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Financial Instruments (Tables) | 12 Months Ended
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Dec. 31, 2018
Financial Instruments [Abstract] |
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis |
The following table presents the financial assets and liabilities measured at fair value using a market approach on a recurring basis by balance sheet categories and fair value hierarchy level as defined in Note 1E:
|  | December 31, 2018 |  | December 31, 2017
(MILLIONS OF DOLLARS) |  | Total |  |  | Level 1 |  |  | Level 2 |  |  | Total |  |  | Level 1 |  |  | Level 2 |
Financial assets measured at fair value on a recurring basis: |  |  |  |  |  |  |  |  |  |  |  |
Short-term investments |  |  |  |  |  |  |  |  |  |  |  |
Classified as equity securities: |  |  |  |  |  |  |  |  |  |  |  |
Money market funds |  | $ | 1,571 |  |  | $ | — |  |  | $ | 1,571 |  |  | $ | 2,115 |  |  | $ | — |  |  | $ | 2,115 |
Equity(a) |  | 29 |  |  | 17 |  |  | 11 |  |  | 35 |  |  | 16 |  |  | 19 |
|  | 1,600 |  |  | 17 |  |  | 1,583 |  |  | 2,150 |  |  | 16 |  |  | 2,134 |
Classified as available-for-sale debt securities: |  |  |  |  |  |  |  |  |  |  |  |
Government and agency—non-U.S. |  | 9,609 |  |  | — |  |  | 9,609 |  |  | 12,242 |  |  | — |  |  | 12,242 |
Corporate and other |  | 5,482 |  |  | — |  |  | 5,482 |  |  | 3,120 |  |  | — |  |  | 3,120 |
|  | 15,091 |  |  | — |  |  | 15,091 |  |  | 15,362 |  |  | — |  |  | 15,362 |
Total short-term investments |  | 16,691 |  |  | 17 |  |  | 16,674 |  |  | 17,512 |  |  | 16 |  |  | 17,496 |
Other current assets |  |  |  |  |  |  |  |  |  |  |  |
Derivative assets: |  |  |  |  |  |  |  |  |  |  |  |
Interest rate contracts |  | 97 |  |  | — |  |  | 97 |  |  | 104 |  |  | — |  |  | 104 |
Foreign exchange contracts |  | 477 |  |  | — |  |  | 477 |  |  | 234 |  |  | — |  |  | 234 |
Total other current assets |  | 574 |  |  | — |  |  | 574 |  |  | 337 |  |  | — |  |  | 337 |
Long-term investments |  |  |  |  |  |  |  |  |  |  |  |
Classified as equity securities: |  |  |  |  |  |  |  |  |  |  |  |
Equity(a) |  | 1,223 |  |  | 1,193 |  |  | 30 |  |  | 1,440 |  |  | 1,398 |  |  | 42 |
Classified as trading securities: |  |  |  |  |  |  |  |  |  |  |  |
Equity |  | 50 |  |  | 50 |  |  | — |  |  | 73 |  |  | 73 |  |  | — |
|  | 1,273 |  |  | 1,243 |  |  | 30 |  |  | 1,514 |  |  | 1,472 |  |  | 42 |
Classified as available-for-sale debt securities: |  |  |  |  |  |  |  |  |  |  |  |
Government and agency—non-U.S. |  | 94 |  |  | — |  |  | 94 |  |  | 387 |  |  | — |  |  | 387 |
Corporate and other |  | 397 |  |  | — |  |  | 397 |  |  | 4,702 |  |  | 36 |  |  | 4,667 |
|  | 491 |  |  | — |  |  | 491 |  |  | 5,090 |  |  | 36 |  |  | 5,054 |
Total long-term investments |  | 1,764 |  |  | 1,243 |  |  | 521 |  |  | 6,603 |  |  | 1,507 |  |  | 5,096 |
Other noncurrent assets |  |  |  |  |  |  |  |  |  |  |  |
Derivative assets: |  |  |  |  |  |  |  |  |  |  |  |
Interest rate contracts |  | 335 |  |  | — |  |  | 335 |  |  | 477 |  |  | — |  |  | 477 |
Foreign exchange contracts |  | 232 |  |  | — |  |  | 232 |  |  | 7 |  |  | — |  |  | 7 |
Total other noncurrent assets |  | 566 |  |  | — |  |  | 566 |  |  | 484 |  |  | — |  |  | 484 |
Total assets |  | $ | 19,595 |  |  | $ | 1,260 |  |  | $ | 18,335 |  |  | $ | 24,937 |  |  | $ | 1,523 |  |  | $ | 23,414 |
Financial liabilities measured at fair value on a recurring basis: |  |  |  |  |  |  |  |  |  |  |  |
Other current liabilities |  |  |  |  |  |  |  |  |  |  |  |
Derivative liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Interest rate contracts |  | $ | 5 |  |  | $ | — |  |  | $ | 5 |  |  | $ | 1 |  |  | $ | — |  |  | $ | 1 |
Foreign exchange contracts |  | 78 |  |  | — |  |  | 78 |  |  | 201 |  |  | — |  |  | 201 |
Total other current liabilities |  | 82 |  |  | — |  |  | 82 |  |  | 201 |  |  | — |  |  | 201 |
Other noncurrent liabilities |  |  |  |  |  |  |  |  |  |  |  |
Derivative liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Interest rate contracts |  | 378 |  |  | — |  |  | 378 |  |  | 177 |  |  | — |  |  | 177 |
Foreign exchange contracts |  | 564 |  |  | — |  |  | 564 |  |  | 313 |  |  | — |  |  | 313 |
Total other noncurrent liabilities |  | 942 |  |  | — |  |  | 942 |  |  | 490 |  |  | — |  |  | 490 |
Total liabilities |  | $ | 1,024 |  |  | $ | — |  |  | $ | 1,024 |  |  | $ | 691 |  |  | $ | — |  |  | $ | 691 |
(a) | As of December 31, 2018, short-term equity securities of $11 million and long-term equity securities of $29 million are held in trust for benefits attributable to the former Pharmacia Savings Plus Plan. As of December 31, 2017, short-term equity securities of $19 million and long-term equity securities of $42 million are held in trust for benefits attributable to the former Pharmacia Savings Plus Plan.
Financial Liabilities Not Measured at Fair Value on a Recurring Basis |
The following table presents the financial liabilities not measured at fair value on a recurring basis, including the carrying values and estimated fair values using a market approach:
|  | December 31, 2018 |  | December 31, 2017
|  | Carrying Value |  |  | Estimated Fair Value |  | Carrying Value |  | Estimated Fair Value
(MILLIONS OF DOLLARS) |  |  |  | Total |  |  | Level 2 |  |  |  |  | Total |  |  | Level 2 |
Financial Liabilities |  |  |  |  |  |  |  |  |  |  |  |
Long-term debt, excluding the current portion |  | $ | 32,909 |  |  | $ | 35,260 |  |  | $ | 35,260 |  |  | $ | 33,538 |  |  | $ | 37,253 |  |  | $ | 37,253 |
Summary of Investments |
The following table represents our investments by classification type:
|  | As of December 31,
(MILLIONS OF DOLLARS) |  | 2018 |  | 2017
Short-term investments |  |  |  |
Equity securities |  | $ | 1,600 |  |  | $ | 2,150 |
Available-for-sale debt securities |  | 15,091 |  |  | 15,362 |
Held-to-maturity debt securities |  | 1,003 |  |  | 1,138 |
Total Short-term investments |  | $ | 17,694 |  |  | $ | 18,650 |
Long-term investments |  |  |  |
Equity securities |  | $ | 1,223 |  |  | $ | 1,440 |
Trading equity securities |  | 50 |  |  | 73 |
Available-for-sale debt securities |  | 491 |  |  | 5,090 |
Held-to-maturity debt securities |  | 59 |  |  | 4 |
Private equity investments carried at equity-method or cost |  | 944 |  |  | 408 |
Total Long-term investments |  | $ | 2,767 |  |  | $ | 7,015 |
Held-to-maturity cash equivalents |  | $ | 199 |  |  | $ | 719 |
Contractual Maturities of Available-for-sale and Held-to-maturity Securities |
At December 31, 2018 and 2017, the investment securities portfolio consisted of debt securities that were virtually all investment-grade. Information on investments in debt and equity securities at December 31, 2018 and December 31, 2017 is as follows, including, as of December 31, 2018, the contractual maturities, or as necessary, the estimated maturities, of the available-for-sale and held-to-maturity debt securities:
|  | December 31, 2018 |  | December 31, 2017
|  |  |  | Gross Unrealized |  |  |  | Maturities (in Years) |  |  |  |  | Gross Unrealized |  |  |
(MILLIONS OF DOLLARS) |  | Amortized Cost |  |  | Gains |  |  | Losses |  |  | Fair Value |  |  | Within 1 |  |  | Over 1 to 5 |  |  | Over 5 |  |  | Total |  |  | Amortized Cost |  |  | Gains |  |  | Losses |  |  | Fair Value |
Available-for-sale debt securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Government and agency––non-U.S. |  | $ | 9,754 |  |  | $ | 7 |  |  | $ | (58 | ) |  | $ | 9,703 |  |  | $ | 9,609 |  |  | $ | 94 |  |  | $ | — |  |  | $ | 9,703 |  |  | $ | 12,616 |  |  | $ | 61 |  |  | $ | (48 | ) |  | $ | 12,629 |
Corporate and other(a) |  | 5,905 |  |  | — |  |  | (27 | ) |  | 5,878 |  |  | 5,482 |  |  | 394 |  |  | 3 |  |  | 5,878 |  |  | 7,859 |  |  | 15 |  |  | (52 | ) |  | 7,823 |
Held-to-maturity debt securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Time deposits and other |  | 668 |  |  | — |  |  | — |  |  | 668 |  |  | 610 |  |  | 24 |  |  | 35 |  |  | 668 |  |  | 1,091 |  |  | — |  |  | — |  |  | 1,091 |
Government and agency––non-U.S. |  | 592 |  |  | — |  |  | — |  |  | 592 |  |  | 592 |  |  | — |  |  | — |  |  | 592 |  |  | 770 |  |  | — |  |  | — |  |  | 770 |
Total debt securities |  | $ | 16,920 |  |  | $ | 8 |  |  | $ | (85 | ) |  | $ | 16,842 |  |  | $ | 16,293 |  |  | $ | 512 |  |  | $ | 38 |  |  | $ | 16,842 |  |  | $ | 22,337 |  |  | $ | 77 |  |  | $ | (100 | ) |  | $ | 22,313 |
Available-for-sale equity securities(b) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Money market funds |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 2,115 |  |  | $ | — |  |  | $ | — |  |  | $ | 2,115 |
Equity |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 728 |  |  | 586 |  |  | (124 | ) |  | 1,190 |
Total available-for-sale equity securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 2,843 |  |  | $ | 586 |  |  | $ | (124 | ) |  | $ | 3,304 |
(a) | Primarily issued by a diverse group of corporations.
(b) | Upon the 2018 adoption of a new accounting standard related to financial assets and liabilities, available-for-sale equity securities were classified as equity securities. For additional information see Note 1B.
Schedule of Available-for-sale Securities Reconciliation |
At December 31, 2018 and 2017, the investment securities portfolio consisted of debt securities that were virtually all investment-grade. Information on investments in debt and equity securities at December 31, 2018 and December 31, 2017 is as follows, including, as of December 31, 2018, the contractual maturities, or as necessary, the estimated maturities, of the available-for-sale and held-to-maturity debt securities:
|  | December 31, 2018 |  | December 31, 2017
|  |  |  | Gross Unrealized |  |  |  | Maturities (in Years) |  |  |  |  | Gross Unrealized |  |  |
(MILLIONS OF DOLLARS) |  | Amortized Cost |  |  | Gains |  |  | Losses |  |  | Fair Value |  |  | Within 1 |  |  | Over 1 to 5 |  |  | Over 5 |  |  | Total |  |  | Amortized Cost |  |  | Gains |  |  | Losses |  |  | Fair Value |
Available-for-sale debt securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Government and agency––non-U.S. |  | $ | 9,754 |  |  | $ | 7 |  |  | $ | (58 | ) |  | $ | 9,703 |  |  | $ | 9,609 |  |  | $ | 94 |  |  | $ | — |  |  | $ | 9,703 |  |  | $ | 12,616 |  |  | $ | 61 |  |  | $ | (48 | ) |  | $ | 12,629 |
Corporate and other(a) |  | 5,905 |  |  | — |  |  | (27 | ) |  | 5,878 |  |  | 5,482 |  |  | 394 |  |  | 3 |  |  | 5,878 |  |  | 7,859 |  |  | 15 |  |  | (52 | ) |  | 7,823 |
Held-to-maturity debt securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Time deposits and other |  | 668 |  |  | — |  |  | — |  |  | 668 |  |  | 610 |  |  | 24 |  |  | 35 |  |  | 668 |  |  | 1,091 |  |  | — |  |  | — |  |  | 1,091 |
Government and agency––non-U.S. |  | 592 |  |  | — |  |  | — |  |  | 592 |  |  | 592 |  |  | — |  |  | — |  |  | 592 |  |  | 770 |  |  | — |  |  | — |  |  | 770 |
Total debt securities |  | $ | 16,920 |  |  | $ | 8 |  |  | $ | (85 | ) |  | $ | 16,842 |  |  | $ | 16,293 |  |  | $ | 512 |  |  | $ | 38 |  |  | $ | 16,842 |  |  | $ | 22,337 |  |  | $ | 77 |  |  | $ | (100 | ) |  | $ | 22,313 |
Available-for-sale equity securities(b) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Money market funds |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 2,115 |  |  | $ | — |  |  | $ | — |  |  | $ | 2,115 |
Equity |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 728 |  |  | 586 |  |  | (124 | ) |  | 1,190 |
Total available-for-sale equity securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 2,843 |  |  | $ | 586 |  |  | $ | (124 | ) |  | $ | 3,304 |
(a) | Primarily issued by a diverse group of corporations.
(b) | Upon the 2018 adoption of a new accounting standard related to financial assets and liabilities, available-for-sale equity securities were classified as equity securities. For additional information see Note 1B.
Schedule of Gains and Losses on Investment Securities |
The following table presents the net unrealized gains and losses for the period that relate to equity securities still held at the reporting date, calculated as follows:
(MILLIONS OF DOLLARS) |  | December 31, 2018 |
Net gains recognized during the period on investments in equity securities(a) |  | $ | 586 |
Less: Net gains recognized during the period on equity securities sold during the period |  | (109 | )
Net unrealized gains during the reporting period on equity securities still held at the reporting date |  | $ | 477 |
(a) | The net gains on investments in equity securities are reported in Other (income)/deductions––net and, for 2018, include unrealized net gains on equity securities reflecting the adoption of a new accounting standard in the first quarter of 2018. For additional information, see Note 4.
Held-to-maturity Securities |
At December 31, 2018 and 2017, the investment securities portfolio consisted of debt securities that were virtually all investment-grade. Information on investments in debt and equity securities at December 31, 2018 and December 31, 2017 is as follows, including, as of December 31, 2018, the contractual maturities, or as necessary, the estimated maturities, of the available-for-sale and held-to-maturity debt securities:
|  | December 31, 2018 |  | December 31, 2017
|  |  |  | Gross Unrealized |  |  |  | Maturities (in Years) |  |  |  |  | Gross Unrealized |  |  |
(MILLIONS OF DOLLARS) |  | Amortized Cost |  |  | Gains |  |  | Losses |  |  | Fair Value |  |  | Within 1 |  |  | Over 1 to 5 |  |  | Over 5 |  |  | Total |  |  | Amortized Cost |  |  | Gains |  |  | Losses |  |  | Fair Value |
Available-for-sale debt securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Government and agency––non-U.S. |  | $ | 9,754 |  |  | $ | 7 |  |  | $ | (58 | ) |  | $ | 9,703 |  |  | $ | 9,609 |  |  | $ | 94 |  |  | $ | — |  |  | $ | 9,703 |  |  | $ | 12,616 |  |  | $ | 61 |  |  | $ | (48 | ) |  | $ | 12,629 |
Corporate and other(a) |  | 5,905 |  |  | — |  |  | (27 | ) |  | 5,878 |  |  | 5,482 |  |  | 394 |  |  | 3 |  |  | 5,878 |  |  | 7,859 |  |  | 15 |  |  | (52 | ) |  | 7,823 |
Held-to-maturity debt securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Time deposits and other |  | 668 |  |  | — |  |  | — |  |  | 668 |  |  | 610 |  |  | 24 |  |  | 35 |  |  | 668 |  |  | 1,091 |  |  | — |  |  | — |  |  | 1,091 |
Government and agency––non-U.S. |  | 592 |  |  | — |  |  | — |  |  | 592 |  |  | 592 |  |  | — |  |  | — |  |  | 592 |  |  | 770 |  |  | — |  |  | — |  |  | 770 |
Total debt securities |  | $ | 16,920 |  |  | $ | 8 |  |  | $ | (85 | ) |  | $ | 16,842 |  |  | $ | 16,293 |  |  | $ | 512 |  |  | $ | 38 |  |  | $ | 16,842 |  |  | $ | 22,337 |  |  | $ | 77 |  |  | $ | (100 | ) |  | $ | 22,313 |
Available-for-sale equity securities(b) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Money market funds |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 2,115 |  |  | $ | — |  |  | $ | — |  |  | $ | 2,115 |
Equity |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 728 |  |  | 586 |  |  | (124 | ) |  | 1,190 |
Total available-for-sale equity securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 2,843 |  |  | $ | 586 |  |  | $ | (124 | ) |  | $ | 3,304 |
(a) | Primarily issued by a diverse group of corporations.
(b) | Upon the 2018 adoption of a new accounting standard related to financial assets and liabilities, available-for-sale equity securities were classified as equity securities. For additional information see Note 1B.
Schedule of Short-term Borrowings |
Short-term borrowings include:
|  | As of December 31,
(MILLIONS OF DOLLARS) |  | 2018 |  | 2017
Commercial paper |  | $ | 3,100 |  |  | $ | 6,100 |
Current portion of long-term debt, principal amount(a) |  | 4,781 |  |  | 3,532 |
Other short-term borrowings, principal amount(b) |  | 966 |  |  | 320 |
Total short-term borrowings, principal amount |  | 8,847 |  |  | 9,951 |
Net fair value adjustments related to hedging and purchase accounting |  | (5 | ) |  | 14 |
Net unamortized discounts, premiums and debt issuance costs |  | (11 | ) |  | (12 | )
Total Short-term borrowings, including current portion of long-term debt, carried at historical proceeds, as adjusted |  | $ | 8,831 |  |  | $ | 9,953 |
(a) | For additional information, see Note 7D.
(b) | Other short-term borrowings primarily include cash collateral. For additional information, see Note 7F.
Schedule of Long-term Debt Instruments |
In 2018, we issued the following senior unsecured notes:
(MILLIONS OF DOLLARS) |  |  |  |
Maturity Date |  | Interest Rate |  | Principal
September 2021 |  | 3.000% notes(a) |  | $ | 1,000 |
September 2023 |  | Floating rate notes (LIBOR plus 0.33%)(b) |  | 300 |
September 2023 |  | 3.200% notes(a) |  | 1,000 |
September 2028 |  | 3.600% notes(a) |  | 1,000 |
September 2038 |  | 4.100% notes(a) |  | 700 |
September 2048 |  | 4.200% notes(a) |  | 1,000 |
Total long-term debt issued(c) |  | $ | 5,000 |
(a) | Fixed rate notes may be redeemed by us at any time, in whole, or in part, at varying redemption prices plus accrued and unpaid interest.
(b) | Floating rate notes may not be redeemed by their terms prior to maturity.
(c) | The weighted-average effective interest rate for the notes at issuance was 3.56%.
The following table provides the components of our senior unsecured long-term debt, including the weighted-average stated interest rate for 2018 and 2017 by maturity:
|  | As of December 31,
(MILLIONS OF DOLLARS) |  | 2018 |  |  | 2017 |
Notes due 2019 (1.3%)(a) |  | $ | — |  |  | $ | 4,848 |
Notes due 2020 (1.2% and 1.1%) |  | 1,474 |  |  | 1,528 |
Notes due 2021 (3.4% and 3.5%) |  | 4,459 |  |  | 3,550 |
Notes due 2022 (0.3%) |  | 1,145 |  |  | 1,199 |
Notes due 2023 (3.6% and 4.3%) |  | 2,892 |  |  | 1,592 |
Notes due 2024 (4.4%) |  | 1,500 |  |  | 1,500 |
Notes due 2026-2028 (3.3% and 3.2%) |  | 5,718 |  |  | 4,759 |
Notes due 2034 (6.5%) |  | 750 |  |  | 750 |
Notes due 2036-2039 (6.0% and 6.2%) |  | 7,301 |  |  | 6,636 |
Notes due 2040-2044 (3.8%) |  | 4,004 |  |  | 4,106 |
Notes due 2046-2048 (4.2%) |  | 3,315 |  |  | 2,315 |
Total long-term debt, principal amount |  | 32,558 |  |  | 32,783 |
Net fair value adjustments related to hedging and purchase accounting |  | 479 |  |  | 872 |
Net unamortized discounts, premiums and debt issuance costs |  | (136 | ) |  | (125 | )
Other long-term debt |  | 7 |  |  | 8 |
Total long-term debt, carried at historical proceeds, as adjusted |  | $ | 32,909 |  |  | $ | 33,538 |
Current portion of long-term debt, carried at historical proceeds (not included above (1.3% and 2.4%)) |  | $ | 4,776 |  |  | $ | 3,546 |
(a) | At December 31, 2018, the debt issuances have been reclassified to the current portion of long-term debt.
Schedule of Derivative Financial Instruments |
The following table provides the fair value of the derivative financial instruments and the related notional amounts presented between those derivatives that are designated as hedging instruments and those that are not designated as hedging instruments:
(MILLIONS OF DOLLARS) |  | December 31, 2018 |  | December 31, 2017
|  |  |  | Fair Value |  |  |  | Fair Value
|  | Notional |  | Asset |  | Liability |  | Notional |  | Asset |  | Liability
Derivatives designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |  |
Foreign exchange contracts(a) |  | $ | 22,984 |  |  | $ | 654 |  |  | $ | 586 |  |  | $ | 18,723 |  |  | $ | 179 |  |  | $ | 459 |
Interest rate contracts |  | 11,145 |  |  | 432 |  |  | 383 |  |  | 12,430 |  |  | 581 |  |  | 178 |
|  |  |  | 1,085 |  |  | 968 |  |  |  |  | 760 |  |  | 637 |
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |  |
Foreign exchange contracts |  | $ | 15,154 |  |  | 55 |  |  | 55 |  |  | $ | 14,300 |  |  | 62 |  |  | 54 |
Total |  |  |  | $ | 1,140 |  |  | $ | 1,024 |  |  |  |  | $ | 822 |  |  | $ | 691 |
(a) | As of December 31, 2018, the notional amount of outstanding foreign currency forward-exchange contracts hedging our intercompany forecasted inventory sales was $5.8 billion.
Schedule of Derivative Assets at Fair Value |
The following table provides the fair value of the derivative financial instruments and the related notional amounts presented between those derivatives that are designated as hedging instruments and those that are not designated as hedging instruments:
(MILLIONS OF DOLLARS) |  | December 31, 2018 |  | December 31, 2017
|  |  |  | Fair Value |  |  |  | Fair Value
|  | Notional |  | Asset |  | Liability |  | Notional |  | Asset |  | Liability
Derivatives designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |  |
Foreign exchange contracts(a) |  | $ | 22,984 |  |  | $ | 654 |  |  | $ | 586 |  |  | $ | 18,723 |  |  | $ | 179 |  |  | $ | 459 |
Interest rate contracts |  | 11,145 |  |  | 432 |  |  | 383 |  |  | 12,430 |  |  | 581 |  |  | 178 |
|  |  |  | 1,085 |  |  | 968 |  |  |  |  | 760 |  |  | 637 |
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |  |
Foreign exchange contracts |  | $ | 15,154 |  |  | 55 |  |  | 55 |  |  | $ | 14,300 |  |  | 62 |  |  | 54 |
Total |  |  |  | $ | 1,140 |  |  | $ | 1,024 |  |  |  |  | $ | 822 |  |  | $ | 691 |
(a) | As of December 31, 2018, the notional amount of outstanding foreign currency forward-exchange contracts hedging our intercompany forecasted inventory sales was $5.8 billion.
Schedule of Derivative Liabilities at Fair Value |
The following table provides the fair value of the derivative financial instruments and the related notional amounts presented between those derivatives that are designated as hedging instruments and those that are not designated as hedging instruments:
(MILLIONS OF DOLLARS) |  | December 31, 2018 |  | December 31, 2017
|  |  |  | Fair Value |  |  |  | Fair Value
|  | Notional |  | Asset |  | Liability |  | Notional |  | Asset |  | Liability
Derivatives designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |  |
Foreign exchange contracts(a) |  | $ | 22,984 |  |  | $ | 654 |  |  | $ | 586 |  |  | $ | 18,723 |  |  | $ | 179 |  |  | $ | 459 |
Interest rate contracts |  | 11,145 |  |  | 432 |  |  | 383 |  |  | 12,430 |  |  | 581 |  |  | 178 |
|  |  |  | 1,085 |  |  | 968 |  |  |  |  | 760 |  |  | 637 |
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |  |
Foreign exchange contracts |  | $ | 15,154 |  |  | 55 |  |  | 55 |  |  | $ | 14,300 |  |  | 62 |  |  | 54 |
Total |  |  |  | $ | 1,140 |  |  | $ | 1,024 |  |  |  |  | $ | 822 |  |  | $ | 691 |
(a) | As of December 31, 2018, the notional amount of outstanding foreign currency forward-exchange contracts hedging our intercompany forecasted inventory sales was $5.8 billion.
Schedule of Gains/(Losses) Incurred to Hedge or Offset Operational Foreign Exchange or Interest Rate Risk |
The following table provides information about the gains/(losses) incurred to hedge or offset operational foreign exchange or interest rate risk:
|  | Amount of Gains/(Losses) Recognized in OID(a), (b) |  | Amount of Gains/(Losses) Recognized in OCI(a), (c) |  | Amount of Gains/(Losses) Reclassified from OCI into OID and COS(a), (c)
|  | As of December 31,
(MILLIONS OF DOLLARS) |  | 2018 |  |  | 2017 |  |  | 2018 |  |  | 2017 |  |  | 2018 |  |  | 2017 |
Derivative Financial Instruments in Cash Flow Hedge Relationships: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign exchange contracts(d) |  | $ | — |  |  | $ | (6 | ) |  | $ | 80 |  |  | $ | (12 | ) |  | $ | (182 | ) |  | $ | 520 |
Amount excluded from effectiveness testing recognized in earnings based on an amortization approach |  | — |  |  |  |  |  | 140 |  |  |  |  |  | 153 |  |  |  |
Derivative Financial Instruments in Fair Value Hedge Relationships: |  |  |  |  |  |  |  |  |  |  |  |
Interest rate contracts |  | (348 | ) |  | (60 | ) |  | — |  |  | — |  |  | — |  |  | — |
Hedged item gain |  | 348 |  |  | 60 |  |  | — |  |  | — |  |  | — |  |  | — |
Foreign exchange contracts |  | 5 |  |  | (19 | ) |  | — |  |  | — |  |  | — |  |  | — |
Hedged item gain/(loss) |  | (5 | ) |  | 19 |  |  | — |  |  | — |  |  | — |  |  | — |
Derivative Financial Instruments in Net Investment Hedge Relationships: |  |  |  |  |  |  |  |  |  |  |  |
Foreign exchange contracts |  | — |  |  | — |  |  | 175 |  |  | — |  |  | — |  |  | — |
The portion of gains/(losses) on foreign exchange contracts excluded from the assessment of hedge effectiveness |  | — |  |  |  |  |  | 77 |  |  |  |  |  | 68 |  |  |  |
Non-Derivative Financial Instruments in Net Investment Hedge Relationships: |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency short-term borrowings |  | — |  |  | — |  |  | 68 |  |  | — |  |  | — |  |  | — |
Foreign currency long-term debt(e) |  | — |  |  | — |  |  | 149 |  |  | (580 | ) |  | — |  |  | — |
Derivative Financial Instruments Not Designated as Hedges: |  |  |  |  |  |  |  |  |  |  |  |
Foreign exchange contracts |  | 136 |  |  | (87 | ) |  | — |  |  | — |  |  | — |  |  | — |
All other net |  | — |  |  | — |  |  | (1 | ) |  | 2 |  |  | 2 |  |  | 1 |
|  | $ | 136 |  |  | $ | (93 | ) |  | $ | 688 |  |  | $ | (591 | ) |  | $ | 41 |  |  | $ | 520 |
(a) | OID = Other (income)/deductions—net, included in Other (income)/deductions—net in the consolidated statements of income. COS = Cost of Sales, included in Cost of sales in the consolidated statements of income. OCI = Other comprehensive income/(loss), included in the consolidated statements of comprehensive income.
(b) | For 2017, there is no significant ineffectiveness.
(c) | For derivative financial instruments in cash flow hedge relationships, the gains and losses are included in Other comprehensive income/(loss)––Unrealized holding gains/(losses) on derivative financial instruments, net. For derivative financial instruments in net investment hedge relationships and for foreign currency debt designated as hedging instruments, the effective portion is included in Other comprehensive income/(loss)––Foreign currency translation adjustments, net.
(d) | Based on year-end foreign exchange rates that are subject to change, we expect to reclassify a pre-tax gain of $156 million within the next 12 months into Cost of sales. The maximum length of time over which we are hedging future foreign exchange cash flow relates to our $1.8 billion U.K. pound debt maturing in 2043.
(e) | Short-term borrowings include foreign currency short-term borrowings with carrying values of $1.4 billion as of December 31, 2018, which are used as hedging instruments in net investment hedges. Long-term debt includes foreign currency long-term borrowings with carrying values of $3.2 billion as of December 31, 2018, which are used as hedging instruments in net investment hedges.
Schedule of Amounts Recorded In Balance Sheet Related to Cumulative Adjustments for Fair Value Hedges |
The following table provides the total amount of each income and expense line in which the results of fair value or cash flow hedges are recorded:
(MILLIONS OF DOLLARS) |  | December 31, 2018 |
Cost of sales |  | $ | 11,248 |
Other (income)/deductions—net |  | 2,116 |
The following table provides the amounts recorded in our consolidated balance sheet related to cumulative basis adjustments for fair value hedges:
|  | Carrying Amount of Hedged Assets/Liabilities |  |  | Cumulative Amount of Fair Value Hedging Adjustment Gains/(Losses) Included in the Carrying Amount of the Hedged Assets/Liabilities |
(MILLIONS OF DOLLARS) |  | December 31, 2018 |  |  | December 31, 2018 |
Long-term investments |  | $ | 45 |  |  | $ | (1 | )
Short-term borrowings, including current portion of long-term debt |  | 1,499 |  |  | 5 |
Long-term debt |  | 9,952 |  |  | 45 |
Schedule of Amounts Recorded In Balance Sheet Related to Cumulative Adjustments for Cash Flow Hedges |
The following table provides the total amount of each income and expense line in which the results of fair value or cash flow hedges are recorded:
(MILLIONS OF DOLLARS) |  | December 31, 2018 |
Cost of sales |  | $ | 11,248 |
Other (income)/deductions—net |  | 2,116 |

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