Changes in exchange rates and interest rates create exposure to market risk. Certain derivative financial instruments are used when available on a cost-effective basis to hedge the underlying economic exposure. These instruments qualify as cash flow, net investment and fair value hedges upon meeting certain criteria, including effectiveness of offsetting hedged exposures. Changes in fair value of derivatives that do not qualify for hedge accounting are recognized in earnings as they occur. Derivative financial instruments are not used for trading purposes.

Financial instruments are subject to counterparty credit risk which is considered as part of the overall fair value measurement. Counterparty credit risk is monitored on an ongoing basis and mitigated by limiting amounts outstanding with any individual counterparty, utilizing conventional derivative financial instruments and only entering into agreements with counterparties that meet high credit quality standards. The consolidated financial statements would not be materially impacted if any counterparty failed to perform according to the terms of its agreement. Collateral is not required by any party whether derivatives are in an asset or liability position under the terms of the agreements.

Level 2 inputs utilize observable prices for similar instruments and quoted prices for identical or similar instruments in non-active markets. Additionally, certain corporate debt securities utilize a third-party matrix pricing model using significant inputs corroborated by market data for substantially the full term of the assets. Equity and fixed income funds are primarily invested in publicly traded securities valued at the respective NAV of the underlying investments. Level 2 derivative instruments are valued using SOFR yield curves, less credit valuation adjustments, and observable forward foreign exchange rates at the reporting date. Valuations of derivative contracts may fluctuate considerably from volatility in underlying foreign currencies and underlying interest rates driven by market conditions and the duration of the contract. The fair value of Level 2 equity investments is adjusted for characteristics specific to the security and is not adjusted for contractual sale restrictions. Equity investments subject to contractual sale restrictions were not material as of December 31, 2023 and 2022.


	December 31, 2023						December 31, 2022
Dollars in millions	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Cash and cash equivalents
Money market and other securities	$	—	$	8,489	$	—	$	—	$	7,770	$	—
Marketable debt securities
Certificates of deposit	—		609		—		—		32		—
Commercial paper	—		92		—		—		98		—
Corporate debt securities	—		460		—		—		—		—
U.S. Treasury securities	—		19		—		—		—		—
Derivative assets			219		—		—		305		—
Equity investments	318		141		—		424		680		—
Derivative liabilities	—		160		—		—		213		—
Contingent consideration liability
Contingent value rights	4		—		—		5		—		—
Other acquisition related contingent consideration	—		—		8		—		—		24


	December 31,
Dollars in millions	2023		2022
Equity investments with readily determinable fair values	$	459	$	1,104
Equity investments without readily determinable fair values	698		537
Limited partnerships and other equity method investments	542		546
Total equity investments	$	1,699	$	2,187


	Year ended December 31,
Dollars in millions	2023		2022		2021
Equity investments with readily determined fair values
Net loss recognized	$	117	$	762	$	403
Net (gain) recognized on investments sold	(3)		(17)		(357)
Net unrealized loss recognized on investments still held	120		779		760

Equity investments without readily determinable fair values
Upward adjustments	(9)		(80)		(918)
Impairments and downward adjustments	14		11		1
Equity in net (income)/loss of affiliates	38		108		(231)

Total equity investment losses/(gains)	160		801		(745)

BMS enters into foreign currency forward and purchased local currency put option contracts (foreign exchange contracts) to hedge certain forecasted intercompany inventory sales and certain other foreign currency transactions. The objective of these foreign exchange contracts is to reduce variability caused by changes in foreign exchange rates that would affect the U.S. dollar value of future cash flows derived from foreign currency denominated sales, primarily the euro and Japanese yen. The fair values of these derivative contracts are recorded as either assets (gain positions) or liabilities (loss positions) in the consolidated balance sheets. Changes in fair value for these foreign exchange contracts, which are designated as cash flow hedges, are temporarily recorded in Accumulated other comprehensive loss ("AOCL") and reclassified to net earnings when the hedged item affects earnings (typically within the next 24 months). As of December 31, 2023, assuming market rates remain constant through contract maturities, we expect to reclassify pre-tax gains of $4 million into Cost of products sold for our foreign exchange contracts out of AOCL during the next 12 months. The notional amount of outstanding foreign currency exchange contracts was primarily $4.4 billion for the euro contracts and $1.2 billion for Japanese yen contracts as of December 31, 2023.

BMS also enters into cross-currency swap contracts to hedge exposure to foreign currency exchange rate risk associated with its long-term debt denominated in euros. These contracts convert interest payments and principal repayment of the long-term debt to U.S. dollars from euros and are designated as cash flow hedges. The unrealized gains and losses on these contracts are reported in AOCL and reclassified to Other (income)/expense, net, in the same periods during which the hedged debt affects earnings. The notional amount of cross-currency interest rate swap contracts associated with long-term debt denominated in euros was $1.2 billion as of December 31, 2023.

Cash flow hedge accounting is discontinued when the forecasted transaction is no longer probable of occurring within 60 days after the originally forecasted date or when the hedge is no longer effective. Assessments to determine whether derivatives designated as qualifying hedges are highly effective in offsetting changes in the cash flows of hedged items are performed at inception and on a quarterly basis. The earnings impact related to discontinued cash flow hedges and hedge ineffectiveness was not material during all periods presented. Foreign currency exchange contracts not designated as a cash flow hedge offset exposures in certain foreign currency denominated assets, liabilities and earnings. Changes in the fair value of these derivatives are recognized in earnings as they occur.

Cross-currency swap contracts and foreign currency forward contracts of $962 million as of December 31, 2023 are designated to hedge currency exposure of BMS's net investment in its foreign subsidiaries. Contract fair value changes are recorded in the foreign currency translation component of AOCL with a related offset in derivative asset or liability in the consolidated balance sheets. The notional amount of outstanding cross-currency swap and foreign currency forward contracts was primarily attributed to the Japanese yen of $524 million and euro of $438 million as of December 31, 2023.

Fixed to floating interest rate swap contracts are designated as fair value hedges and used as an interest rate risk management strategy to create an appropriate balance of fixed and floating rate debt. The contracts and underlying debt for the hedged benchmark risk are recorded at fair value. Gains or losses resulting from changes in fair value of the underlying debt attributable to the hedged benchmark interest rate risk are recorded in interest expense with an associated offset to the carrying value of debt. Since the specific terms and notional amount of the swap are intended to align with the debt being hedged, all changes in fair value of the swap are recorded in interest expense with an associated offset to the derivative asset or liability on the consolidated balance sheet. As a result, there was no net impact in earnings. If the underlying swap is terminated prior to maturity, then the fair value adjustment to the underlying debt is amortized as a reduction to interest expense over the remaining term of the debt.

Derivative cash flows, with the exception of net investment hedges, are principally classified in the operating section of the consolidated statements of cash flows, consistent with the underlying hedged item. Cash flows related to net investment hedges are classified in investing activities.


	December 31, 2023				December 31, 2022
	Asset(a)		Liability(b)		Asset(a)		Liability(b)
Dollars in millions	Notional	Fair Value	Notional	Fair Value	Notional	Fair Value	Notional	Fair Value
Designated as cash flow hedges
Foreign exchange contracts	4,772	130	1,971	(66)	5,771	271	2,281	(80)
Cross-currency swap contracts	1,210	50	—	—	—	—	584	(7)
Designated as net investment hedges
Foreign exchange contracts	—	—	215	(8)	—	—	—	—
Cross-currency swap contracts	—	—	747	(43)	72	1	1,157	(78)
Designated as fair value hedges
Interest rate swap contracts	2,500	3	1,755	(14)	—	—	255	(18)
Not designated as hedges
Foreign currency exchange contracts	906	20	1,250	(29)	1,564	33	1,703	(19)
Total return swap contracts(c)	401	16	—	—	—	—	322	(11)


	Year Ended December 31,
	2023				2022				2021
Dollars in millions	Cost of products sold		Other (income)/expense, net		Cost of products sold		Other (income)/expense, net		Cost of products sold		Other (income)/expense, net
Interest rate swap contracts	$	—	$	(5)	$	—	$	(27)	$	—	$	(31)
Cross-currency swap contracts	—		(65)		—		(52)		—		(11)
Foreign exchange contracts	(303)		(95)		(492)		(96)		96		(21)


	Year Ended December 31,
Dollars in millions	2023		2022		2021
Derivatives qualifying as cash flow hedges
Foreign exchange contracts gain/(loss):
Recognized in Other Comprehensive Income/(Loss)	$	13	$	592	$	364
Reclassified to Cost of products sold	(303)		(492)		96
Cross-currency swap contracts gain/(loss):
Recognized in Other Comprehensive Income	57		(7)		—
Reclassified to Other (income)/expense, net	(31)		(29)		—
Forward starting interest rate swap contract loss:
Reclassified to Other (income)/expense, net	—		(3)		—



Derivatives qualifying as net investment hedges
Cross-currency swap contracts gain/(loss):
Recognized in Other Comprehensive Income/(Loss)	52		30		38
Foreign Exchange contracts gain/(loss):
Recognized in Other Comprehensive Income/(Loss)	(15)		—		—

Non-derivatives qualifying as net investment hedges
Non-U.S. dollar borrowings gain/(loss):
Recognized in Other Comprehensive Income/(Loss) (a)	(10)		91		83