Annual report pursuant to Section 13 and 15(d)

FAIR VALUE MEASUREMENTS (Tables)

v3.24.0.1
FAIR VALUE MEASUREMENTS (Tables)
 12 Months Ended
Dec. 31, 2023
Fair Value Disclosures [Abstract]  
Assets and liabilities measured at fair value on a recurring basis
The following tables summarize those assets and liabilities measured at fair value on a recurring basis (in millions):
December 31, 2023
Level 1 Level 2 Level 3
Other3
Netting
Adjustment
4
 Fair Value
Measurements
Assets:          
Equity securities with readily determinable values1
$ 1,727  $ 188  $ 6  $ 85  $ —  $ 2,006 
Debt securities1
—  1,172  3  —  —  1,175 
Derivatives2
—  275  —  —  (222)
6
 53 
8
Total assets $ 1,727  $ 1,635  $ 9  $ 85  $ (222) $ 3,234 
Liabilities:          
Contingent consideration liability $ —  $ —  $ 3,017 
5
 $ —  $ —  $ 3,017 
Derivatives2
3  1,445  —  —  (1,256)
7
 192 
8
Total liabilities $ 3  $ 1,445  $ 3,017  $ —  $ (1,256) $ 3,209 
1Refer to Note 4 for additional information related to the composition of our equity securities with readily determinable values and debt securities.
2Refer to Note 5 for additional information related to the composition of our derivatives portfolio.
3Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy but are included to reconcile to the amounts presented in Note 4.
4Amounts represent the impact of legally enforceable master netting agreements that allow the Company to settle net positive and negative positions and also cash collateral held or placed with the same counterparties. There were no amounts subject to legally enforceable master netting agreements that management has chosen not to offset or that do not meet the offsetting requirements. Refer to Note 5.
5Represents the fair value of the remaining milestone payment related to our acquisition of fairlife, LLC (“fairlife”) in 2020, which is contingent on fairlife achieving certain financial targets through 2024 and, if achieved, is payable in 2025. This milestone payment is based
on agreed-upon formulas related to fairlife’s operating results, the resulting value of which is not subject to a ceiling. The fair value was determined using a Monte Carlo valuation model. We are required to remeasure this liability to fair value quarterly, with any changes in the fair value recorded in income until the final milestone payment is made. The Company made a milestone payment of $275 million during 2023.
6The Company is obligated to return $4 million in cash collateral it has netted against its derivative position.
7The Company has the right to reclaim $1,039 million in cash collateral it has netted against its derivative position.
8The Company’s derivative financial instruments were recorded at fair value in our consolidated balance sheet as follows: $53 million in the line item other noncurrent assets and $192 million in the line item other noncurrent liabilities. Refer to Note 5 for additional information related to the composition of our derivatives portfolio.
December 31, 2022
Level 1 Level 2 Level 3
Other3
Netting
Adjustment
4
 Fair Value
Measurements
Assets:          
Equity securities with readily determinable values1
$ 1,801  $ 169  $ 15  $ 85  $ —  $ 2,070 
Debt securities1
—  975  8  —  —  983 
Derivatives2
2  239  —  —  (227)
6
 14 
8
Total assets $ 1,803  $ 1,383  $ 23  $ 85  $ (227) $ 3,067 
Liabilities:          
Contingent consideration liability $ —  $ —  $ 1,590 
5
 $ —  $ —  $ 1,590 
Derivatives2
4  1,962  —  —  (1,678)
7
 288 
8
Total liabilities $ 4  $ 1,962  $ 1,590  $ —  $ (1,678) $ 1,878 
1Refer to Note 4 for additional information related to the composition of our equity securities with readily determinable values and debt securities.
2Refer to Note 5 for additional information related to the composition of our derivatives portfolio.
3Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy but are included to reconcile to the amounts presented in Note 4.
4Amounts represent the impact of legally enforceable master netting agreements that allow the Company to settle net positive and negative positions and also cash collateral held or placed with the same counterparties. There were no amounts subject to legally enforceable master netting agreements that management has chosen not to offset or that do not meet the offsetting requirements. Refer to Note 5.
5Represents the fair value of future milestone payments related to our acquisition of fairlife, which are contingent on fairlife achieving certain financial targets through 2024 and, if achieved, are payable in 2023 and 2025. These milestone payments are based on agreed-upon formulas related to fairlife’s operating results, the resulting values of which are not subject to a ceiling. The fair value was determined using a Monte Carlo valuation model. We are required to remeasure this liability to fair value quarterly, with any changes in the fair value recorded in income until the final milestone payment is made.
6The Company was not obligated to return any cash collateral it had netted against its derivative position.
7The Company had the right to reclaim $1,447 million in cash collateral it had netted against its derivative position.
8The Company’s derivative financial instruments were recorded at fair value in our consolidated balance sheet as follows: $14 million in the line item other noncurrent assets and $288 million in the line item other noncurrent liabilities. Refer to Note 5 for additional information related to the composition of our derivatives portfolio.
Gains and losses on assets measured at fair value on a nonrecurring basis
The gains and losses on assets measured at fair value on a nonrecurring basis are summarized in the following table (in millions):
Gains (Losses)  
Year Ended December 31, 2023   2022  
Impairment of property, plant and equipment $ (46)
1
 $ — 
Other-than-temporary impairment charges (39)
2
 (96)
3
Impairment of intangible assets —  (57)
4
Valuation of shares in equity method investee —  (24)
5
Total $ (85) $ (177)
1The Company recorded an asset impairment charge of $25 million during the year ended December 31, 2023 related to the discontinuation of certain manufacturing operations in Asia Pacific. Additionally, the Company recorded an asset impairment charge of $21 million during the year ended December 31, 2023 related to the restructuring of our manufacturing operations in the United States. These charges, which were calculated based on Level 3 inputs, were primarily driven by management’s best estimate of the potential proceeds from the disposal of the related assets.
2The Company recorded an other-than-temporary impairment charge of $39 million during the year ended December 31, 2023 related to an equity method investee in Latin America. This impairment charge was derived using Level 3 inputs and was primarily driven by revised projections of future operating results.
3The Company recorded an other-than-temporary impairment charge of $96 million during the year ended December 31, 2022 related to an equity method investee in Russia. This impairment charge was derived using Level 3 inputs and was primarily driven by revised projections of future operating results.
4During the year ended December 31, 2022, the Company recorded an impairment charge of $57 million related to a trademark in Asia Pacific, which was primarily driven by a change in brand strategy resulting in revised projections of future operating results for the trademark. The fair value of this trademark was derived using discounted cash flow analyses based on Level 3 inputs.
5During the year ended December 31, 2022, we recognized a net loss of $24 million on assets measured at fair value on a nonrecurring basis. The net loss was recorded as a result of an equity method investee issuing additional shares of its stock. Accordingly, the Company is required to treat this type of transaction as if the Company had sold a proportionate share of its investment. This net loss was determined using Level 2 inputs and primarily resulted from the recognition of cumulative translation losses.
Summary of the levels within the fair value hierarchy of pension plan assets
The following table summarizes the levels within the fair value hierarchy for our pension plan assets (in millions):
December 31, 2023 December 31, 2022
Level 1 Level 2 Level 3 Other
1
 Total Level 1 Level 2 Level 3 Other
1
 Total
Cash and cash equivalents $ 163  $ 212  $ —  $ —  $ 375  $ 146  $ 489  $ —  $ —  $ 635 
Equity securities:    
U.S.-based companies 1,148  —  30  —  1,178  1,157  7  24  —  1,188 
International-based companies 904  15  2  —  921  920  16  3  —  939 
Fixed-income securities:
Government bonds 107  1,279  —  —  1,386  91  1,147  —  —  1,238 
Corporate bonds and debt
   securities		 —  552  27  —  579  —  469  30  —  499 
Mutual, pooled and commingled
   funds		 12  257  —  509 
4
 778  35  202  —  530 
4
 767 
Hedge funds/limited
   partnerships		 —  —  —  1,057 
5
 1,057  —  —  —  936 
5
 936 
Real estate —  —  —  376 
6
 376  —  —  —  424 
6
 424 
Derivative financial instruments —  33 
2
 —  —  33  —  (14)
2
 —  —  (14)
Other —  —  323 
3
 254 
7
 577  —  —  300 
3
 246 
7
 546 
Total $ 2,334  $ 2,348  $ 382  $ 2,196  $ 7,260  $ 2,349  $ 2,316  $ 357  $ 2,136  $ 7,158 
1Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy but are included to reconcile to the amounts presented in Note 14.
2This class of assets includes investments in interest rate contracts, credit contracts and foreign exchange contracts.
3Includes purchased annuity insurance contracts.
4This class of assets includes actively managed emerging markets equity funds and a collective trust fund for qualified plans, invested primarily in equity securities of companies in developing and emerging markets. There are no liquidity restrictions on these investments.
5This class of assets includes hedge funds that can be subject to redemption restrictions, ranging from monthly to semiannually, with a redemption notice period of up to one year and/or initial lock-up periods of up to three years, and private equity funds that are primarily closed-end funds in which the Company’s investments are generally not eligible for redemption. Distributions from these private equity funds will be received as the underlying assets are liquidated or distributed.
6This class of assets includes funds invested in real estate, including a privately held real estate investment trust, a real estate commingled pension trust fund, infrastructure limited partnerships and commingled investment funds. These funds seek current income and capital appreciation and can be subject to redemption restrictions, ranging from quarterly to semiannually, with a redemption notice period of up to 90 days.
7Primarily includes segregated portfolios of private investment funds that are invested in a portfolio of insurance-linked securities. These assets can be subject to a semiannual redemption, with a redemption notice period of 90 days, subject to certain gate restrictions.
Reconciliation of the beginning and ending balance of Level 3 assets for U.S. and non-U.S. pension plans
The following table provides a reconciliation of the beginning and ending balance of Level 3 assets for our U.S. and non-U.S. pension plans (in millions):
Equity
Securities		 Fixed-Income Securities
Other1
Total
2022        
Balance at beginning of year $ 27  $ 29  $ 283  $ 339 
Actual return on plan assets (12) 1  5  (6)
Purchases, sales and settlements — net (1) 4  —  3 
Transfers into (out of) Level 3 — net 13  (4) —  9 
Other —  —  27  27 
Net foreign currency translation adjustments —  —  (15) (15)
Balance at end of year $ 27  $ 30  $ 300  $ 357 
2023      
Balance at beginning of year $ 27  $ 30  $ 300  $ 357 
Actual return on plan assets 1  (2) 8  7 
Purchases, sales and settlements — net —  (1) 7  6 
Transfers into (out of) Level 3 — net 4  —  —  4 
Net foreign currency translation adjustments —  —  8  8 
Balance at end of year $ 32  $ 27  $ 323  $ 382 
1Includes purchased annuity insurance contracts.
Summary of the fair value of postretirement benefit plan assets
The following table summarizes the levels within the fair value hierarchy for our other postretirement benefit plan assets (in millions):
December 31, 2023 December 31, 2022
Level 1 Level 2
Other 1
Total Level 1 Level 2
Other 1
Total
Cash and cash equivalents $ 6  $ 4  $ —  $ 10  $ 35  $ 8  $ —  $ 43 
Equity securities:    
U.S.-based companies 73  —  —  73  133  —  —  133 
International-based companies 4  —  —  4  4  —  —  4 
Fixed-income securities:  
Government bonds —  14  —  14  —  12  —  12 
Corporate bonds and debt securities —  7  —  7  —  71  —  71 
Mutual, pooled and commingled funds —  37  2  39  —  83  3  86 
Hedge funds/limited partnerships —  —  18  18  —  —  14  14 
Real estate —  —  6  6  —  —  6  6 
Other —  —  5  5  —  —  4  4 
Total $ 83  $ 62  $ 31  $ 176  $ 172  $ 174  $ 27  $ 373 
1Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy but are included to reconcile to the amounts presented in Note 14