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ABBOTT 2013 ANNUAL REPORT
48
Basis of Fair Value Measurement
Quoted Significant Other Significant
Outstanding Prices in Observable Unobservable
(in millions) Balances Active Markets Inputs Inputs
December 31, 2013:
Equity securities $   26 $26 $   — $  —
Interest rate swap financial instruments 87 — 87 —
Foreign currency forward exchange contracts 84 — 84 —
Total Assets $  197 $26 $  171 $  —
Fair value of hedged long‑term debt $ 1,623 $ — $1,623 $  —
Foreign currency forward exchange contracts 75 — 75 —
Contingent consideration related to business combinations 208 — — 208
Total Liabilities $ 1,906 $ — $1,698 $208
December 31, 2012:
Equity securities $   76 $76 $   — $  —
Interest rate swap financial instruments 185 — 185 —
Foreign currency forward exchange contracts 120 — 120 —
Total Assets $  381 $76 $ 305 $  —
Fair value of hedged long‑term debt $ 9,632 $ — $9,632 $  —
Interest rate swap financial instruments 80 — 80 —
Foreign currency forward exchange contracts 146 — 146 —
Contingent consideration related to business combinations 323 — — 323
Total Liabilities $10,181 $ — $9,858 $323
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The fair value of the debt was determined based on the face value of
the debt adjusted for the fair value of the interest rate swaps, which
is based on a discounted cash flow analysis using significant other
observable inputs. The fair value of the contingent consideration
was determined based on an independent appraisal adjusted for the
time value of money, exchange and other changes in fair value.
NOTE 11 — LITIGATION AND ENVIRONMENTAL MATTERS
Abbott has been identified as a potentially responsible party for
investigation and cleanup costs at a number of locations in the
United States and Puerto Rico under federal and state remediation
laws and is investigating potential contamination at a number
of company‑owned locations. Abbott has recorded an estimated
cleanup cost for each site for which management believes Abbott
has a probable loss exposure. No individual site cleanup exposure
is expected to exceed $4 million, and the aggregate cleanup
exposure is not expected to exceed $15 million.
The following table summarizes the bases used to measure
certain assets and liabilities at fair value on a recurring basis in the
balance sheet:
Abbott is involved in various claims and legal proceedings, and
Abbott estimates the range of possible loss for its legal proceedings
and environmental exposures to be from approximately $70 mil‑
lion to $90 million. The recorded accrual balance at December 31,
2013 for these proceedings and exposures was approximately
$80 million. This accrual represents management’s best estimate
of probable loss, as defined by FASB ASC No. 450, “Contingencies.”
Within the next year, legal proceedings may occur that may result
in a change in the estimated loss accrued by Abbott. While it is
not feasible to predict the outcome of all such proceedings and
exposures with certainty, management believes that their ultimate
disposition should not have a material adverse effect on Abbott’s
financial position, cash flows, or results of operations.