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Financial instruments - additional disclosures | 12 Months Ended
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Dec. 31, 2022
Financial Instruments - additional disclosure [abstract] |
Disclosure of detailed information about financial instruments [text block] | 29. Financial instruments – additional disclosures The following tables show the carrying values of financial instruments by measurement category as of December 31, 2022 and 2021. Except for straight bonds (see Note 19), the carrying values are equal to, or a reasonable approximation of, the fair values.
|  |  |  | 2022 |
(USD millions) |  | Note |  | Financial instruments at amortized costs |  | Financial instruments at fair value through other comprehensive income |  | Financial instruments at fair value through the consolidated income statement |  | Other financial liabilities at amortized costs |
Cash and cash equivalents |  | 16 |  | 7 517 |  |  |  |  |  |  |
Time deposits and short-term investments with original maturity more than 90 days |  | 16 |  | 11 089 |  |  |  |  |  |  |
Trade receivables |  | 15 |  | 8 066 |  |  |  |  |  |  |
Other receivables and current assets |  | 17 |  | 958 |  |  |  |  |  |  |
Marketable securities - debt securities |  | 16 |  |  |  | 9 |  |  |  |  |
Long-term financial investments - equity securities |  | 13 |  |  |  | 828 |  | 317 |  |  |
Long-term financial investments - debt securities |  | 13 |  |  |  | 37 |  |  |  |  |
Long-term financial investments - fund investments |  | 13 |  |  |  |  |  | 281 |  |  |
Long-term loans, advances, security deposits and other long-term receivables |  | 13 |  | 341 |  |  |  |  |  |  |
Associated companies at fair value through profit and loss |  |  |  |  |  |  |  | 129 |  |  |
Derivative financial instruments |  | 16 |  |  |  |  |  | 204 |  |  |
Contingent consideration receivables |  | 13/17 |  |  |  |  |  | 650 |  |  |
Total financial assets |  |  |  | 27 971 |  | 874 |  | 1 581 |  |  |
Bank and other short-term financial debt |  | 21 |  | 863 |  |  |  |  |  |  |
Commercial paper |  | 21 |  | 2 772 |  |  |  |  |  |  |
Straight bonds |  | 19 |  | 22 341 |  |  |  |  |  |  |
Long-term liabilities to banks and other financial institutions |  | 19 |  | 144 |  |  |  |  |  |  |
Trade payables |  |  |  | 5 146 |  |  |  |  |  |  |
Contingent consideration liabilities (see Note 20/22) and other financial liabilities |  |  |  |  |  |  |  | 1 067 |  |  |
Derivative financial instruments |  | 21 |  |  |  |  |  | 55 |  |  |
Lease liabilities |  | 10 |  |  |  |  |  |  |  | 1 789 |
Total financial liabilities |  |  |  | 31 266 |  |  |  | 1 122 |  | 1 789 |
|  |  |  | 2021 |
(USD millions) |  | Note |  | Financial instruments at amortized costs |  | Financial instruments at fair value through other comprehensive income |  | Financial instruments at fair value through the consolidated income statement |  | Other financial liabilities at amortized costs |
Cash and cash equivalents 1 |  | 16 |  | 10 397 |  | 2 010 |  |  |  |  |
Time deposits and short-term investments with original maturity more than 90 days |  | 16 |  | 12 965 |  |  |  |  |  |  |
Trade receivables |  | 15 |  | 8 005 |  |  |  |  |  |  |
Other receivables and current assets |  | 17 |  | 793 |  |  |  |  |  |  |
Marketable securities - debt securities |  | 16 |  |  |  | 2 741 |  |  |  |  |
Long-term financial investments - equity securities |  | 13 |  |  |  | 1 195 |  | 468 |  |  |
Long-term financial investments - debt securities |  | 13 |  |  |  | 34 |  |  |  |  |
Long-term financial investments - fund investments |  | 13 |  |  |  |  |  | 366 |  |  |
Long-term loans, advances, security deposits and other long-term receivables |  | 13 |  | 332 |  |  |  |  |  |  |
Associated companies at fair value through profit and loss |  |  |  |  |  |  |  | 192 |  |  |
Derivative financial instruments |  | 16 |  |  |  |  |  | 105 |  |  |
Contingent consideration receivables |  | 13 |  |  |  |  |  | 641 |  |  |
Total financial assets |  |  |  | 32 492 |  | 5 980 |  | 1 772 |  |  |
Interest-bearing accounts of employees payable on demand |  | 21 |  | 1 814 |  |  |  |  |  |  |
Bank and other short-term financial debt |  | 21 |  | 899 |  |  |  |  |  |  |
Commercial paper |  | 21 |  | 893 |  |  |  |  |  |  |
Straight bonds |  | 19 |  | 25 296 |  |  |  |  |  |  |
Long-term liabilities to banks and other financial institutions |  | 19 |  | 227 |  |  |  |  |  |  |
Trade payables |  |  |  | 5 553 |  |  |  |  |  |  |
Commitment for repurchase of own shares |  | 18/22 |  | 2 809 |  |  |  |  |  |  |
Contingent consideration liabilities (see Note 20/22) and other financial liabilities |  |  |  |  |  |  |  | 1 094 |  |  |
Derivative financial instruments |  | 21 |  |  |  |  |  | 68 |  |  |
Lease liabilities |  | 10 |  |  |  |  |  |  |  | 1 896 |
Total financial liabilities |  |  |  | 37 491 |  |  |  | 1 162 |  | 1 896 |
1 Includes short-term highly rated government-backed debt securities, with an original maturity of three months or less
Derivative financial instruments The following tables show the contract or underlying principal amounts and fair values of derivative financial instruments analyzed by type of contract at December 31, 2022 and 2021. Contract or underlying principal amounts indicate the gross volume of business outstanding at the consolidated balance sheet date and do not represent amounts at risk. The fair values are determined by reference to market prices or standard pricing models that use observable market inputs at December 31, 2022 and 2021.
|  | Contract or underlying principal amount |  | Positive fair values |  | Negative fair values |
(USD millions) |  | 2022 |  | 2021 |  | 2022 |  | 2021 |  | 2022 |  | 2021 |
Forward foreign exchange rate contracts |  | 7 907 |  | 13 248 |  | 189 |  | 92 |  | -41 |  | -35 |
Commodity purchase contract |  | 97 |  | 17 |  | 15 |  | 13 |  |  |  |  |
Options on equity securities |  | 39 |  | 82 |  |  |  |  |  | -14 |  | -33 |
Total derivative financial instruments included in marketable securities and in current financial debts |  | 8 043 |  | 13 347 |  | 204 |  | 105 |  | -55 |  | -68 |
The following table shows a breakdown by currency of the contract or underlying principal amount of derivative financial instruments at December 31, 2022 and 2021:
|  | 2022 |
(USD millions) |  | EUR |  | USD |  | Other |  | Total |
Forward foreign exchange rate contracts |  | 687 |  | 5 659 |  | 1 561 |  | 7 907 |
Commodity purchase contract |  | 80 |  | 17 |  |  |  | 97 |
Options on equity securities |  |  |  | 39 |  |  |  | 39 |
Total derivative financial instruments |  | 767 |  | 5 715 |  | 1 561 |  | 8 043 |
|  | 2021 |
(USD millions) |  | EUR |  | USD |  | Other |  | Total |
Forward foreign exchange rate contracts |  | 1 485 |  | 5 158 |  | 6 605 |  | 13 248 |
Commodity purchase contract |  |  |  | 17 |  |  |  | 17 |
Options on equity securities |  |  |  | 82 |  |  |  | 82 |
Total derivative financial instruments |  | 1 485 |  | 5 257 |  | 6 605 |  | 13 347 |
Derivative financial instruments effective for hedge accounting purposes At the end of 2022 and 2021, there were no open hedging instruments for anticipated transactions. Fair value by hierarchy As required by IFRS, financial assets and liabilities recorded at fair value in the consolidated financial statements are categorized based upon the level of judgment associated with the inputs used to measure their fair value. There are three hierarchical levels, based on increasing subjectivity associated with the inputs to derive fair valuation for these assets and liabilities, which are as follows: The assets carried at Level 1 fair value are equity and debt securities as well as fund investments listed in active markets. The assets generally included in Level 2 fair value hierarchy are derivatives, and certain debt securities. The liabilities generally included in this fair value hierarchy consist of derivatives. These are valued using corroborated market data. Level 3 inputs are unobservable for the asset or liability. The assets generally included in Level 3 fair value hierarchy are various investments in funds and unquoted equity security investments. Contingent consideration and other financial liabilities carried at fair value are included in this category.
|  | 2022 |
(USD millions) |  | Level 1 |  | Level 2 |  | Level 3 |  | Total |
Financial assets |  |  |  |  |  |  |  |  |
Marketable securities |  |  |  |  |  |  |  |  |
Debt securities |  |  |  | 9 |  |  |  | 9 |
Derivative financial instruments |  |  |  | 204 |  |  |  | 204 |
Total marketable securities and derivative financial instruments at fair value |  |  |  | 213 |  |  |  | 213 |
Current contingent consideration receivables |  |  |  |  |  | 43 |  | 43 |
Long-term financial investments |  |  |  |  |  |  |  |  |
Debt and equity securities |  | 473 |  | 10 |  | 699 |  | 1 182 |
Fund investments |  | 20 |  |  |  | 261 |  | 281 |
Non-current contingent consideration receivables |  |  |  |  |  | 607 |  | 607 |
Total long-term financial investments at fair value |  | 493 |  | 10 |  | 1 567 |  | 2 070 |
Associated companies at fair value through profit and loss |  |  |  |  |  | 129 |  | 129 |
Financial liabilities |  |  |  |  |  |  |  |  |
Current contingent consideration liabilities |  |  |  |  |  | -131 |  | -131 |
Derivative financial instruments |  |  |  | -55 |  |  |  | -55 |
Total current financial liabilities at fair values |  |  |  | -55 |  | -131 |  | -186 |
Non-current contingent consideration liabilities |  |  |  |  |  | -704 |  | -704 |
Other financial liabilities |  |  |  |  |  | -232 |  | -232 |
Total non-current financial liabilities at fair value |  |  |  |  |  | -936 |  | -936 |
|  | 2021 |
(USD millions) |  | Level 1 |  | Level 2 |  | Level 3 |  | Total |
Financial assets |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  |  |  |  |  |  |  |  |
Debt securities 1 |  | 2 010 |  |  |  |  |  | 2 010 |
Total cash and cash equivalents at fair value |  | 2 010 |  |  |  |  |  | 2 010 |
Marketable securities and derivative financial instruments |  |  |  |  |  |  |  |  |
Debt securities |  | 2 719 |  | 22 |  |  |  | 2 741 |
Derivative financial instruments |  |  |  | 105 |  |  |  | 105 |
Total marketable securities and derivative financial instruments at fair value |  | 2 719 |  | 127 |  |  |  | 2 846 |
Long-term financial investments |  |  |  |  |  |  |  |  |
Debt and equity securities |  | 1 080 |  |  |  | 617 |  | 1 697 |
Fund investments |  | 28 |  |  |  | 338 |  | 366 |
Contingent consideration receivables |  |  |  |  |  | 641 |  | 641 |
Total long-term financial investments at fair value |  | 1 108 |  |  |  | 1 596 |  | 2 704 |
Associated companies at fair value through profit and loss |  |  |  |  |  | 192 |  | 192 |
Financial liabilities |  |  |  |  |  |  |  |  |
Contingent consideration payables |  |  |  |  |  | -1 075 |  | -1 075 |
Derivative financial instruments |  |  |  | -68 |  |  |  | -68 |
Other financial liabilities |  |  |  |  |  | -19 |  | -19 |
Total financial liabilities at fair value |  |  |  | -68 |  | -1 094 |  | -1 162 |
1 Includes short-term highly rated government-backed debt securities, with an original maturity of three months or less
The change in carrying values associated with Level 3 financial instruments, using significant unobservable inputs during the year ended December 31, is set forth below:
|  | 2022 |
(USD millions) |  | Associated companies at fair value through profit and loss |  | Fund investments |  | Long-term financial investments |  | Contingent consideration receivables |  | Contingent consideration liabilities |  | Other financial liabiltiies |
January 1 |  | 192 |  | 338 |  | 617 |  | 641 |  | -1 075 |  | -19 |
Fair value gains and other adjustments, including from divestments recognized in the consolidated income statement |  |  |  | 4 |  | 35 |  | 53 |  | 530 |  | 15 |
Fair value losses (including impairments and amortizations) and other adjustments recognized in the consolidated income statement |  | -63 |  | -78 |  | -84 |  |  |  | -114 |  | -18 |
Fair value adjustments recognized in the consolidated statement of comprehensive income, including currency translation effects |  |  |  |  |  | 24 |  |  |  | 11 |  |  |
Purchases |  | 4 |  | 11 |  | 160 |  |  |  | -231 |  | -238 |
Cash receipts and payments |  |  |  |  |  |  |  | -44 |  | 44 |  | 28 |
Disposals |  |  |  | -12 |  | -13 |  |  |  |  |  |  |
Reclassification |  | -4 |  | -2 |  | -40 |  |  |  |  |  |  |
December 31 |  | 129 |  | 261 |  | 699 |  | 650 |  | -835 |  | -232 |
Total of fair value gains and losses recognized in the consolidated income statement for assets and liabilities held at December 31, 2022 |  | -63 |  | -74 |  | -49 |  | 53 |  | 416 |  | -3 |
|  | 2021 |
(USD millions) |  | Associated companies at fair value through profit and loss |  | Fund investments |  | Long-term financial investments |  | Contingent consideration receivables |  | Contingent consideration payables |
January 1 |  | 211 |  | 366 |  | 460 |  | 625 |  | -1 046 |
Fair value gains and other adjustments, including from divestments recognized in the consolidated income statement |  | 2 |  | 70 |  | 69 |  | 124 |  | 182 |
Fair value losses (including impairments and amortizations) and other adjustments recognized in the consolidated income statement |  | -26 |  | -8 |  | -13 |  | -44 |  | -189 |
Fair value adjustments recognized in the consolidated statement of comprehensive income, including currency translation effects |  | -2 |  | -1 |  | 51 |  | -22 |  | 22 |
Purchases |  | 34 |  | 12 |  | 137 |  |  |  | -88 |
Cash receipts and payments |  |  |  |  |  |  |  | -42 |  | 44 |
Disposals |  | -27 |  | -71 |  | -43 |  |  |  |  |
Reclassification |  |  |  | -30 |  | -44 |  |  |  |  |
December 31 |  | 192 |  | 338 |  | 617 |  | 641 |  | -1 075 |
Total of fair value gains and losses recognized in the consolidated income statement for assets and liabilities held at December 31, 2021 |  | -24 |  | 62 |  | 56 |  | 80 |  | -7 |
During 2022, there was one transfer of equity securities from Level 3 to Level 1 for USD 44 million (2021: USD 73 million), due to Initial Public Offering of the invested company. During 2022, there were no transfers of equity securities from Level 1 to Level 3 due to de-listing (2021: USD 29 million). Realized gains and losses associated with Level 3 long-term financial investments measured at fair value through the consolidated income statement are recorded in the consolidated income statement under “Other income” or “Other expense,” respectively. Realized gains and losses associated with Level 3 long-term financial investments measured at fair value through other comprehensive income are not recycled through the consolidated income statement but are instead reclassified to retained earnings. During the year, the net loss and net gain recorded on associated companies, fund investments and long-term financial investments at fair value through profit and loss were USD 316 million and USD 55 million, respectively. To determine the fair value of a contingent consideration, various unobservable inputs are used. A change in these inputs might result in a significantly higher or lower fair value measurement. The inputs used are, among others, the probability of success, sales forecast and assumptions regarding the discount rate and timing and different scenarios of triggering events. The inputs are interrelated. The significance and usage of these inputs to each contingent consideration may vary due to differences in the timing and triggering events for payments or in the nature of the asset related to the contingent consideration. If the most significant parameters for the Level 3 input were to change by 10% positively or negatively, or where the probability of success (POS) is the most significant input parameter, 10% were added or deducted from the applied probability of success, for contingent consideration payables and contingent consideration receivables, this would change the amounts recorded in the 2022 consolidated income statement by USD 154 million and USD 140 million, respectively. Equity securities measured at fair value through other comprehensive income Equity securities held as strategic investments, typically held outside the Novartis Venture Fund, are generally designated at date of acquisition as financial assets valued at fair value through other comprehensive income with no subsequent recycling through profit and loss. These are made up of individually non-significant investments. At December 31, 2022, the Group holds 65 non-listed equity securities (December 31, 2021: 60) and 46 listed equity securities (December 31, 2021: 40) in this category with the following fair values:
(USD millions) |  | 2022 |  | 2021 |
Listed equity securities |  | 438 |  | 888 |
Non-listed equity securities |  | 390 |  | 307 |
Total equity securities |  | 828 |  | 1 195 |
During 2022 and 2021, dividends received from these equity securities were insignificant. In 2022, in accordance with the consolidated foundations Alcon Inc. shares divestment plans, Alcon Inc. shares with a fair value of USD 22 million were sold (2021: USD 9 million), and the USD 7 million gain on disposal (2021: USD 1 million gain) was transferred from other comprehensive income to retained earnings during 2022. In addition, in 2022, equity securities that were no longer considered strategic, with a fair value of USD 3 million (2021: USD 254 million), were sold, and the USD 3 million loss on disposal (2021: USD 211 million gain) was transferred from other comprehensive income to retained earnings (see Note 8). Nature and extent of risks arising from financial instruments Market risk Market risk in general comprises currency risk, interest rate risk and price risk, such as commodity and equity prices. Novartis is exposed to market risk, primarily related to foreign currency exchange rates, interest rates and the market value of the investments. The Group actively monitors and seeks to reduce, where it deems it appropriate to do so, fluctuations in these exposures. It is the Group’s policy and practice to enter into a variety of derivative financial instruments to manage the volatility of these exposures. It does not enter into any financial transactions containing a risk that cannot be quantified at the time the transaction is concluded. In addition, it does not sell short assets it does not have, or does not know it will have, in the future. The Group only sells existing assets or enters into transactions and future transactions (in the case of anticipatory hedges) that it confidently expects it will have in the future, based on past experience. Foreign currency exchange rate risk The Group uses the US dollar as its reporting currency. As a result, the Group is exposed to foreign currency exchange movements, primarily in European, Japanese and emerging market currencies. Fluctuations in the exchange rates between the US dollar and other currencies can have a significant effect on both the Group’s results of operations, including reported sales and earnings, as well as on the reported value of our assets, liabilities and cash flows. This, in turn, may significantly affect the comparability of period-to-period results of operations. Because our expenditures in Swiss francs are significantly higher than our revenues in Swiss francs, volatility in the value of the Swiss franc can have a significant impact on the reported value of our earnings, assets and liabilities, and the timing and extent of such volatility can be difficult to predict. There is also a risk that certain countries could experience a devaluation of their currency. If this occurs, it could impact the effective prices we would be able to charge for our products and also have an adverse impact on both our consolidated income statement and balance sheet. Subsidiaries whose functional currencies have experienced a cumulative inflation rate of more than 100% over the past three years apply the principles of IAS 29 “Financial reporting in Hyperinflationary Economies.” The hyperinflationary economies in which Novartis operates are Argentina, Venezuela and Turkey. Venezuela and Argentina were hyperinflationary for all periods presented, and Turkey became hyperinflationary effective May 1, 2022, requiring retroactive implementation of hyperinflation accounting as of January 1, 2022. The impacts of applying IAS 29 were not significant in all years presented. The Group manages its global currency exposure by engaging in hedging transactions where management deems appropriate. Novartis may enter into various contracts that reflect the changes in the value of foreign currency exchange rates to preserve the value of assets, commitments and anticipated transactions. Novartis also uses forward contracts and may enter into foreign currency option contracts to hedge. Net investments in subsidiaries in foreign countries are long-term investments. Their fair value changes through movements of foreign currency exchange rates. The Group has designated a certain portion of its long-term euro-denominated straight bonds, maturing in 2028, as hedges of the translation risk arising on certain of these net investments in foreign operations with euro functional currency. As of December 31, 2022, long-term financial debt with a carrying amount of EUR 1.8 billion (USD 2.0 billion; December 31, 2021: USD 2.1 billion), has been designated as a hedge instrument. During 2022, USD 91 million of net of taxes unrealized income (2021: USD 216 million) was recognized in other comprehensive income and accumulated in currency translation effects in relation with this net investment hedge. The hedge remained effective since inception, and no amount was recognized in the consolidated income statement in 2022, 2021 and 2020. Commodity price risk The Group has only a very limited exposure to price risk related to anticipated purchases of certain commodities used as raw materials by the Group’s businesses. A change in those prices may alter the gross margin of a specific business, but generally by not more than 10% of the margin and thus below the Group’s risk management tolerance levels. Accordingly, the Group does not enter into significant commodity futures, forward or option contracts to manage fluctuations in prices of anticipated purchases. Interest rate risk The Group addresses its net exposure to interest rate risk mainly through the ratio of its fixed-rate financial debt to variable-rate financial debt contained in its total financial debt portfolio. To manage this mix, Novartis may enter into interest rate swap agreements, in which it exchanges periodic payments based on a notional amount and agreed-upon fixed and variable interest rates. Equity risk The Group may purchase equities as investments of its liquid funds. As a policy, it limits its holdings in an unrelated company to less than 5% of its liquid funds. Potential investments are thoroughly analyzed. Call options are written on equities that the Group owns, and put options are written on equities that the Group wants to buy and for which cash is available. Credit risk Credit risks arise from the possibility that customers may not be able to settle their obligations as agreed. To manage this risk, the Group periodically assesses country and customer credit risk, assigns individual credit limits, and takes actions to mitigate credit risk where appropriate (for example payment guarantees, credit insurance and factoring). The provisions for expected credit losses for customers are based on a forward-looking expected credit loss, which includes possible default events on the trade receivables over the entire holding period of the trade receivables. In measuring the expected credit losses, trade receivables are grouped based on shared credit risk characteristics (such as private versus public receivables) and days past due. In determining the expected credit loss rates, the Group considers current and forward-looking macroeconomic factors that may affect the ability of the customers to settle the receivables, and historical loss rates for each category of customers. The Group’s largest customer accounted for approximately 16% of net sales to third parties, and the second largest and third largest customers accounted for 11% and 7% of net sales to third parties, respectively (2021: 17%, 11% and 6%, respectively; 2020: 17%, 11% and 6%, respectively). The highest amounts of trade receivables outstanding were for these same three customers and amounted to 16%, 14% and 7%, respectively, of the Group’s trade receivables at December 31, 2022 (2021: 16%, 12% and 7%, respectively). There is no other significant concentration of customer credit risk. Counterparty risk Counterparty risk encompasses issuer risk on marketable securities and money market instruments; credit risk on cash, time deposits and derivatives; as well as settlement risk for different instruments. Issuer risk is reduced by only buying securities that are at least A- rated. Counterparty credit risk and settlement risk are reduced by a policy of entering into transactions with counterparties (banks or financial institutions) that feature a strong credit rating. Exposure to these risks is closely monitored and kept within predetermined parameters. The limits are regularly assessed and determined based upon credit analysis, including financial statement and capital adequacy ratio reviews. In addition, reverse repurchasing agreements are contracted, and Novartis has entered into credit support agreements with various banks for derivative transactions. To further reduce the settlement risk, the Group has implemented a multi-currency payment system, Continuous Linked Settlement (CLS), providing multilateral netting (payment-versus-payment settlement) of cash flows from foreign exchange transactions. The Group’s cash and cash equivalents are held with major regulated financial institutions; the three largest ones hold approximately 13.2%, 9.2% and 6.8%, respectively (2021: 9.7%, 9.7% and 7.6%, respectively). As of December 31, 2021, the Group’s cash and cash equivalents also included short-term highly rated government-backed debt securities, with an original maturity of three months or less, for approximately 16% (2022: nil). The Group does not expect any losses from non-performance by these counterparties and does not have any significant grouping of exposures to financial sector or country risk. Liquidity risk Liquidity risk is defined as the risk that the Group could not be able to settle or meet its obligations associated with financial liabilities that are settled by delivering cash or another financial asset. Group Treasury is responsible for liquidity, funding and settlement management. In addition, liquidity and funding risks, and related processes and policies, are overseen by management. Novartis manages its liquidity risk on a consolidated basis according to business needs and tax, capital or regulatory considerations, if applicable, through numerous sources of financing in order to maintain flexibility. Certain countries have legal or economic restrictions on the ability of subsidiaries to transfer funds to the Group in the form of cash dividends, loans or advances, but these restrictions do not have an impact on the ability of the Group to meet its cash obligations. Management monitors the Group’s net debt or liquidity position through rolling forecasts on the basis of expected cash flows. Novartis has two US commercial paper programs under which it can issue up to USD 9.0 billion in the aggregate of unsecured commercial paper notes. Novartis also has one Japanese commercial paper program under which it can issue up to JPY 150 billion (approximately USD 1.1 billion) of unsecured commercial paper notes. Commercial paper notes totaling USD 2.8 billion under these three programs were outstanding as per December 31, 2022 (2021: USD 0.9 billion). Novartis further has a committed credit facility of USD 6.0 billion, which was extended in September 2022. This credit facility is provided by a syndicate of banks and is intended to be used as a backstop for the US commercial paper programs. The facility matures in September 2025 and was undrawn as per December 31, 2022, and December 31, 2021. The following table sets forth how management monitors net debt or liquidity based on details of the remaining contractual maturities of current financial assets and liabilities, excluding trade receivables and payables as well as liabilities for contingent consideration at December 31, 2022, and December 31, 2021:
|  | 2022 |
(USD millions) |  | Due within one month |  | Due later than one month but less than three months |  | Due later than three months but less than one year |  | Due later than one year but less than five years |  | Due after five years |  | Total |
Current assets |  |  |  |  |  |  |  |  |  |  |  |  |
Marketable securities, time deposits and short-term investments with original maturity more than 90 days and accrued interest |  | 4 142 |  | 6 911 |  | 36 |  |  |  | 9 |  | 11 098 |
Commodities |  |  |  |  |  |  |  |  |  | 111 |  | 111 |
Derivative financial instruments |  | 23 |  | 147 |  | 19 |  |  |  | 15 |  | 204 |
Cash and cash equivalents |  | 4 011 |  | 3 506 |  |  |  |  |  |  |  | 7 517 |
Total current financial assets |  | 8 176 |  | 10 564 |  | 55 |  |  |  | 135 |  | 18 930 |
Non-current liabilities |  |  |  |  |  |  |  |  |  |  |  |  |
Financial debt |  |  |  |  |  |  |  | -8 975 |  | -11 269 |  | -20 244 |
Financial debt - undiscounted |  |  |  |  |  |  |  | -9 002 |  | -11 394 |  | -20 396 |
Total non-current financial debt |  |  |  |  |  |  |  | -8 975 |  | -11 269 |  | -20 244 |
Current liabilities |  |  |  |  |  |  |  |  |  |  |  |  |
Financial debt |  | -3 215 |  | -146 |  | -2 515 |  |  |  |  |  | -5 876 |
Financial debt - undiscounted |  | -3 215 |  | -146 |  | -2 517 |  |  |  |  |  | -5 878 |
Derivative financial instruments |  | -38 |  | -13 |  | -4 |  |  |  |  |  | -55 |
Total current financial debt |  | -3 253 |  | -159 |  | -2 519 |  |  |  |  |  | -5 931 |
Net debt |  | 4 923 |  | 10 405 |  | -2 464 |  | -8 975 |  | -11 134 |  | -7 245 |
|  | 2021 |
(USD millions) |  | Due within one month |  | Due later than one month but less than three months |  | Due later than three months but less than one year |  | Due later than one year but less than five years |  | Due after five years |  | Total |
Current assets |  |  |  |  |  |  |  |  |  |  |  |  |
Marketable securities, time deposits and short-term investments with original maturity more than 90 days and accrued interest |  | 11 |  | 14 585 |  | 1 088 |  | 4 |  | 18 |  | 15 706 |
Commodities |  |  |  |  |  |  |  |  |  | 111 |  | 111 |
Derivative financial instruments |  | 21 |  | 64 |  | 7 |  |  |  | 13 |  | 105 |
Cash and cash equivalents |  | 7 406 |  | 5 001 |  |  |  |  |  |  |  | 12 407 |
Total current financial assets |  | 7 438 |  | 19 650 |  | 1 095 |  | 4 |  | 142 |  | 28 329 |
Non-current liabilities |  |  |  |  |  |  |  |  |  |  |  |  |
Financial debt |  |  |  |  |  |  |  | -8 464 |  | -14 438 |  | -22 902 |
Financial debt - undiscounted |  |  |  |  |  |  |  | -8 490 |  | -14 587 |  | -23 077 |
Total non-current financial debt |  |  |  |  |  |  |  | -8 464 |  | -14 438 |  | -22 902 |
Current liabilities |  |  |  |  |  |  |  |  |  |  |  |  |
Financial debt |  | -2 780 |  | -521 |  | -2 926 |  |  |  |  |  | -6 227 |
Financial debt - undiscounted |  | -2 780 |  | -521 |  | -2 928 |  |  |  |  |  | -6 229 |
Derivative financial instruments |  | -50 |  | -16 |  | -2 |  |  |  |  |  | -68 |
Total current financial debt |  | -2 830 |  | -537 |  | -2 928 |  |  |  |  |  | -6 295 |
Net debt |  | 4 608 |  | 19 113 |  | -1 833 |  | -8 460 |  | -14 296 |  | -868 |
The carrying amounts of financial liabilities included in the above analysis are not materially different to the contractual amounts due on maturity. The positive and negative fair values on derivative financial instruments represent the net contractual amounts to be exchanged at maturity. The Group’s contractual undiscounted potential cash flows from derivative financial instruments to be settled on a gross basis are as follows:
|  | 2022 |
(USD millions) |  | Due within one month |  | Due later than one month but less than three months |  | Due later than three months but less than one year |  | Total |
Derivative financial instruments and accrued interest on derivative financial instruments |  |  |  |  |  |  |  |  |
Potential outflows in various currencies - from financial derivative liabilities |  | -2 029 |  | -4 598 |  | -316 |  | -6 943 |
Potential inflows in various currencies - from financial derivative assets |  | 2 029 |  | 4 712 |  | 321 |  | 7 062 |
|  | 2021 |
(USD millions) |  | Due within one month |  | Due later than one month but less than three months |  | Due later than three months but less than one year |  | Total |
Derivative financial instruments and accrued interest on derivative financial instruments |  |  |  |  |  |  |  |  |
Potential outflows in various currencies - from financial derivative liabilities |  | -843 |  | -5 482 |  | -461 |  | -6 786 |
Potential inflows in various currencies - from financial derivative assets |  | 847 |  | 5 516 |  | 457 |  | 6 820 |
Other contractual liabilities that are not part of management’s monitoring of the net debt or liquidity consist of the following items:
|  | 2022 |
(USD millions) |  | Due within three months |  | Due later than three months but less than one year |  | Due later than one year but less than five years |  | Due after five years |  | Total |
Contractual interest on non-current liabilities |  | -64 |  | -412 |  | -1 432 |  | -3 624 |  | -5 532 |
Lease liabilities 1 |  | -71 |  | -180 |  | -616 |  | -922 |  | -1 789 |
Trade payables |  | -5 020 |  | -126 |  |  |  |  |  | -5 146 |
Contingent consideration liabilities |  | -16 |  | -115 |  | -437 |  | -267 |  | -835 |
1 Note 10 provides additional disclosures related to lease liabilities.
|  | 2021 |
(USD millions) |  | Due within three months |  | Due later than three months but less than one year |  | Due later than one year but less than five years |  | Due after five years |  | Total |
Contractual interest on non-current liabilities |  | -82 |  | -445 |  | -1 628 |  | -3 908 |  | -6 063 |
Lease liabilities 1 |  | -78 |  | -197 |  | -639 |  | -982 |  | -1 896 |
Trade payables |  | -5 373 |  | -180 |  |  |  |  |  | -5 553 |
Commitment for repurchase of own shares |  | -2 809 |  |  |  |  |  |  |  | -2 809 |
Contingent consideration liabilities |  | -54 |  | -65 |  | -517 |  | -439 |  | -1 075 |
1 Note 10 provides additional disclosures related to lease liabilities.
Capital risk management Novartis strives to maintain a strong credit rating. In managing its capital, Novartis focuses on maintaining a strong balance sheet. As of December 31, 2022, Moody’s Investors Service rated the Company A1 for long-term maturities and P-1 for short-term maturities, and S&P Global Ratings rated the Company AA- for long-term maturities and A-1+ for short-term maturities. Sensitivity analysis The Group uses sensitivity analysis disclosures to provide quantitative information about market risks to which it is exposed. The sensitivity analysis disclosures are in line with the Group’s financial risk management policy, and are based on a one-parameter risk model that considers a one-factor linear relationship between risk factors and exposures. They consider aggregated risk exposures arising from the most significant risk factors (currency risk, interest rate risk and equity price risk) and include all financial assets and financial liabilities as set forth in the table on page F-64. The disclosures below illustrate the potential impact on the Group’s consolidated financial statements as a result of hypothetical market movements in foreign currency exchange rates, interest rates and equity prices. The range of variables chosen reflects management’s view of changes that are reasonably possible over a one-year period. Foreign currency exchange rate sensitivity The Group uses the US dollar as its reporting currency. As a result, the Group is exposed to foreign currency exchange movements, primarily in European, Japanese and emerging market currencies, as well as in the Swiss franc. A strengthening (weakening) of the US dollar against these currencies as of December 31, 2022 and 2021 would have affected the measurement of financial instruments denominated in these foreign currencies. This analysis assumes that all other variables, in particular interest rates, remain constant. A hypothetical 5% increase or decrease in the foreign currency exchange rates against the US dollar would have impacted the Group’s consolidated income statement as presented below:
(USD millions) |  | 2022 |  | 2021 |
5% increase in foreign currency exchange rates against USD |  | -6 |  | 3 |
5% decrease in foreign currency exchange rates against USD |  | 7 |  | -3 |
As of December 31, 2022, the Group designated EUR 1.8 billion (December 31, 2021: EUR 1.8 billion) of its long-term euro-denominated straight bonds as hedges of the translation risk arising on certain net investments in foreign operations with euro functional currency. This analysis assumes that all other variables, in particular interest rates, remain constant. A hypothetical 5% increase, or decrease, in the foreign currency exchange rates against the US dollar, without considering the translation effect of these net investments, would have impacted the Group’s consolidated equity as presented below:
(USD millions) |  | 2022 |  | 2021 |
5% increase in foreign currency exchange rates against USD |  | 93 |  | 99 |
5% decrease in foreign currency exchange rates against USD |  | -98 |  | -104 |
Interest rate sensitivity Our portfolio of fixed-income instruments as of December 31, 2022, was mainly composed of time deposits and debt securities. Novartis uses duration models to approximate the possible change in the value of fixed-income instruments. Based on these models, management believes that a 100-basis point change in interest is deemed a reasonable possible change over a one-year period. Based on exposures in 2022 and 2021, a hypothetical 100-basis point increase (decrease) in interest rates would not have resulted in a significant increase (decrease) in the fair values of the fixed-income instruments. In addition, a hypothetical 100-basis point increase (decrease) in interest rates would not have resulted in a material increase (decrease) of cash flows attributable to such fixed-income instruments. The vast majority of our outstanding financial debts are straight bonds with fixed interest rates and are therefore not affected by movements in interest rates. Equity price sensitivity Fund investments and equity securities held by the Novartis Venture Fund are valued at fair value through profit and loss. Equity securities held as strategic investments, typically held outside the Novartis Venture Fund, are generally designated at date of acquisition as financial assets valued at fair value through other comprehensive income with no subsequent recycling through profit and loss. The fair value of these fund investments and equity securities was USD 1.6 billion as of December 31, 2022 (December 31, 2021: USD 2.2 billion). The fair values of these investments are impacted by the volatility of the stock market, valuation parameters applied (for non-listed equities) and changes in general economic factors. This analysis assumes that all other variables, in particular interest rates, remain constant. A hypothetical increase or decrease of 15% in the risk factors would have impacted the Group’s consolidated income statement as presented below:
(USD millions) |  | 2022 |  | 2021 |
15% increase in equity prices |  | 109 |  | 154 |
15% decrease in equity prices |  | -109 |  | -154 |
A hypothetical increase or decrease of 15% in the risk factors would have impacted the Group’s consolidated equity as presented below:
(USD millions) |  | 2022 |  | 2021 |
15% increase in equity prices |  | 124 |  | 179 |
15% decrease in equity prices |  | -124 |  | -179 |

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