Financial Instruments and Fair Value Measures (Tables)

12 Months Ended

Dec. 31, 2018

Summary of amounts and location of derivatives on the consolidated balance sheets

The following table summarizes the amounts and location of AbbVie's derivative instruments on the consolidated balance sheets:



	Fair value - Derivatives in asset position					Fair value - Derivatives in liability position
as of December 31 (in millions)	Balance sheet caption	2018		2017		Balance sheet caption	2018		2017
Foreign currency forward exchange contracts
Designated as cash flow hedges	Prepaid expenses and other	$	113	$	1	Accounts payable and accrued liabilities	$	—	$	120
Not designated as hedges	Prepaid expenses and other	19		22		Accounts payable and accrued liabilities	26		29
Interest rate swaps designated as fair value hedges	Prepaid expenses and other	—		—		Accounts payable and accrued liabilities	—		8
Interest rate swaps designated as fair value hedges	Other assets	—		—		Other long-term liabilities	466		393
Total derivatives		$	132	$	23		$	492	$	550

Schedule of pre-tax amounts of derivatives recognized in other comprehensive income (loss)

The following table presents the pre-tax amounts of gains (losses) from derivative instruments recognized in other comprehensive income (loss):



	2018						2017								2016
years ended December 31 (in millions)	Cash Flow Hedges		Net Investment Hedges		Total		Cash Flow Hedges			Net Investment Hedges		Total			Cash Flow Hedges		Net Investment Hedges		Total
Foreign currency forward exchange contracts	$	175	$	—	$	175	$	(250	)	$	—	$	(250	)	$	174	$	118	$	292

Summary of pre-tax amounts and location of derivatives recognized in the consolidated statement of earnings

The following table summarizes the pre-tax amounts and location of derivative instrument net gains (losses) recognized in the consolidated statements of earnings, including the net gains (losses) reclassified out of AOCI into net earnings. See Note 12 for the amount of net gains (losses) reclassified out of AOCI.



years ended December 31 (in millions)	Statement of earnings caption	2018			2017			2016
Foreign currency forward exchange contracts
Designated as cash flow hedges	Cost of products sold	$	(161	)	$	118		$	20
Not designated as hedges	Net foreign exchange loss	83			(96		)	6
Non-designated treasury rate lock agreements	Other expense, net	—			—			(12		)
Interest rate swaps designated as fair value hedges	Interest expense, net	(71		)	(63		)	(266		)
Debt designated as hedged item in fair value hedges	Interest expense, net	71			63			266

Summary of bases used to measure assets and liabilities carried at fair value on a recurring basis

The following table summarizes the bases used to measure certain assets and liabilities carried at fair value on a recurring basis on the consolidated balance sheet as of December 31, 2018:



			Basis of fair value measurement
(in millions)	Total		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable Inputs (Level 3)
Assets
Cash and equivalents	$	7,289	$	1,209	$	6,080	$	—
Time deposits	568		—		568		—
Debt securities	1,536		—		1,536		—
Equity securities	4		4		—		—
Foreign currency contracts	132		—		132		—
Total assets	$	9,529	$	1,213	$	8,316	$	—
Liabilities
Interest rate hedges	$	466	$	—	$	466	$	—
Foreign currency contracts	26		—		26		—
Contingent consideration	4,483		—		—		4,483
Total liabilities	$	4,975	$	—	$	492	$	4,483

The following table summarizes the bases used to measure certain assets and liabilities carried at fair value on a recurring basis on the consolidated balance sheet as of December 31, 2017:



			Basis of fair value measurement
(in millions)	Total		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable Inputs (Level 3)
Assets
Cash and equivalents	$	9,303	$	849	$	8,454	$	—
Debt securities	2,524		—		2,524		—
Equity securities	4		4		—		—
Foreign currency contracts	23		—		23		—
Total assets	$	11,854	$	853	$	11,001	$	—
Liabilities
Interest rate hedges	$	401	$	—	$	401	$	—
Foreign currency contracts	149		—		149		—
Contingent consideration	4,534		—		—		4,534
Total liabilities	$	5,084	$	—	$	550	$	4,534

Summary of changes in fair value of contingent consideration liabilities which are measured using Level 3 inputs

The following table presents the changes in fair value of contingent consideration liabilities which are measured using Level 3 inputs:



years ended December 31 (in millions)	2018			2017			2016
Beginning balance	$	4,534		$	4,213		$	—
Additions (See Note 5)	—			—			3,985
Change in fair value recognized in net earnings	49			626			228
Milestone payments	(100		)	(305		)	—
Ending balance	$	4,483		$	4,534		$	4,213

Schedule of book values, approximate fair values and bases used to measure certain financial instruments

The book values, approximate fair values and bases used to measure the approximate fair values of certain financial instruments as of December 31, 2018 are shown in the table below:



					Basis of fair value measurement
(in millions)	Book value		Approximate fair values		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable Inputs (Level 3)
Liabilities
Short-term borrowings	$	3,699	$	3,693	$	—	$	3,693	$	—
Current portion of long-term debt and lease obligations, excluding fair value hedges	1,609		1,617		1,609		8		—
Long-term debt and lease obligations, excluding fair value hedges	35,468		34,052		34,024		28		—
Total liabilities	$	40,776	$	39,362	$	35,633	$	3,729	$	—

AbbVie also holds investments in equity securities that do not have readily determinable fair values. The company records these investments at cost and remeasures them to fair value based on certain observable price changes or impairment events as they occur. The carrying amount of these investments was $84 million as of December 31, 2018. No significant cumulative upward or downward adjustments have been recorded for these investments as of December 31, 2018. Prior to the adoption of ASU No. 2016-01 discussed in Note 2, these investments were accounted for under the cost method and disclosed in the table below as of December 31, 2017.

The book values, approximate fair values and bases used to measure the approximate fair values of certain financial instruments as of December 31, 2017 are shown in the table below:



					Basis of fair value measurement
(in millions)	Book value		Approximate fair values		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable Inputs (Level 3)
Assets
Investments	$	48	$	48	$	—	$	—	$	48
Total assets	$	48	$	48	$	—	$	—	$	48
Liabilities
Short-term borrowings	$	400	$	400	$	—	$	400	$	—
Current portion of long-term debt and lease obligations, excluding fair value hedges	6,023		6,034		4,004		2,030		—
Long-term debt and lease obligations, excluding fair value hedges	31,346		32,846		32,763		83		—
Total liabilities	$	37,769	$	39,280	$	36,767	$	2,513	$	—

Summary of available-for-sale securities by type

The following table summarizes available-for-sale securities by type as of December 31, 2018:



	Amortized cost		Gross unrealized					Fair value
(in millions)	Amortized cost		Gains		Losses			Fair value
Asset backed securities	$	423	$	—	$	(2	)	$	421
Corporate debt securities	1,042		1		(9		)	1,034
Other debt securities	81		—		—			81
Total	$	1,546	$	1	$	(11	)	$	1,536

The following table summarizes available-for-sale securities by type as of December 31, 2017:



	Amortized cost		Gross unrealized					Fair value
(in millions)	Amortized cost		Gains		Losses			Fair value
Asset backed securities	$	930	$	1	$	(3	)	$	928
Corporate debt securities	1,451		4		(2		)	1,453
Other debt securities	144		—		(1		)	143
Equity securities	4		2		(2		)	4
Total	$	2,529	$	7	$	(8	)	$	2,528