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FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
 3 Months Ended
Mar. 31, 2017
Investments, Debt and Equity Securities [Abstract]  
Financial Instruments [Text Block]
FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

Financial assets and liabilities measured at fair value on a recurring basis are summarized below:
 
March 31, 2017
 
December 31, 2016
Dollars in Millions
Level 1
 
Level 2
 
Level 1
 
Level 2
Cash and cash equivalents - Money market and other securities
$
—

 
$
3,256

 
$
—

 
$
3,532

Marketable securities:
 
 
 
 
 
 
 
Certificates of deposit
—

 
419

 
—

 
27

Commercial paper
—

 
480

 
—

 
750

Corporate debt securities
—

 
3,869

 
—

 
3,947

Equity funds
—

 
109

 
—

 
101

Fixed income funds
—

 
7

 
—

 
7

Derivative assets
—

 
29

 
—

 
75

Equity investments
30

 
—

 
24

 
—

Derivative liabilities
—

 
(24
)
 
—

 
(30
)

As further described in "Note 9. Financial Instruments and Fair Value Measurements" in our 2016 Form 10-K, our fair value estimates use inputs that are either (1) quoted prices for identical assets or liabilities in active markets (Level 1 inputs), (2) observable prices for similar assets or liabilities in active markets or for identical or similar assets or liabilities in markets that are not active (Level 2 inputs) or (3) unobservable inputs (Level 3 inputs). There were no Level 3 financial assets or liabilities as of March 31, 2017 and December 31, 2016.

Available-for-sale Securities

The following table summarizes available-for-sale securities:
 
March 31, 2017
 
December 31, 2016
Dollars in Millions
Amortized Cost
 
Gross Unrealized
 
 
 
Amortized Cost
 
Gross Unrealized
 
 
 
Gains
 
Losses
 
Fair Value
 
 
Gains
 
Losses
 
Fair Value
Certificates of deposit
$
419

 
$
—

 
$
—

 
$
419

 
$
27

 
$
—

 
$
—

 
$
27

Commercial paper
480

 
—

 
—

 
480

 
750

 
—

 
—

 
750

Corporate debt securities
3,864

 
11

 
(6
)
 
3,869

 
3,945

 
10

 
(8
)
 
3,947

Equity investments
31

 
4

 
(5
)
 
30

 
31

 
—

 
(7
)
 
24

Total
$
4,794

 
$
15

 
$
(11
)
 
$
4,798

 
$
4,753

 
$
10

 
$
(15
)
 
$
4,748


Dollars in Millions
March 31,
2017
 
December 31,
2016
Current marketable securities(a)
$
2,199

 
$
2,113

Non-current marketable securities(b)
2,685

 
2,719

Other assets
30

 
24

Total
$
4,914

 
$
4,856

(a)
The fair value option for financial assets was elected for investments in equity and fixed income funds. The fair value of these investments were $116 million at March 31, 2017 and $108 million at December 31, 2016 and included in current marketable securities.
(b)
All non-current marketable securities mature within five years as of March 31, 2017 and December 31, 2016.
Qualifying Hedges and Non-Qualifying Derivatives
The following table summarizes the fair value of outstanding derivatives:
 
March 31, 2017
 
December 31, 2016
 
Asset(a)
 
Liability(b)
 
Asset(a)
 
Liability(b)
Dollars in Millions
Notional
 
Fair Value
 
Notional
 
Fair Value
 
Notional
 
Fair Value
 
Notional
 
Fair Value
Derivatives designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swap contracts
$
—

 
$
—

 
$
1,505

 
$
(5
)
 
$
750

 
$
1

 
$
755

 
$
(3
)
Forward starting interest rate swap contracts
—

 
—

 
—

 
—

 
500

 
8

 
250

 
(11
)
Foreign currency forward contracts
507

 
29

 
536

 
(17
)
 
967

 
66

 
198

 
(9
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign currency forward contracts
71

 
—

 
137

 
(2
)
 
106

 
—

 
360

 
(7
)

(a)
Included in prepaid expenses and other and other assets.
(b)
Included in accrued liabilities and pension and other liabilities.

Cash Flow Hedges — The notional amount of outstanding foreign currency forward contracts was primarily attributed to the euro ($584 million) and Japanese yen ($252 million) at March 31, 2017. BMS terminated forward starting interest rate swap contracts in the first quarter of 2017 with an aggregate notional value of $750 million. The proceeds and related gain were not material.

Net Investment Hedges — Non-U.S. dollar borrowings of €950 million ($1,026 million) are designated to hedge euro currency exposures of the net investment in certain foreign affiliates.

Fair Value Hedges — The notional amount of fixed-to-floating interest rate swap contracts terminated was $500 million in 2016 generating proceeds of $43 million (including accrued interest).

Debt Obligations
Short-term debt obligations includes:
Dollars in Millions
March 31,
2017
 
December 31,
2016
Bank drafts and short-term borrowings
$
448

 
$
243

Current portion of long-term debt
749

 
749

Total
$
1,197

 
$
992



Long-term debt and the current portion of long-term debt includes:
Dollars in Millions
March 31,
2017
 
December 31,
2016
Principal Value
$
7,800

 
$
6,261

Adjustments to Principal Value:
 
 
 
Fair value of interest rate swap contracts
(5
)
 
(2
)
Unamortized basis adjustment from swap terminations
280

 
287

Unamortized bond discounts and issuance costs
(89
)
 
(81
)
Total
$
7,986

 
$
6,465

 
 
 
 
Current portion of long-term debt
$
749

 
$
749

Long-term debt
7,237

 
5,716



The fair value of debt was $8,411 million at March 31, 2017 and $6,932 million at December 31, 2016 valued using Level 2 inputs. Interest payments were $43 million and $33 million for the three months ended March 31, 2017 and 2016, respectively, net of amounts related to interest rate swap contracts.

On February 27, 2017, BMS issued senior unsecured notes in a registered public offering. The notes rank equally in right of payment with all of BMS's existing and future senior unsecured indebtedness. BMS may redeem the notes, in whole or in part, at any time prior to maturity at a predetermined redemption price. The following table summarizes the note issuances:
Amounts in Millions
2017
Principal Value:
 
1.600% Notes due 2019
$
750

3.250% Notes due 2027
750

Total
$
1,500

 
 
Proceeds net of discount and deferred loan issuance costs
$
1,488