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Financial Instruments and Risk Management (Tables)

12 Months Ended

Dec. 31, 2017

Notional Amounts of Outstanding Derivative Instruments

As at December 31, 2017, the Company had the following outstanding derivative instruments that were entered into to hedge Euro-denominated and Singapore dollar-denominated forecasted transactions:


In millions of Euros	Notional amount for hedge on forecasted R&D and other operating expenses	Notional amount for hedge on forecasted manufacturing costs
Forward contracts	237	352
Currency collars	208	284
In millions of Singapore dollars	Notional amount for hedge on forecasted R&D and other operating expenses	Notional amount for hedge on forecasted manufacturing costs
Forward contracts	—	130

Fair Value of Derivative Instruments

Information on fair value of derivative instruments and their location in the consolidated balance sheets as at December 31, 2017 and December 31, 2016 is presented in the table below:

As at December 31, 2017

As at December 31, 2016

Asset Derivatives

Balance sheet location

Fair
value

Balance sheet location

Fair
value

Derivatives designated as a hedge:

Foreign exchange forward contracts

Other current assets

Currency collars

Other current assets

—

Total derivatives designated as a hedge

Derivatives not designated as a hedge:

Foreign exchange forward contracts

Other current assets

Total derivatives not designated as a hedge:

Total Derivatives


	As at December 31, 2017				As at December 31, 2016
Liability Derivatives	Balance sheet location	Fair value			Balance sheet location		Fair value
Derivatives designated as a hedge:
Foreign exchange forward contracts	Other payables and accrued liabilities		—			Other payables and accrued liabilities		(31	)
Currency collars	Other long-term liabilities		—			Other long-term liabilities		(1	)
Currency collars	Other payables and accrued liabilities		—			Other payables and accrued liabilities		(11	)

Total derivatives designated as a hedge			—					(43	)

Derivatives not designated as a hedge:
Foreign exchange forward contracts	Other payables and accrued liabilities		(1	)		Other payables and accrued liabilities		(2	)

Total derivatives not designated as a hedge:			(1	)				(2	)

Total Derivatives			(1	)				(45	)

Effect on Consolidated Statements of Income of Derivative Instruments

The effect on the consolidated statements of income for the year ended December 31, 2017 and December 31, 2016 and on the “Accumulated other comprehensive income (loss)” (“AOCI”) as reported in the statements of equity as at December 31, 2017 and December 31, 2016 of derivative instruments designated as cash flow hedge is presented in the table below:


	Gain (loss) deferred in OCI on derivative					Location of gain (loss) reclassified from OCI into earnings	Gain (loss) reclassified from OCI into earnings
	December 31, 2017		December 31, 2016				December 31, 2017		December 31, 2016
Foreign exchange forward contracts		18		(24	)	Cost of sales		12		(5	)
Foreign exchange forward contracts		2		(2	)	Selling, general and administrative		2		—
Foreign exchange forward contracts		7		(8	)	Research and development		8		(1	)
Currency collars		12		(8	)	Cost of sales		4		(2	)
Currency collars		1		(1	)	Selling, general and administrative		1		—
Currency collars		5		(4	)	Research and development		3		(1	)

Total		45		(47	)			30		(9	)

Effect on Consolidated Statements of Income of Derivative Instruments Not Designated as Hedge

The effect on the consolidated statements of income for the year ended December 31, 2017 and December 31, 2016 of derivative instruments not designated as a hedge is presented in the table below:


	Location of gain recognized in earnings	Gain recognized in earnings
		December 31, 2017		December 31, 2016
Foreign exchange forward contracts	Other income and expenses, net		6		(3	)
Total			6		(3	)

Schedule of Financial Assets (Liabilities) Measured at Fair Value on Recurring Basis

The table below details financial assets (liabilities) measured at fair value on a recurring basis as at December 31, 2017:


				Fair Value Measurements using
	December 31, 2017			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Marketable securities — U.S. Treasury Bonds		431			431		—			—
Equity securities classified as available-for-sale		11			11		—			—
Equity securities classified as held-for-trading		9			9		—			—
Derivative instruments designated as cash flow hedge		37			—		37			—
Derivative instruments not designated as cash flow hedge		4			—		4			—
Derivative instruments not designated as cash flow hedge		(1	)		—		(1	)		—
Contingent consideration on business combinations		(12	)		—		—			(12	)

Total		479			451		40			(12	)

The table below details financial assets (liabilities) measured at fair value on a recurring basis as at December 31, 2016:


				Fair Value Measurements using
	December 31, 2016			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Marketable securities — U.S. Treasury Bonds		335			335		—			—
Equity securities classified as available-for-sale		11			11		—			—
Equity securities classified as held-for-trading		8			8		—			—
Derivative instruments designated as cash flow hedge		1			—		1			—
Derivative instruments designated as cash flow hedge		(43	)		—		(43	)		—
Derivative instruments not designated as cash flow hedge		1			—		1			—
Derivative instruments not designated as cash flow hedge		(2	)		—		(2	)		—
Contingent consideration on business combinations		(12	)		—		—			(12	)

Total		299			354		(43	)		(12	)

Schedule of Assets (Liabilities) Measured at Fair Value on Recurring Basis Using Significant Unobservable Inputs (Level 3)

For assets (liabilities) measured at fair value on a recurring basis using significant unobservable inputs (Level 3), the reconciliation between January 1, 2017 and December 31, 2017 is presented as follows:


	Fair Value Measurements using Significant Unobservable Inputs (Level 3)
January 1, 2017		(12	)
Contingent consideration on business combination		—

December 31, 2017		(12	)

Amount of total losses for the period included in earnings attributable to assets still held at the reporting date		—

Fair Value Information on Other Financial Assets and Liabilities Recorded at Amortized Cost

The following table includes additional fair value information on financial assets and liabilities as at December 31, 2017 and 2016:


	2017						2016
	Level		Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Cash equivalents⁽¹⁾		1		1,303		1,303		960		960
Long-term debt
— Bank loans (including current portion)		2		423		423		525		525
— Senior unsecured convertible bonds⁽²⁾		1		1,278		1,860		926		1,127

(1)	Cash equivalents primarily correspond to deposits at call with banks.

(2)

The carrying amount of the senior unsecured convertible bonds as reported above corresponds to the liability component only, since, at initial recognition, an amount of $121 million was recorded directly in shareholders’ equity as the value of the equity instrument embedded in the convertible bonds issued on July 3, 2014 and outstanding as at December 31, 2016. For the convertible bonds issued on July 3, 2017 and outstanding as at December 31, 2017, the carrying amount of the senior unsecured convertible bonds corresponds to the liability component only, since, at initial recognition, an amount of $242 million was recorded directly in shareholders’ equity as the value of the equity instrument embedded in the convertible instrument.

Summary of Securities That Were in Unrealized Loss Position

The table below details securities that were in an unrealized loss position as at December 31, 2017. The securities are segregated by investment type and length of time that the individual securities have been in a continuous unrealized position as at December 31, 2017.


	December 31, 2017
	Less than 12 months					More than 12 months				Total
Description	Fair Values		Unrealized Losses			Fair Values		Unrealized Losses		Fair Values		Unrealized Losses
U.S. Treasury Bonds		332		(1	)		—		—		332		(1	)

Total		332		(1	)		—		—		332		(1	)

- Definition

Tabular disclosure of available-for-sale securities which includes, but is not limited to, changes in the cost basis and fair value, fair value and gross unrealized gain (loss), fair values by type of security, contractual maturity and classification, amortized cost basis, contracts to acquire securities to be accounted for as available-for-sale, debt maturities, transfers to trading, change in net unrealized holding gain (loss) net of tax, continuous unrealized loss position fair value, aggregate losses qualitative disclosures, other than temporary impairment (OTTI) losses or other disclosures related to available for sale securities.

+ References + Details