Derivative instruments (Tables)

3 Months Ended

Mar. 31, 2020

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 March 31, 2020, 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 March 31,
Derivatives in cash flow hedging relationships	2020			2019
Foreign currency contracts	$	239		$	85
Cross-currency swap contracts	(401		)	(55		)
Total unrealized (losses) gains	$	(162	)	$	30

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	March 31, 2020		December 31, 2019		March 31, 2020		December 31, 2019
Current portion of long-term debt	$	90	$	903	$	90	$	4
Long-term debt	$	7,784	$	8,814	$	558	$	292

^____________ 

⁽¹⁾ Current portion of long-term debt includes $90 million of carrying value with discontinued hedging relationships as of March 31, 2020. Long-term debt includes $592 million and $136 million of carrying value with discontinued hedging relationships as of March 31, 2020 and December 31, 2019, respectively.

⁽²⁾ 

Current portion of long-term debt includes $90 million of hedging adjustments on discontinued hedging relationships as of March 31, 2020. Long-term debt includes $492 million and $36 million of hedging adjustments on discontinued hedging relationships as of March 31, 2020 and December 31, 2019, 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 March 31, 2020
	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	$	5,894	$	11		$	(346	)
The effects of cash flow and fair value hedging:
Gains (losses) on cash flow hedging relationships reclassified out of AOCI:
Foreign currency contracts	$	49	$	—		$	—
Cross-currency swap contracts	$	—	$	(133	)	$	—
Gains (losses) on fair value hedging relationships—interest rate swap agreements:
Hedged items(1)	$	—	$	—		$	210
Derivatives designated as hedging instruments	$	—	$	—		$	(190	)

	Three months ended March 31, 2019
	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	$	5,286	$	185		$	(343	)
The effects of cash flow and fair value hedging:
Gains (losses) on cash flow hedging relationships reclassified out of AOCI:
Foreign currency contracts	$	14	$	—		$	—
Cross-currency swap contracts	$	—	$	(42	)	$	—
(Losses) gains on fair value hedging relationships—interest rate swap agreements:
Hedged items(1)	$	—	$	—		$	(130	)
Derivatives designated as hedging instruments	$	—	$	—		$	133

^__________ 

⁽¹⁾ 

Gains (losses) on hedged items do not completely offset gains (losses) 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 and the recognition of gains on terminated hedges where the corresponding hedged item was paid down in the period.

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
March 31, 2020	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	$	375	Accrued liabilities/ Other noncurrent liabilities	$	5
Cross-currency swap contracts	Other current assets/ Other assets	10		Accrued liabilities/ Other noncurrent liabilities	657
Interest rate swap contracts	Other current assets/ Other assets	89		Accrued liabilities/ Other noncurrent liabilities	23
Total derivatives designated as hedging instruments		474			685
Derivatives not designated as hedging instruments:
Foreign currency contracts	Other current assets	—		Accrued liabilities	—
Total derivatives not designated as hedging instruments		—			—
Total derivatives		$	474		$	685

	Derivative assets			Derivative liabilities
December 31, 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	$	223	Accrued liabilities/ Other noncurrent liabilities	$	31
Cross-currency swap contracts	Other current assets/ Other assets	66		Accrued liabilities/ Other noncurrent liabilities	315
Interest rate swap contracts	Other current assets/ Other assets	259		Accrued liabilities/ Other noncurrent liabilities	—
Total derivatives designated as hedging instruments		548			346
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		$	549		$	346