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FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS (Tables)

9 Months Ended

Sep. 30, 2022

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

Financial assets and liabilities measured at fair value on a recurring basis are summarized below:


	September 30, 2022						December 31, 2021
Dollars in Millions	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Cash and cash equivalents - money market and other securities	$	—	$	4,667	$	—	$	—	$	12,225	$	—
Marketable debt securities:
Certificates of deposit	—		1,080		—		—		2,264		—
Commercial paper	—		168		—		—		320		—
Corporate debt securities	—		45		—		—		403		—
Derivative assets	—		1,058		8		—		206		12
Equity investments	426		493		—		1,910		109		—
Derivative liabilities	—		81		—		—		25		—
Contingent consideration liability:
Contingent value rights	6		—		—		8		—		—
Other acquisition related contingent consideration	—		—		32		—		—		35

Marketable Securities

The following table summarizes marketable debt securities:


	September 30, 2022								December 31, 2021
Dollars in Millions	Amortized Cost		Gross Unrealized						Amortized Cost		Gross Unrealized
			Gains		Losses		Fair Value				Gains		Losses		Fair Value
Certificates of deposit	$	1,080	$	—	$	—	$	1,080	$	2,264	$	—	$	—	$	2,264
Commercial paper	168		—		—		168		320		—		—		320
Corporate debt securities	45		—		—		45		401		2		—		403
Total marketable debt securities(a)	$	1,293	$	—	$	—	$	1,293	$	2,985	$	2	$	—	$	2,987

(a) All marketable debt securities mature within one year as of September 30, 2022, and December 31, 2021.

Schedule of Equity Investments

The following summarizes the carrying amount of equity investments:


Dollars in Millions	September 30, 2022		December 31, 2021
Equity investments with readily determinable fair values	$	919	$	2,019
Equity investments without readily determinable fair values	505		283
Limited partnerships and other equity method investments	535		666
Total equity investments	$	1,959	$	2,968

Debt Securities, Trading, and Equity Securities, FV-NI

The following summarizes the activity related to equity investments. Changes in fair value of equity investments are included in Other (income)/expense, net.


	Three Months Ended September 30,				Nine Months Ended September 30,
Dollars in Millions	2022		2021		2022		2021
Equity investments with readily determined fair values(a)
Net loss/(gain) recognized	$	75	$	22	$	927	$	(93)
Net (gain)/loss recognized on investments sold	(1)		3		(17)		5
Net unrealized loss/(gain) recognized on investments still held	76		19		944		(98)

Equity investments without readily determinable fair values
Upward adjustments	(64)		(447)		(70)		(908)
Impairments and downward adjustments	—		—		2		1
Cumulative upward adjustments					(173)
Cumulative impairments and downward adjustments					52

Equity in net loss/(income) of affiliates	3		(40)		107		(214)

(a) Certain prior year amounts have been reclassified to conform to the current year's presentation.

Schedule of Derivatives and Fair Value

The following table summarizes the fair value of outstanding derivatives:


	September 30, 2022								December 31, 2021
	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	$	—	$	—	$	255	$	(19)	$	255	$	10	$	—	$	—
Cross-currency interest rate swap contracts	1,411		136		584		(43)		600		26		—		—
Foreign currency forward contracts	7,978		882		145		(8)		3,587		161		1,814		(20)

Derivatives not designated as hedging instruments:
Foreign currency forward contracts	1,628		40		561		(11)		883		9		568		(5)

Other	—		8		—		—		—		12		—		—

(a) Included in Other current assets and Other non-current assets.

(b) Included in Other current liabilities and Other non-current liabilities.

Derivative Instruments, Gain (Loss)

The following table summarizes the financial statement classification and amount of (gain)/loss recognized on hedging instruments:


	Three Months Ended September 30, 2022				Nine Months Ended September 30, 2022
Dollars in Millions	Cost of products sold		Other (income)/expense, net		Cost of products sold		Other (income)/expense, net
Interest rate swap contracts	$	—	$	(5)	$	—	$	(23)

Cross-currency interest rate swap contracts	—		13		—		5
Foreign currency forward contracts	(195)		(61)		(408)		(136)


	Three Months Ended September 30, 2021				Nine Months Ended September 30, 2021
Dollars in Millions	Cost of products sold		Other (income)/expense, net		Cost of products sold		Other (income)/expense, net
Interest rate swap contracts	$	—	$	(7)	$	—	$	(22)
Cross-currency interest rate swap contracts	—		(2)		—		(8)
Foreign currency forward contracts	19		2		145		(14)

The following table summarizes the effect of derivative and non-derivative instruments designated as hedging instruments in Other Comprehensive Income:


	Three Months Ended September 30,				Nine Months Ended September 30,
Dollars in Millions	2022		2021		2022		2021
Derivatives qualifying as cash flow hedges
Foreign currency forward contracts gain/(loss):
Recognized in Other Comprehensive Income(a)	$	548	$	93	$	1,149	$	314
Reclassified to Cost of products sold	(195)		37		(408)		126
Cross-currency interest rate swap contracts gain/(loss):
Recognized in Other Comprehensive Income	(43)		—		(43)		—
Reclassified to Other (income)/expense, net	20		—		20		—
Forward starting interest rate swap contract loss:
Reclassified to Other (income)/expense, net	—		—		(3)		—

Derivatives qualifying as net investment hedges
Cross-currency interest rate swap contracts gain:
Recognized in Other Comprehensive Income	71		—		135		26

Non-derivatives qualifying as net investment hedges
Non-U.S. dollar borrowings gain:
Recognized in Other Comprehensive Income	40		20		123		45

(a) The majority is expected to be reclassified into earnings in the next 24 months.

Schedule of Short-term Debt

Short-term debt obligations include:


Dollars in Millions	September 30, 2022		December 31, 2021
Non-U.S. short-term borrowings	$	107	$	105
Current portion of long-term debt	1,903		4,764
Other	122		79
Total	$	2,132	$	4,948

Schedule of Fair Value and Other Adjustments to Long Term Debt

Long-term debt and the current portion of long-term debt include:


Dollars in Millions	September 30, 2022		December 31, 2021
Principal Value	$	38,137	$	43,095

Adjustments to Principal Value:
Fair value of interest rate swap contracts	(19)		10
Unamortized basis adjustment from swap terminations	101		119
Unamortized bond discounts and issuance costs	(290)		(263)
Unamortized purchase price adjustments of Celgene debt	940		1,408
Total	$	38,869	$	44,369

Current portion of long-term debt	$	1,903	$	4,764
Long-term debt	36,966		39,605
Total	$	38,869	$	44,369

The table below summarizes the issuances:


Dollars in Millions
Principal Value:
2.950% Notes due 2032	$	1,750
3.550% Notes due 2042	1,250
3.700% Notes due 2052	2,000
3.900% Notes due 2062	1,000
Total	$	6,000

- Definition

Tabular disclosure of long-debt instruments or arrangements, including identification, terms, features, collateral requirements and other information necessary to a fair presentation. These are debt arrangements that originally required repayment more than twelve months after issuance or greater than the normal operating cycle of the entity, if longer.

+ References

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+ Details