Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2018

Schedule of Financial Assets and Liabilities Measured At Fair Value On a Recurring Basis



The following table presents the financial assets and liabilities measured at fair value using a market approach on a recurring basis by balance sheet categories and fair value hierarchy level as defined in Notes to Consolidated Financial Statements––Note 1E. Basis of Presentation and Significant Accounting Policies: Fair Value in Pfizer’s 2017 Financial Report:
	September 30, 2018						December 31, 2017
(MILLIONS OF DOLLARS)	Total		Level 1		Level 2		Total		Level 1		Level 2
Financial assets measured at fair value on a recurring basis:
Short-term investments
Classified as equity securities:
Money market funds	$	1,184	$	—	$	1,184	$	2,115	$	—	$	2,115
Equity^(a)	29		17		12		35		16		19
	1,213		17		1,196		2,150		16		2,134
Classified as available-for-sale debt securities:
Government and agency—non-U.S.	8,336		—		8,336		12,242		—		12,242
Corporate	2,890		—		2,890		2,766		—		2,766
Government—U.S.	8		—		8		252		—		252
Agency asset-backed—U.S.	17		—		17		23		—		23
Other asset-backed	5		—		5		79		—		79
	11,256		—		11,256		15,362		—		15,362
Total short-term investments	12,469		17		12,452		17,512		16		17,496
Other current assets
Derivative assets:
Interest rate contracts	88		—		88		104		—		104
Foreign exchange contracts	488		—		488		234		—		234
Total other current assets	576		—		576		337		—		337
Long-term investments
Classified as equity securities:
Equity^(a)	1,563		1,527		36		1,440		1,398		42
Classified as trading securities:
Debt	50		50		—		73		73		—
	1,612		1,577		36		1,514		1,472		42
Classified as available-for-sale debt securities:
Government and agency—non-U.S.	106		—		106		387		—		387
Corporate	3,210		—		3,210		4,172		36		4,136
Government—U.S.	421		—		421		495		—		495
Other asset-backed	4		—		4		35		—		35
	3,742		—		3,742		5,090		36		5,054
Total long-term investments	5,354		1,577		3,778		6,603		1,507		5,096
Other noncurrent assets
Derivative assets:
Interest rate contracts	246		—		246		477		—		477
Foreign exchange contracts	220		—		220		7		—		7
Total other noncurrent assets	467		—		467		484		—		484
Total assets	$	18,866	$	1,594	$	17,272	$	24,937	$	1,523	$	23,414

Financial liabilities measured at fair value on a recurring basis:
Other current liabilities
Derivative liabilities:
Interest rate contracts	$	9	$	—	$	9	$	1	$	—	$	1
Foreign exchange contracts	80		—		80		201		—		201
Total other current liabilities	89		—		89		201		—		201
Other noncurrent liabilities
Derivative liabilities:
Interest rate contracts	653		—		653		177		—		177
Foreign exchange contracts	432		—		432		313		—		313
Total other noncurrent liabilities	1,085		—		1,085		490		—		490
Total liabilities	$	1,174	$	—	$	1,174	$	691	$	—	$	691

^(a)

As of September 30, 2018, short-term equity securities of $12 million and long-term equity securities of $35 million are held in trust for benefits attributable to the former Pharmacia Savings Plus Plan. As of December 31, 2017, short-term equity securities of $19 million and long-term equity securities of $42 million are held in trust for benefits attributable to the former Pharmacia Savings Plus Plan.

Schedule of Financial Liabilities Not Measured At Fair Value On a Recurring Basis



The following table presents the financial liabilities not measured at fair value on a recurring basis, including the carrying values and estimated fair values:
	September 30, 2018						December 31, 2017
	Carrying Value		Estimated Fair Value				Carrying Value		Estimated Fair Value
(MILLIONS OF DOLLARS)			Total		Level 2				Total		Level 2
Financial Liabilities
Long-term debt, excluding the current portion	$	33,652	$	36,243	$	36,243	$	33,538	$	37,253	$	37,253

Investments by Classification Type



The following table represents our investments by classification type:
(MILLIONS OF DOLLARS)	September 30, 2018		December 31, 2017
Short-term investments
Equity securities	$	1,213	$	2,150
Available-for-sale debt securities	11,256		15,362
Held-to-maturity debt securities	1,211		1,138
Total Short-term investments	$	13,680	$	18,650

Long-term investments
Equity securities	$	1,563	$	1,440
Trading debt securities	50		73
Available-for-sale debt securities	3,742		5,090
Held-to-maturity debt securities	63		4
Private equity investments carried at equity-method or cost	1,027		408
Total Long-term investments	$	6,444	$	7,015
Held-to-maturity cash equivalents	$	237	$	719

Schedule of Held-to-maturity Securities



At September 30, 2018, the investment securities portfolio consisted of debt securities that were virtually all investment-grade. Information on investments in debt and equity securities at September 30, 2018 and December 31, 2017 is as follows, including, as of September 30, 2018, the contractual maturities, or as necessary, the estimated maturities, of the available-for-sale and held-to-maturity debt securities:
	September 30, 2018																	December 31, 2017
			Gross Unrealized							Maturities (in Years)										Gross Unrealized
(MILLIONS OF DOLLARS)	Amortized Cost		Gains		Losses			Fair Value		Within 1		Over 1 to 5		Over 5		Total		Amortized Cost		Gains		Losses			Fair Value
Available-for-sale debt securities
Government and agency––non-U.S.	$	8,476	$	9	$	(43	)	$	8,442	$	8,336	$	106	$	—	$	8,442	$	12,616	$	61	$	(48	)	$	12,629
Corporate^(a)	6,192		2		(94		)	6,100		2,890		2,356		854		6,100		6,955		15		(33		)	6,938
Government––U.S.	451		—		(23		)	428		8		421		—		428		765		—		(19		)	747
Agency asset-backed––U.S.	18		—		(1		)	18		17		—		—		18		24		—		(1		)	24
Other asset-backed^(b)	9		—		—			9		5		3		2		9		114		—		—			114
Held-to-maturity debt securities
Time deposits and other	734		—		—			734		670		23		40		734		1,091		—		—			1,091
Government and agency––non-U.S.	778		—		—			778		778		—		—		778		770		—		—			770
Total debt securities	$	16,658	$	11	$	(160	)	$	16,509	$	12,704	$	2,909	$	896	$	16,509	$	22,337	$	77	$	(100	)	$	22,313
Available-for-sale equity securities^(c)
Money market funds																		$	2,115	$	—	$	—		$	2,115
Equity																		728		586		(124		)	1,190
Total available-for-sale equity securities																		$	2,843	$	586	$	(124	)	$	3,304


^(a)	Issued by a diverse group of corporations.

^(b)

Includes mortgage-backed, loan-backed and receivable-backed securities, all of which are in senior positions in the capital structure of the security. Mortgage-backed securities are collateralized by diversified pools of residential and commercial mortgages. Loan-backed securities are collateralized by senior secured obligations of a diverse pool of companies or student loans. Receivable-backed securities are collateralized by credit cards receivables.


^(c)	Upon the 2018 adoption of a new accounting standard related to financial assets and liabilities, available-for-sale equity securities were classified as equity securities. For additional information see Note 1B.

Schedule of Available-for-sale Securities



At September 30, 2018, the investment securities portfolio consisted of debt securities that were virtually all investment-grade. Information on investments in debt and equity securities at September 30, 2018 and December 31, 2017 is as follows, including, as of September 30, 2018, the contractual maturities, or as necessary, the estimated maturities, of the available-for-sale and held-to-maturity debt securities:
	September 30, 2018																	December 31, 2017
			Gross Unrealized							Maturities (in Years)										Gross Unrealized
(MILLIONS OF DOLLARS)	Amortized Cost		Gains		Losses			Fair Value		Within 1		Over 1 to 5		Over 5		Total		Amortized Cost		Gains		Losses			Fair Value
Available-for-sale debt securities
Government and agency––non-U.S.	$	8,476	$	9	$	(43	)	$	8,442	$	8,336	$	106	$	—	$	8,442	$	12,616	$	61	$	(48	)	$	12,629
Corporate^(a)	6,192		2		(94		)	6,100		2,890		2,356		854		6,100		6,955		15		(33		)	6,938
Government––U.S.	451		—		(23		)	428		8		421		—		428		765		—		(19		)	747
Agency asset-backed––U.S.	18		—		(1		)	18		17		—		—		18		24		—		(1		)	24
Other asset-backed^(b)	9		—		—			9		5		3		2		9		114		—		—			114
Held-to-maturity debt securities
Time deposits and other	734		—		—			734		670		23		40		734		1,091		—		—			1,091
Government and agency––non-U.S.	778		—		—			778		778		—		—		778		770		—		—			770
Total debt securities	$	16,658	$	11	$	(160	)	$	16,509	$	12,704	$	2,909	$	896	$	16,509	$	22,337	$	77	$	(100	)	$	22,313
Available-for-sale equity securities^(c)
Money market funds																		$	2,115	$	—	$	—		$	2,115
Equity																		728		586		(124		)	1,190
Total available-for-sale equity securities																		$	2,843	$	586	$	(124	)	$	3,304


^(a)	Issued by a diverse group of corporations.

^(b)


^(c)	Upon the 2018 adoption of a new accounting standard related to financial assets and liabilities, available-for-sale equity securities were classified as equity securities. For additional information see Note 1B.

Contractual Maturities of Available-for-sale and Held-to-maturity Debt Securities



At September 30, 2018, the investment securities portfolio consisted of debt securities that were virtually all investment-grade. Information on investments in debt and equity securities at September 30, 2018 and December 31, 2017 is as follows, including, as of September 30, 2018, the contractual maturities, or as necessary, the estimated maturities, of the available-for-sale and held-to-maturity debt securities:
	September 30, 2018																	December 31, 2017
			Gross Unrealized							Maturities (in Years)										Gross Unrealized
(MILLIONS OF DOLLARS)	Amortized Cost		Gains		Losses			Fair Value		Within 1		Over 1 to 5		Over 5		Total		Amortized Cost		Gains		Losses			Fair Value
Available-for-sale debt securities
Government and agency––non-U.S.	$	8,476	$	9	$	(43	)	$	8,442	$	8,336	$	106	$	—	$	8,442	$	12,616	$	61	$	(48	)	$	12,629
Corporate^(a)	6,192		2		(94		)	6,100		2,890		2,356		854		6,100		6,955		15		(33		)	6,938
Government––U.S.	451		—		(23		)	428		8		421		—		428		765		—		(19		)	747
Agency asset-backed––U.S.	18		—		(1		)	18		17		—		—		18		24		—		(1		)	24
Other asset-backed^(b)	9		—		—			9		5		3		2		9		114		—		—			114
Held-to-maturity debt securities
Time deposits and other	734		—		—			734		670		23		40		734		1,091		—		—			1,091
Government and agency––non-U.S.	778		—		—			778		778		—		—		778		770		—		—			770
Total debt securities	$	16,658	$	11	$	(160	)	$	16,509	$	12,704	$	2,909	$	896	$	16,509	$	22,337	$	77	$	(100	)	$	22,313
Available-for-sale equity securities^(c)
Money market funds																		$	2,115	$	—	$	—		$	2,115
Equity																		728		586		(124		)	1,190
Total available-for-sale equity securities																		$	2,843	$	586	$	(124	)	$	3,304


^(a)	Issued by a diverse group of corporations.

^(b)


^(c)	Upon the 2018 adoption of a new accounting standard related to financial assets and liabilities, available-for-sale equity securities were classified as equity securities. For additional information see Note 1B.

Schedule of Gains and Losses on Investment Securities



The following table presents the net unrealized gains and losses for the period that relates to equity securities still held at the reporting date, calculated as follows:
(MILLIONS OF DOLLARS)	Three Months Ended September 30, 2018			Nine Months Ended September 30, 2018
Net gains recognized during the period on investments in equity securities^(a)	$	94		$	460
Less: Net gains recognized during the period on equity securities sold during the period	(54		)	(90		)
Net unrealized gains during the reporting period on equity securities still held at the reporting date^(b)	$	40		$	370


^(a)	The net gains on investments in equity securities are reported in Other (income)/deductions––net and, for the third quarter and first nine months of 2018, include unrealized net gains on equity securities reflecting the adoption of a new accounting standard in the first quarter of 2018. For additional information, see Note 4.

^(b)

The third quarter of 2018 includes $8 million of unrealized net gains in Other (income)/deductions––net reflecting the adoption of a new accounting standard in the first quarter of 2018 and $32 million of unrealized gains on other equity securities. The first nine months of 2018 includes $344 million of unrealized net gains in Other (income)/deductions––net reflecting the adoption of a new accounting standard in the first quarter of 2018 and $26 million of unrealized gains on other equity securities. For additional information, see Note 1B and Note 4.

Schedule of Short-term Borrowings



Short-term borrowings include:
(MILLIONS OF DOLLARS)	September 30, 2018			December 31, 2017
Commercial paper	$	2,600		$	6,100
Current portion of long-term debt, principal amount	4,260			3,532
Other short-term borrowings, principal amount^(a)	537			320
Total short-term borrowings, principal amount	7,396			9,951
Net fair value adjustments related to hedging and purchase accounting	(5		)	14
Net unamortized discounts, premiums and debt issuance costs	(7		)	(12		)
Total Short-term borrowings, including current portion of long-term debt, carried at historical proceeds, as adjusted	$	7,385		$	9,953


^(a)	Other short-term borrowings primarily include cash collateral. For additional information, see Note 7F.

Schedule of Principal Amounts of Senior Unsecured Long-Term Debt and Adjustments



In the third quarter of 2018, we issued the following senior unsecured notes:
		Principal
(MILLIONS OF DOLLARS)	Maturity Date	As of September 30, 2018
3.000% notes^(a)	September 15, 2021	$	1,000
Floating rate notes (LIBOR plus 0.33%)^(b)	September 15, 2023	300
3.200% notes^(a)	September 15, 2023	1,000
3.600% notes^(a)	September 15, 2028	1,000
4.100% notes^(a)	September 15, 2038	700
4.200% notes^(a)	September 15, 2048	1,000
Total long-term debt issued in the third quarter of 2018		$	5,000


^(a)	Fixed rate notes may be redeemed by us at any time, in whole, or in part, at varying redemption prices plus accrued and unpaid interest.


^(b)	Floating rate notes may not be redeemed by their terms prior to maturity.



The following table provides the aggregate principal amount of our senior unsecured long-term debt, and adjustments to report our aggregate long-term debt:
(MILLIONS OF DOLLARS)	September 30, 2018			December 31, 2017
Total long-term debt, principal amount	$	33,658		$	32,783
Net fair value adjustments related to hedging and purchase accounting	129			872
Net unamortized discounts, premiums and debt issuance costs	(142		)	(125		)
Other long-term debt	7			8
Total long-term debt, carried at historical proceeds, as adjusted	$	33,652		$	33,538
Current portion of long-term debt, carried at historical proceeds, as adjusted	$	4,255		$	3,546

Schedule of Derivative Instruments



The following table provides the fair value of the derivative financial instruments and the related notional amounts presented between those derivatives that are designated as hedging instruments and those that are not designated as hedging instruments:
(MILLIONS OF DOLLARS)	September 30, 2018						December 31, 2017
			Fair Value						Fair Value
	Notional		Asset		Liability		Notional		Asset		Liability
Derivatives designated as hedging instruments:
Foreign exchange contracts^(a)	$	19,955	$	590	$	464	$	18,723	$	179	$	459
Interest rate contracts	11,300		335		661		12,430		581		178
			925		1,126				760		637

Derivatives not designated as hedging instruments:
Foreign exchange contracts	$	16,798	118		48		$	14,300	62		54

Total			$	1,043	$	1,174			$	822	$	691


^(a)	As of September 30, 2018, the notional amount of outstanding foreign currency forward-exchange contracts hedging our intercompany forecasted inventory sales was $5.4 billion.

Schedule of Derivative Assets



The following table provides the fair value of the derivative financial instruments and the related notional amounts presented between those derivatives that are designated as hedging instruments and those that are not designated as hedging instruments:
(MILLIONS OF DOLLARS)	September 30, 2018						December 31, 2017
			Fair Value						Fair Value
	Notional		Asset		Liability		Notional		Asset		Liability
Derivatives designated as hedging instruments:
Foreign exchange contracts^(a)	$	19,955	$	590	$	464	$	18,723	$	179	$	459
Interest rate contracts	11,300		335		661		12,430		581		178
			925		1,126				760		637

Derivatives not designated as hedging instruments:
Foreign exchange contracts	$	16,798	118		48		$	14,300	62		54

Total			$	1,043	$	1,174			$	822	$	691


^(a)	As of September 30, 2018, the notional amount of outstanding foreign currency forward-exchange contracts hedging our intercompany forecasted inventory sales was $5.4 billion.

Schedule of Derivative Liabilities



The following table provides the fair value of the derivative financial instruments and the related notional amounts presented between those derivatives that are designated as hedging instruments and those that are not designated as hedging instruments:
(MILLIONS OF DOLLARS)	September 30, 2018						December 31, 2017
			Fair Value						Fair Value
	Notional		Asset		Liability		Notional		Asset		Liability
Derivatives designated as hedging instruments:
Foreign exchange contracts^(a)	$	19,955	$	590	$	464	$	18,723	$	179	$	459
Interest rate contracts	11,300		335		661		12,430		581		178
			925		1,126				760		637

Derivatives not designated as hedging instruments:
Foreign exchange contracts	$	16,798	118		48		$	14,300	62		54

Total			$	1,043	$	1,174			$	822	$	691


^(a)	As of September 30, 2018, the notional amount of outstanding foreign currency forward-exchange contracts hedging our intercompany forecasted inventory sales was $5.4 billion.

Information about Gains/(Losses) Incurred to Hedge or Offset Operational Foreign Exchange or Interest Rate Risk



The following table provides information about the gains/(losses) incurred to hedge or offset operational foreign exchange or interest rate risk:
	Amount of Gains/(Losses) Recognized in OID^{(a), (b)}						Amount of Gains/(Losses) Recognized in OCI^{(a), (c)}					Amount of Gains/(Losses) Reclassified from OCI into OID and COS^{(a), (c)}
(MILLIONS OF DOLLARS)	Sep 30, 2018			Oct 1, 2017			Sep 30, 2018		Oct 1, 2017			Sep 30, 2018		Oct 1, 2017
Three Months Ended
Derivative Financial Instruments in Cash Flow Hedge Relationships:
Foreign exchange contracts^(d)	$	—		$	1		$	183	$	(51	)	$	198	$	(56	)
Amount excluded from effectiveness testing recognized in earnings based on an amortization approach	—			—			39		—			36		—

Derivative Financial Instruments in Fair Value Hedge Relationships:
Interest rate contracts	(195		)	10			—		—			—		—
Hedged item gain/(loss)	195			(10		)	—		—			—		—
Foreign exchange contracts	1			(11		)	—		—			—		—
Hedged item gain/(loss)	(1		)	11			—		—			—		—

Derivative Financial Instruments in Net Investment Hedge Relationships:
Foreign exchange contracts	—			—			43		—			—		—
The portion of gains/(losses) on foreign exchange contracts excluded from the assessment of hedge effectiveness	—			—			14		—			21		—

Non-Derivative Financial Instruments in Net Investment Hedge Relationships:
Foreign currency short-term borrowings^(e)	—			—			8		—			—		—
Foreign currency long-term debt^(e)	—			—			17		(166		)	—		—

Derivative Financial Instruments Not Designated as Hedges:
Foreign exchange contracts	150			33			—		—			—		—
All other net	—			—			—		1			—		—
	$	150		$	34		$	304	$	(216	)	$	256	$	(55	)



	Amount of Gains/(Losses) Recognized in OID^{(a), (b)}						Amount of Gains/(Losses) Recognized in OCI^{(a), (c)}					Amount of Gains/(Losses) Reclassified from OCI into OID and COS^{(a), (c)}
(MILLIONS OF DOLLARS)	Sep 30, 2018			Oct 1, 2017			Sep 30, 2018		Oct 1, 2017			Sep 30, 2018			Oct 1, 2017
Nine Months Ended
Derivative Financial Instruments in Cash Flow Hedge Relationships:
Foreign exchange contracts^(d)	$	—		$	(5	)	$	147	$	(149	)	$	(204	)	$	394
Amount excluded from effectiveness testing recognized in earnings based on an amortization approach	—			—			87		—			84			—

Derivative Financial Instruments in Fair Value Hedge Relationships:
Interest rate contracts	(715		)	19			—		—			—			—
Hedged item gain/(loss)	715			(19		)	—		—			—			—
Foreign exchange contracts	5			(19		)	—		—			—			—
Hedged item gain/(loss)	(5		)	19			—		—			—			—

Derivative Financial Instruments in Net Investment Hedge Relationships:
Foreign exchange contracts	—			—			191		—			—			—
The portion of gains/(losses) on foreign exchange contracts excluded from the assessment of hedge effectiveness	—			—			41		—			47			—

Non-Derivative Financial Instruments in Net Investment Hedge Relationships:
Foreign currency short-term borrowings^(e)	—			—			50		—			—			—
Foreign currency long-term debt^(e)	—			—			111		(518		)	—			—

Derivative Financial Instruments Not Designated as Hedges:
Foreign exchange contracts	156			(112		)	—		—			—			—
All other net	—			—			1		1			1			—
	$	156		$	(117	)	$	629	$	(666	)	$	(72	)	$	394


^(a)	OID = Other (income)/deductions—net, included in Other (income)/deductions—net in the condensed consolidated statements of income. COS = Cost of Sales, included in Cost of sales in the condensed consolidated statements of income. OCI = Other comprehensive income/(loss), included in the condensed consolidated statements of comprehensive income.


^(b)	For the third quarter and first nine months ended October 1, 2017, there was no significant ineffectiveness.

^(c)

For derivative financial instruments in cash flow hedge relationships, the gains and losses are included in Other comprehensive income/(loss)––Unrealized holding gains/(losses) on derivative financial instruments, net. For derivative financial instruments in net investment hedge relationships and for foreign currency debt designated as hedging instruments, the effective portion is included in Other comprehensive income/(loss)––Foreign currency translation adjustments, net.


^(d)	Based on quarter-end foreign exchange rates that are subject to change, we expect to reclassify a pre-tax gain of $120 million within the next 12 months into Cost of sales. The maximum length of time over which we are hedging future foreign exchange cash flow relates to our $1.8 billion U.K. pound debt maturing in 2043.


^(e)	Short-term borrowings include foreign currency short-term borrowings with carrying values of $1.5 billion as of September 30, 2018, which are used as hedging instruments in net investment hedges. Long-term debt includes foreign currency long-term borrowings with carrying values of $3.2 billion as of September 30, 2018, which are used as hedging instruments in net investment hedges.

Schedule of Amounts Recorded In Balance Sheet Related to Cumulative Adjustments for Fair Value Hedges



The following table provides the total amount of each income and expense line in which the results of fair value or cash flow hedges are recorded:
	Three Months Ended			Nine Months Ended
(MILLIONS OF DOLLARS)	September 30, 2018			September 30, 2018
Cost of sales	$	2,694		$	8,173
Other (income)/deductions—net	(414		)	(1,143		)

Schedule of Amounts Recorded In Balance Sheet Related to Cumulative Adjustments for Fair Value Hedges



The following table provides the total amount of each income and expense line in which the results of fair value or cash flow hedges are recorded:
	Three Months Ended			Nine Months Ended
(MILLIONS OF DOLLARS)	September 30, 2018			September 30, 2018
Cost of sales	$	2,694		$	8,173
Other (income)/deductions—net	(414		)	(1,143		)



The following table provides the amounts recorded in our condensed consolidated balance sheet related to cumulative basis adjustments for fair value hedges:
	Carrying Amount of Hedged Assets/Liabilities		Cumulative Amount of Fair Value Hedging Adjustment Gains/(Losses) Included in the Carrying Amount of the Hedged Assets/Liabilities
(MILLIONS OF DOLLARS)	September 30, 2018		September 30, 2018
Short-term investments	$	156	$	—
Long-term investments	45		(1		)
Short-term borrowings, including current portion of long-term debt	1,490		8
Long-term debt	9,548		407