Hedging Activities and Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2019

Derivative [Line Items]

Schedule of Notional Amounts of Outstanding Derivative Positions [Table Text Block]

The following table presents the contractual amounts of our derivative instruments outstanding:

(in millions)	FASB ASC Topic 815 Designation	As of
		September 30, 2019		December 31, 2018
Forward currency contracts	Cash flow hedge	$	4,030	$	3,962
Forward currency contracts	Net investment hedge	1,935		1,483
Forward currency contracts	Non-designated	3,522		5,880
Interest rate derivative contracts	Cash flow hedge	—		1,000
Total Notional Outstanding		$	9,487	$	12,326

Derivative Instruments, Gain (Loss) [Table Text Block]

	Effect of Hedging Relationships on Accumulated Other Comprehensive Income
	Amount Recognized in OCI on Derivative							Unaudited Condensed Consolidated Statements of Operations (1)			Amount Reclassified from AOCI into Earnings
(in millions)	Pre-Tax Gain (Loss)		Tax Benefit (Expense)			Gain (Loss) Net of Tax		Location of Amount Reclassified	Total Amount of Line Item Presented		Pre-Tax (Gain) Loss			Tax (Benefit) Expense			(Gain) Loss Net of Tax
Three Months Ended September 30, 2019
Forward currency contracts
Cash flow hedges	$	101	$	(23	)	$	78	Cost of products sold	$	777	$	(22	)	$	5		$	(17	)
Net investment hedges (2)	64		(14		)	50		Interest expense	95		(12		)	3			(9		)
Interest rate derivative contracts
Cash flow hedges	—		—			—		Interest expense	95		1			—			1
Three Months Ended September 30, 2018
Forward currency contracts
Cash flow hedges	$	58	$	(13	)	$	45	Cost of products sold	$	672	$	2		$	—		$	2
Net investment hedges (2)	4		(1		)	3		Interest expense	58		(10		)	2			(8		)
Nine Months Ended September 30, 2019
Forward currency contracts
Cash flow hedges	$	176	$	(40	)	$	136	Cost of products sold	$	2,265	$	(47	)	$	10		$	(36	)
Net investment hedges (2)	92		(21		)	71		Interest expense	294		(33		)	7			(25		)
Interest rate derivative contracts
Cash flow hedges	—		—			—		Interest expense	294		3			(1		)	2
Nine Months Ended September 30, 2018
Forward currency contracts
Cash flow hedges	$	135	$	(30	)	$	105	Cost of products sold	$	2,084	$	27		$	(6	)	$	21
Net investment hedges (2)	25		(6		)	19		Interest expense	177		(17		)	4			(13		)
Interest rate derivative contracts
Cash flow hedges	—		—			—		Interest expense	177		(1		)	—			(1		)

Derivative Instruments, Gain (Loss) that may be Reclassified from AOCI to Earnings within Twelve Months [Table Text Block]

As of September 30, 2019, pre-tax net gains or losses for our derivative instruments designated, or previously designated, as cash flow and net investment hedges under FASB ASC Topic 815 that may be reclassified from AOCI to earnings within the next twelve months are presented below (in millions):

Designated Derivative Instrument	FASB ASC Topic 815 Designation	Location on Unaudited Condensed Consolidated Statements of Operations	Amount of Pre-Tax Gain (Loss) that may be Reclassified to Earnings
Forward currency contracts	Cash flow hedge	Cost of products sold	$	104
Forward currency contracts	Net investment hedge	Interest expense	48
Interest rate derivative contracts	Cash flow hedge	Interest expense	(5		)

Derivatives Not Designated as Hedging Instruments [Table Text Block]

Net gains and losses on currency hedge contracts not designated as hedging instruments offset by net gains and losses from currency transaction exposures are presented below:

	Location on Unaudited Condensed Consolidated Statements of Operations	Three Months Ended September 30,						Nine Months Ended September 30,
(in millions)		2019			2018			2019			2018
Net gain (loss) on currency hedge contracts	Other, net	$	(202	)	$	16		$	(334	)	$	25
Net gain (loss) on currency transaction exposures	Other, net	(4		)	(23		)	—			(40		)
Net currency exchange gain (loss)		$	(207	)	$	(6	)	$	(334	)	$	(15	)

Certain of our non-designated forward currency contracts were entered into for the purpose of managing our exposure to currency exchange rate risk related to the purchase price of the BTG Acquisition. As of September 30, 2019, we settled all outstanding contracts. We recognized a $207 million loss in the third quarter of 2019 and a $323 million loss in the first nine months of 2019 in Net gain (loss) on currency hedge contracts due to changes in fair value of the contracts.

Schedule of Derivative Instruments in Statement of Financial Position, Fair Value [Table Text Block]

The following are the balances of our derivative assets and liabilities:

	Location on Unaudited Condensed Consolidated Balance Sheets (1)	As of
(in millions)		September 30, 2019		December 31, 2018
Derivative Assets:
Designated Derivative Instruments
Forward currency contracts	Other current assets	$	98	$	55
Forward currency contracts	Other long-term assets	358		183
		456		237
Non-Designated Derivative Instruments
Forward currency contracts	Other current assets	48		67
Total Derivative Assets		$	504	$	304
Derivative Liabilities:
Designated Derivative Instruments
Forward currency contracts	Other current liabilities	$	3	$	2
Forward currency contracts	Other long-term liabilities	5		3
Interest rate contracts	Other current liabilities	—		44
		8		49
Non-Designated Derivative Instruments
Forward currency contracts	Other current liabilities	40		31
Total Derivative Liabilities		$	48	$	80

(1)

We classify derivative assets and liabilities as current when the settlement date of the derivative contract is one year or less.

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

Assets and liabilities measured at fair value on a recurring basis consist of the following:

	As of
	September 30, 2019								December 31, 2018
(in millions)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Money market and government funds	$	26	$	—	$	—	$	26	$	13	$	—	$	—	$	13
Derivative instruments	—		504		—		504		—		304		—		304
Licensing arrangements	—		—		633		633		—		—		—		—
	$	26	$	504	$	633	$	1,163	$	14	$	304	$	—	$	318
Liabilities
Derivative instruments	$	—	$	48	$	—	$	48	$	—	$	80	$	—	$	80
Contingent consideration	—		—		380		380		—		—		347		347
Licensing arrangements	—		—		341		341		—		—		—		—
	$	—	$	48	$	720	$	768	$	—	$	80	$	347	$	427

The recurring Level 3 fair value measurements of our licensing arrangements include the following significant unobservable inputs:

Licensing Arrangements	Fair Value as of September 30, 2019	Valuation Technique	Unobservable Input	Range			Weighted Average (1)
Financial Asset	$633 million	Discounted Cash Flow	Discount Rate	9%			9%
			Projected Year of Payment	2019	-	2027	2023
Financial Liability	$341 million	Discounted Cash Flow	Discount Rate	9%			9%
			Projected Year of Payment	2019	-	2027	2023

(1)

Unobservable inputs relate to a single financial asset and liability. As such, unobservable inputs were not weighted by the relative fair value of the instruments. For projected year of payment, the amount represents the median of the inputs and is not a weighted average.