Derivative instruments (Tables)

9 Months Ended

Sep. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of notional amounts and interest rates for cross-currency swaps

The notional amounts and interest rates of our cross-currency swaps as of September 30, 2019, were as follows (notional amounts in millions):

	Foreign currency				U.S. dollars
Hedged notes	Notional amounts		Interest rates		Notional amounts		Interest rates
1.25% 2022 euro Notes	€	1,250	1.3	%	$	1,388	3.2	%
0.41% 2023 Swiss franc Bonds	CHF	700	0.4	%	$	704	3.4	%
2.00% 2026 euro Notes	€	750	2.0	%	$	833	3.9	%
5.50% 2026 pound sterling Notes	£	475	5.5	%	$	747	6.0	%
4.00% 2029 pound sterling Notes	£	700	4.0	%	$	1,111	4.5	%

Unrealized gain (loss) recognized in Other Comprehensive Income for our derivative instruments designated as cash flow hedges

The unrealized gains and losses recognized in AOCI for our derivative instruments designated as cash flow hedges were as follows (in millions):

	Three months ended September 30,						Nine months ended September 30,
Derivatives in cash flow hedging relationships	2019			2018			2019			2018
Foreign currency contracts	$	176		$	41		$	245		$	233
Cross-currency swap contracts	(105		)	(22		)	(240		)	(99		)
Total unrealized gains	$	71		$	19		$	5		$	134

Derivatives in fair value hedging relationships

The hedged liabilities and related cumulative-basis adjustments for fair value hedges of those liabilities were recorded in the Condensed Consolidated Balance Sheets as follows (in millions):

	Carrying amounts of hedged liabilities(1)				Cumulative amounts of fair value hedging adjustments related to the carrying amounts of the hedged liabilities(2)
Condensed Consolidated Balance Sheets locations	September 30, 2019		December 31, 2018		September 30, 2019		December 31, 2018
Current portion of long-term debt	$	—	$	2,396	$	—	$	(3	)
Long-term debt	$	9,811	$	9,361	$	391	$	(50	)

^____________ 

⁽¹⁾ Current portion of long-term debt includes $1.0 billion of carrying value with discontinued hedging relationships as of December 31, 2018. Long-term debt includes $136 million and $137 million of carrying value with discontinued hedging relationships as of September 30, 2019 and December 31, 2018, respectively.

⁽²⁾ 

Current portion of long-term debt includes $3 million of hedging adjustments on discontinued hedging relationships as of December 31, 2018. Long-term debt includes $36 million and $37 million of hedging adjustments on discontinued hedging relationships as of September 30, 2019 and December 31, 2018, respectively.

Summary of amounts of income and expense line items

The following tables summarize the amounts recorded in income and expense line items and the effects thereon from fair value and cash flow hedging, including discontinued hedging relationships (in millions):

	Three months ended September 30, 2019								Nine months ended September 30, 2019
	Product sales		Interest and other income, net			Interest (expense), net			Product sales		Interest and other income, net			Interest (expense), net
Total amounts recorded in income and (expense) line items presented in the Condensed Consolidated Statements of Income	$	5,463	$	114		$	(313	)	$	16,323	$	517		$	(988	)
The effects of cash flow and fair value hedging:
Gains (losses) on cash flow hedging relationships reclassified out of AOCI:
Foreign currency contracts	$	26	$	—		$	—		$	62	$	—		$	—
Cross-currency swap contracts	$	—	$	(64	)	$	—		$	—	$	(92	)	$	—
(Losses) gains on fair value hedging relationships—interest rate swap agreements:
Hedged items(1)	$	—	$	—		$	(96	)	$	—	$	—		$	(444	)
Derivatives designated as hedging instruments	$	—	$	—		$	96		$	—	$	—		$	447

	Three months ended September 30, 2018								Nine months ended September 30, 2018
	Product sales		Interest and other income, net			Interest (expense), net			Product sales			Interest and other income, net			Interest (expense), net
Total amounts recorded in income and (expense) line items presented in the Condensed Consolidated Statements of Income	$	5,510	$	126		$	(355	)	$	16,532		$	519		$	(1,040	)
The effects of cash flow and fair value hedging:
Gains (losses) on cash flow hedging relationships reclassified out of AOCI:
Foreign currency contracts	$	3	$	—		$	—		$	(51	)	$	—		$	—
Cross-currency swap contracts	$	—	$	(36	)	$	—		$	—		$	(170	)	$	—
Gains (losses) on fair value hedging relationships—interest rate swap agreements:
Hedged items(1)	$	—	$	—		$	48		$	—		$	—		$	278
Derivatives designated as hedging instruments	$	—	$	—		$	(44	)	$	—		$	—		$	(259	)

^__________ 

⁽¹⁾ 

Gains (losses) on hedged items do not completely offset (losses) gains on the related designated hedging instruments due to amortization of the cumulative amounts of fair value hedging adjustments included in the carrying amount of the hedged debt for discontinued hedging relationships.

Fair values of derivatives included in the Condensed Consolidated Balance Sheets

The fair values of derivatives included in the Condensed Consolidated Balance Sheets were as follows (in millions):

	Derivative assets			Derivative liabilities
September 30, 2019	Condensed Consolidated Balance Sheets locations	Fair values		Condensed Consolidated Balance Sheets locations	Fair values
Derivatives designated as hedging instruments:
Foreign currency contracts	Other current assets/ Other assets	$	339	Accrued liabilities/ Other noncurrent liabilities	$	6
Cross-currency swap contracts	Other current assets/ Other assets	12		Accrued liabilities/ Other noncurrent liabilities	478
Interest rate swap contracts	Other current assets/ Other assets	354		Accrued liabilities/ Other noncurrent liabilities	—
Total derivatives designated as hedging instruments		705			484
Derivatives not designated as hedging instruments:
Foreign currency contracts	Other current assets	—		Accrued liabilities	—
Total derivatives not designated as hedging instruments		—			—
Total derivatives		$	705		$	484

	Derivative assets			Derivative liabilities
December 31, 2018	Condensed Consolidated Balance Sheets locations	Fair values		Condensed Consolidated Balance Sheets locations	Fair values
Derivatives designated as hedging instruments:
Foreign currency contracts	Other current assets/ Other assets	$	181	Accrued liabilities/ Other noncurrent liabilities	$	26
Cross-currency swap contracts	Other current assets/ Other assets	170		Accrued liabilities/ Other noncurrent liabilities	401
Interest rate swap contracts	Other current assets/ Other assets	56		Accrued liabilities/ Other noncurrent liabilities	149
Total derivatives designated as hedging instruments		407			576
Derivatives not designated as hedging instruments:
Foreign currency contracts	Other current assets	1		Accrued liabilities	—
Total derivatives not designated as hedging instruments		1			—
Total derivatives		$	408		$	576