a) | In the third quarter and first nine months of 2017, restructuring charges are primarily associated with our acquisitions of Hospira and Medivation, as well as cost-reduction and productivity initiatives not associated with acquisitions. In the third quarter and first nine months of 2016, restructuring charges are largely associated with cost-reduction and productivity initiatives not associated with acquisitions, as well as our acquisitions of Hospira and Medivation. In the third quarter and first nine months ended October 1, 2017, Employee terminations primarily include revisions of our estimates of severance benefits. Employee termination costs are generally recorded when the actions are probable and estimable and include accrued severance benefits, pension and postretirement benefits, many of which may be paid out during periods after termination.
The restructuring activities for 2017 are associated with the following:
• | For the third quarter of 2017, IH ($4 million); EH ($1 million); WRD/GPD ($15 million); manufacturing operations ($47 million); and Corporate ($25 million).
• | For the first nine months of 2017, IH ($10 million); EH ($9 million income); WRD/GPD ($29 million); manufacturing operations ($70 million); and Corporate ($51 million).
The restructuring activities for 2016 are associated with the following:
• | For the third quarter of 2016, IH ($148 million); EH ($28 million); WRD/GPD ($52 million); manufacturing operations ($108 million); and Corporate ($67 million).
• | For the first nine months of 2016, IH ($162 million); EH ($19 million); WRD/GPD ($104 million); manufacturing operations ($181 million); and Corporate ($107 million).
(b) | The asset impairment charges for the third quarter and the first nine months of 2017 are largely associated with our acquisitions of Hospira and Medivation.
(c) | Transaction costs represent external costs for banking, legal, accounting and other similar services, which in the third quarter of 2017 reflect the reversal of an accrual related to the acquisition of Medivation. Transaction costs for the first nine months of 2017 are directly related to our acquisitions of Hospira, Anacor and Medivation. Transaction costs in the third quarter of 2016 were mostly related to the Medivation acquisition, and in the first nine months of 2016, were mostly related to the Medivation and Anacor acquisitions, and our terminated transaction with Allergan.
(d) | Integration costs represent external, incremental costs directly related to integrating acquired businesses, and primarily include expenditures for consulting and the integration of systems and processes. In the third quarter and first nine months of 2017, integration costs primarily relate to our acquisitions of Hospira and Medivation. The first nine months of 2017 also include a net gain of $12 million related to the settlement of the Hospira U.S. qualified defined benefit pension plan (see Note 10). In the third quarter of 2016, integration
costs were mostly related to our acquisition of Hospira, and in the first nine months of 2016, integration costs were mostly related to our acquisition of Hospira and our terminated transaction with Allergan.
(e) | Additional depreciation––asset restructuring represents the impact of changes in the estimated useful lives of assets involved in restructuring actions.
(f) Implementation costs represent external, incremental costs directly related to implementing our non-acquisition-related cost-reduction/productivity initiatives.
Schedule of Components of and Changes in Restructuring Accruals |
The following table provides the components of and changes in our restructuring accruals:
(MILLIONS OF DOLLARS) |  | Employee Termination Costs |  |  | Asset Impairment Charges |  |  | Exit Costs |  |  | Accrual |
Balance, December 31, 2016(a) |  | $ | 1,547 |  |  | $ | — |  |  | $ | 36 |  |  | $ | 1,583 |
Provision |  | 9 |  |  | 126 |  |  | 16 |  |  | 150 |
Utilization and other(b) |  | (401 | ) |  | (126 | ) |  | (24 | ) |  | (551 | )
Balance, October 1, 2017(c) |  | $ | 1,154 |  |  | $ | — |  |  | $ | 28 |  |  | $ | 1,182 |
(a) | Included in Other current liabilities ($863 million) and Other noncurrent liabilities ($720 million).
(b) | Includes adjustments for foreign currency translation.
(c) Included in Other current liabilities ($533 million) and Other noncurrent liabilities ($650 million).

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- Definition Tabular disclosure of costs incurred for restructuring including, but not limited to, exit and disposal activities, remediation, implementation, integration, asset impairment, and charges against earnings from the write-down of assets. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 420 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6394359&loc=d3e17939-110869 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 420 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB TOPIC 5.P.4) -URI http://asc.fasb.org/extlink&oid=27011515&loc=d3e140904-122747 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 420 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 5.P.3) -URI http://asc.fasb.org/extlink&oid=27011515&loc=d3e140864-122747 + Details
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- Definition Tabular disclosure of an entity's restructuring reserve that occurred during the period associated with the exit from or disposal of business activities or restructurings for each major type of cost. This element may also include a description of any reversal and other adjustment made during the period to the amount of an accrued liability for restructuring activities. This element may be used to encapsulate the roll forward presentations of an entity's restructuring reserve by type of cost and in total, and explanation of changes that occurred in the period. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 420 -SubTopic 10 -Section 50 -Paragraph 1 -Subparagraph (b)(2) -URI http://asc.fasb.org/extlink&oid=6394359&loc=d3e17939-110869 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 420 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 5.P.4(b)(2)) -URI http://asc.fasb.org/extlink&oid=27011515&loc=d3e140904-122747 + Details
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