Abbott Laboratories 2015 Annual Report Download - page 51

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ABBOTT 2015 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The interest rate swaps are designated as fair value hedges of
thevariability of the fair value of fixed-rate debt due to changes
inthe long-term benchmark interest rates. The hedged debt is
marked to market, osetting the eect of marking the interest
rateswaps to market.
The carrying values and fair values of certain financial instruments
as of December31 are shown in the table below. The carrying values
of all other financial instruments approximate their estimated fair
values. The counterparties to financial instruments consist of select
major international financial institutions. Abbott does not expect
any losses from nonperformance by these counterparties.
(inmillions)
2015 2014
Carrying Value Fair Value Carrying Value Fair Value
Long-term Investment Securities:
Equity securities $«4,014 $«4,014 $÷÷212 $÷÷212
Other 27 30 17 17
Total Long-term Debt (5,874) (6,337) (3,448) (4,098)
Foreign Currency Forward Exchange Contracts:
Receivable position 179 179 263 263
(Payable) position (102) (102) (135) (135)
Interest Rate Hedge Contracts:
Receivable position 116 116 101 101
The following table summarizes the bases used to measure certain assets and liabilities at fair value on a recurring basis in the balance sheet:
( inmillions) Outstanding Balances
Basis of Fair Value Measurement
Quoted Prices in
Active Markets
Significant Other
Observable
Inputs
Significant
Unobservable
Inputs
December31, 2015:
Equity securities $3,780 $3,780 $÷÷÷— $÷«—
Interest rate swap financial instruments 116 —116 —
Foreign currency forward exchange contracts 179 — 179 —
Total Assets $4,075 $3,780 $÷«295 $÷«—
Fair value of hedged long-term debt $4,135 $÷÷÷— $4,135 $÷«—
Foreign currency forward exchange contracts 102 — 102 —
Contingent consideration related to business combinations 173 — — 173
Total Liabilities $4,410 $÷÷÷— $4,237 $173
December31, 2014:
Equity securities $÷÷÷«9 $÷÷÷«9 $÷÷÷— $÷«—
Interest rate swap financial instruments 101 — 101 —
Foreign currency forward exchange contracts 263 — 263 —
Total Assets $÷«373 $÷÷÷«9 $÷«364 $÷«—
Fair value of hedged long-term debt $1,637 $÷÷÷— $1,637 $÷«—
Foreign currency forward exchange contracts 135 — 135 —
Contingent consideration related to business combinations 243 — — 243
Total Liabilities $2,015 $÷÷÷— $1,772 $243
Equity securities are principally comprised of Mylan N.V. ordinary
shares. The fair value of the Mylan N.V. equity securities was deter-
mined based on the value of the publicly-traded ordinary shares.
The fair value of foreign currency forward exchange contracts is
determined using a market approach, which utilizes values for
comparable derivative instruments. 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 independent appraisals adjusted for the time value of
money and other changes in fair value primarily resulting from
changes in regulatory timelines. Contingent consideration results
from three acquisitions and the maximum amount estimated to
bedue is $450million, which is dependent upon attaining certain
sales thresholds or based on the occurrence of certain events,
suchas regulatory approvals.