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FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
 9 Months Ended
Sep. 30, 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:
 
September 30, 2017
 
December 31, 2016
Dollars in Millions
Level 1
 
Level 2
 
Level 1
 
Level 2
Cash and cash equivalents - Money market and other securities
$
—

 
$
3,915

 
$
—

 
$
3,532

Marketable securities:
 
 
 
 
 
 
 
Certificates of deposit
—

 
176

 
—

 
27

Commercial paper
—

 
977

 
—

 
750

Corporate debt securities
—

 
3,725

 
—

 
3,947

Equity funds
—

 
119

 
—

 
101

Fixed income funds
—

 
7

 
—

 
7

Derivative assets
—

 
31

 
—

 
75

Equity investments
90

 
—

 
24

 
—

Derivative liabilities
—

 
(63
)
 
—

 
(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 September 30, 2017 and December 31, 2016.

Available-for-sale Securities

The following table summarizes available-for-sale securities:
 
September 30, 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
$
176

 
$
—

 
$
—

 
$
176

 
$
27

 
$
—

 
$
—

 
$
27

Commercial paper
977

 
—

 
—

 
977

 
750

 
—

 
—

 
750

Corporate debt securities
3,713

 
15

 
(3
)
 
3,725

 
3,945

 
10

 
(8
)
 
3,947

Equity investments
57

 
34

 
(1
)
 
90

 
31

 
—

 
(7
)
 
24

 
$
4,923

 
$
49

 
$
(4
)
 
$
4,968

 
$
4,753

 
$
10

 
$
(15
)
 
$
4,748

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial assets measured using the fair value option
 
 
 
 
 
 
 
 
 
 
 
 
Equity and fixed income funds(a)
 
 
 
 
 
 
126

 
 
 
 
 
 
 
108

Total
 
 
 
 
 
 
$
5,094

 
 
 
 
 
 
 
$
4,856


Dollars in Millions
September 30,
2017
 
December 31,
2016
Current marketable securities
$
2,478

 
$
2,113

Non-current marketable securities(b)
2,526

 
2,719

Other assets(c)
90

 
24

Total
$
5,094

 
$
4,856

(a)
The fair value option for financial assets was elected for investments in equity and fixed income funds and are included in current marketable securities.
(b)
All non-current marketable securities mature within five years as of September 30, 2017 and December 31, 2016.
(c)
Includes equity investments.

Qualifying Hedges and Non-Qualifying Derivatives
The following table summarizes the fair value of outstanding derivatives:
 
September 30, 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
$
—

 
$
—

 
$
755

 
$
(3
)
 
$
750

 
$
1

 
$
755

 
$
(3
)
Forward starting interest rate swap contracts
—

 
—

 
—

 
—

 
500

 
8

 
250

 
(11
)
Foreign currency forward contracts
1,351

 
25

 
548

 
(28
)
 
967

 
66

 
198

 
(9
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign currency forward contracts
322

 
6

 
1,183

 
(32
)
 
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 ($2.2 billion) and Japanese yen ($586 million) at September 30, 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 ($1.1 billion) 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 include:
Dollars in Millions
September 30,
2017
 
December 31,
2016
Commercial paper
$
799

 
$
—

Bank drafts and short-term borrowings
662

 
243

Current portion of long-term debt
—

 
749

Total
$
1,461

 
$
992



The average amount of commercial paper outstanding was $211 million at a weighted-average rate of 1.12% during 2017. The maximum amount of commercial paper outstanding was $1.0 billion with $799 million outstanding at September 30, 2017.
Long-term debt and the current portion of long-term debt include:
Dollars in Millions
September 30,
2017
 
December 31,
2016
Principal Value
$
6,834

 
$
6,261

Adjustments to Principal Value:
 
 
 
Fair value of interest rate swap contracts
(3
)
 
(2
)
Unamortized basis adjustment from swap terminations
234

 
287

Unamortized bond discounts and issuance costs
(83
)
 
(81
)
Total
$
6,982

 
$
6,465

 
 
 
 
Current portion of long-term debt
$
—

 
$
749

Long-term debt
6,982

 
5,716



The fair value of debt was $7.4 billion at September 30, 2017 and $6.9 billion at December 31, 2016 valued using Level 2 inputs. Interest payments were $172 million and $140 million for the nine months ended September 30, 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:
Dollars 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



During the third quarter of 2017, $750 million of 0.875% Notes matured and were repaid.

During the second quarter of 2017, the Company repurchased certain long-term debt obligations with interest rates ranging from 5.875% to 6.875%. The following summarizes the debt repurchase activity:
Dollars in Millions
2017
Principal amount
$
337

Carrying value
366

Debt redemption price
474

Loss on debt redemption(a)
109

(a)
Including acceleration of debt issuance costs, gain on previously terminated interest rate swap contracts and other related fees.