v3.25.4
Fair value measurements
 12 Months Ended
Dec. 28, 2025
Fair Value Disclosures [Abstract]  
Fair value measurements Fair value measurements
The Company uses forward foreign exchange contracts to manage its exposure to the variability of cash flows, primarily related to the foreign exchange rate changes of future intercompany products and third-party purchases of materials denominated in a foreign currency. The Company uses cross currency interest rate swaps to manage currency risk primarily related to borrowings. Both types of derivatives are designated as cash flow hedges.
Additionally, the Company uses interest rate swaps as an instrument to manage interest rate risk related to fixed rate borrowings. These derivatives are designated as fair value hedges. The Company uses cross currency interest rate swaps and forward foreign exchange contracts designated as net investment hedges. Additionally, the Company uses forward foreign exchange contracts to offset its exposure to certain foreign currency assets and liabilities. These forward foreign exchange contracts are not designated as hedges and therefore, changes in the fair values of these derivatives are recognized in earnings, thereby offsetting the current earnings effect of the related foreign currency assets and liabilities.
The Company does not enter into derivative financial instruments for trading or speculative purposes, or that contain credit risk related contingent features. The Company maintains credit support agreements (CSA) with certain derivative counterparties establishing collateral thresholds based on respective credit ratings and netting agreements. As of December 28, 2025 and December 29, 2024, the total amount of cash collateral paid by the Company under the CSA amounted to $4.6 billion and $2.2 billion net respectively, related to net investment and cash flow hedges. On an ongoing basis, the Company monitors counter-party credit ratings. The Company considers credit non-performance risk to be low, because the Company primarily enters into agreements with commercial institutions that have at least an investment grade credit rating. Refer to the table on significant financial assets and liabilities measured at fair value contained in this footnote for receivables and payables with these commercial institutions. As of December 28, 2025, the Company had notional amounts outstanding for forward foreign exchange contracts, cross currency interest rate swaps and interest rate swaps of $40.6 billion, $38.9 billion and $8.0 billion, respectively. As of December 29, 2024, the Company had notional amounts outstanding for forward foreign exchange contracts, cross currency interest rate swaps and interest rate swaps of $45.1 billion, $40.5 billion and $9.0 billion, respectively.
All derivative instruments are recorded on the balance sheet at fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether the derivative is designated as part of a hedge transaction, and if so, the type of hedge transaction. Cash exchanged for derivatives is primarily in cash flows from operating activities.
The designation as a cash flow hedge is made at the entrance date of the derivative contract. At inception, all derivatives are expected to be highly effective. Foreign exchange contracts designated as cash flow hedges are accounted for under the forward method and all gains/losses associated with these contracts will be recognized in the income statement when the hedged item impacts earnings. Changes in the fair value of these derivatives are recorded in accumulated other comprehensive income until the underlying transaction affects earnings, and are then reclassified to earnings in the same account as the hedged transaction.
Gains and losses associated with interest rate swaps and changes in fair value of hedged debt attributable to changes in interest rates are recorded to interest expense in the period in which they occur. Gains and losses on net investment hedges are accounted through the currency translation account within accumulated other comprehensive income. The portion excluded from effectiveness testing is recorded through interest (income) expense using the spot method. On an ongoing basis, the Company assesses whether each derivative continues to be highly effective in offsetting changes of hedged items. If and when a derivative is no longer expected to be highly effective, hedge accounting is discontinued.
The Company designated its Euro denominated notes with due dates ranging from 2028 to 2055 as a net investment hedge of the Company's investments in certain of its international subsidiaries that use the Euro as their functional currency in order to reduce the volatility caused by changes in exchange rates.
As of December 28, 2025, the balance of deferred net loss on derivatives included in accumulated other comprehensive income was $0.3 billion after-tax. For additional information, see the Consolidated Statements of Comprehensive Income and Note 13. The Company expects that substantially all of the amounts related to forward foreign exchange contracts will be reclassified into earnings over the next 12 months as a result of transactions that are expected to occur over that period. The maximum length of time over which the Company is hedging transaction exposure is 18 months, excluding interest rate contracts and net investment hedges. The amount ultimately realized in earnings may differ as foreign exchange rates change. Realized gains and losses are ultimately determined by actual exchange rates at maturity of the derivative.
The following table is a summary of the activity related to derivatives and hedges for the fiscal years ended December 28, 2025 and December 29, 2024, net of tax:
December 28, 2025December 29, 2024
(Dollars in Millions)SalesCost of
Products
Sold		R&D
Expense		Interest
(Income)
Expense		Other
(Income)
Expense		SalesCost of
Products
Sold		R&D
Expense		Interest
(Income)
Expense		Other
(Income)
Expense
The effects of fair value, net investment and cash flow hedging:
Gain (Loss) on fair value hedging relationship:
Interest rate swaps contracts:
Hedged items$———338————64—
Derivatives designated as hedging instruments———(338)————(64)—
Gain (Loss) on net investment hedging relationship:
Cross currency interest rate swaps contracts:
Amount of gain or (loss) recognized in income on derivative amount excluded from effectiveness testing$———193————148—
Amount of gain or (loss) recognized in AOCI———193————148—
Gain (Loss) on cash flow hedging relationship:
Forward foreign exchange contracts:
Amount of gain or (loss) reclassified from AOCI into income441(52)—(19)242633—6
Amount of gain or (loss) recognized in AOCI11715(109)—(44)(7)(156)80—21
Cross currency interest rate swaps contracts:
Amount of gain or (loss) reclassified from AOCI into income———326————247—
Amount of gain or (loss) recognized in AOCI$———1,187————(597)—
As of December 28, 2025 and December 29, 2024, the following amounts were recorded on the consolidated balance sheet related to cumulative basis adjustment for fair value hedges:
Line item in the Consolidated Balance Sheet
in which the hedged item is included		Carrying Amount of the Hedged LiabilityCumulative Amount of Fair Value Hedging
Adjustment Included in the Carrying
Amount of the Hedged Liability
(Dollars in Millions)December 28, 2025December 29, 2024December 28, 2025December 29, 2024
Long-term Debt$8,318$7,935$(694)$(1,132)
The following table is the effect of derivatives not designated as hedging instrument for the fiscal years ended
December 28, 2025 and December 29, 2024:
(Dollars in Millions)Location of Gain /(Loss)
Recognized in Income on
Derivative		Gain/(Loss)
Recognized In
Income on Derivative
Derivatives Not Designated as Hedging InstrumentsDecember 28, 2025December 29, 2024
Foreign Exchange ContractsOther (income) expense$(265)8
The following table is the effect of net investment hedges for the fiscal years ended December 28, 2025 and
December 29, 2024:
Gain/(Loss)
Recognized In
Accumulated OCI
Location of Gain or
(Loss) Reclassified
from Accumulated
Other Comprehensive
Income Into Income
Gain/(Loss)
Reclassified from
Accumulated OCI
Into Income
(Dollars in Millions)December 28, 2025December 29, 2024December 28, 2025December 29, 2024
Debt$(1,190)282Interest (income) expense——
Cross Currency interest rate swaps$277955Interest (income) expense——
The following table is a summary of the activity related to equity investments for the fiscal years ended December 28, 2025 and December 29, 2024:
December 29, 2024December 28, 2025
(Dollars in Millions)Carrying Value
Changes in Fair
Value Reflected in
Net Income(1)
Sales/
Purchases/
Other(2)
Carrying ValueNon-Current
Other Assets
Equity Investments with readily determinable value$451230(16)665665
Equity Investments without readily determinable value$773253(116)910910
December 31, 2023December 29, 2024
(Dollars in Millions)Carrying Value
Changes in Fair
Value Reflected in
Net Income(1)
Sales/
Purchases/
Other(2)
Carrying ValueNon-Current
Other Assets
Equity Investments with readily determinable value*$4,473(17)(4,005)451451
Equity Investments without readily determinable value$696(197)274773773
(1)Recorded in Other Income/Expense
(2)Other includes impact of currency
*    The December 31, 2023 balance includes the 9.5% remaining stake in Kenvue. A debt-for-equity exchange was completed in the fiscal second quarter of 2024.
On May 15, 2024, the Company issued $3.6 billion aggregate principal amount of commercial paper and received $3.6 billion of net cash proceeds to be used for general corporate purposes. On May 17, 2024, the Company completed a Debt-for-Equity Exchange of its remaining 182,329,550 shares of Kenvue Common Stock for the outstanding Commercial Paper. Upon completion of the Debt-for-Equity Exchange, the Commercial Paper was satisfied and discharged, and the Company no longer owns any shares of Kenvue Common Stock. This exchange resulted in a loss of approximately $0.4 billion recorded in Other (income) expense.
For the fiscal years ended December 28, 2025 and December 29, 2024 for equity investments without readily determinable market values, $115 million and $171 million, respectively, of the changes in fair value reflected in net income were the result of impairments. There were impacts of $368 million and $26 million, respectively, of changes in the fair value reflected in net income due to changes in observable prices and gains on the disposal of investments.
Fair value is the exit price that would be received to sell an asset or paid to transfer a liability. Fair value is a market-based measurement determined using assumptions that market participants would use in pricing an asset or liability. In accordance with ASC 820, a three-level hierarchy to prioritize the inputs used in measuring fair value. The levels within the hierarchy are described below with Level 1 having the highest priority and Level 3 having the lowest.
The fair value of a derivative financial instrument (i.e., forward foreign exchange contracts, interest rate contracts) is the aggregation by currency of all future cash flows discounted to its present value at the prevailing market interest rates and subsequently converted to the U.S. Dollar at the current spot foreign exchange rate. The Company does not believe that fair values of these derivative instruments materially differ from the amounts that could be realized upon settlement or maturity, or that the changes in fair value will have a material effect on the Company’s results of operations, cash flows or financial position. The Company also holds equity investments which are classified as Level 1 and debt securities which are classified as Level 2. The Company holds acquisition related contingent liabilities based upon certain regulatory and commercial events, which are classified as Level 3, whose values are determined using discounted cash flow methodologies or similar techniques for which the determination of fair value requires significant judgment or estimations.
The following three levels of inputs are used to measure fair value:
Level 1 — Quoted prices in active markets for identical assets and liabilities.
Level 2 — Significant other observable inputs.
Level 3 — Significant unobservable inputs.
The Company’s significant financial assets and liabilities measured at fair value as of the fiscal year ended December 28, 2025 and December 29, 2024 were as follows:
20252024
(Dollars in Millions)Level 1Level 2Level 3Total
Total(1)
Derivatives designated as hedging instruments:     
Assets:     
Forward foreign exchange contracts $—686—686660
Interest rate contracts(2)
—589—5891,484
Total$—1,275—1,2752,144
Liabilities:     
Forward foreign exchange contracts—413—413794
Interest rate contracts(2)
—5,848—5,8483,753
Total$—6,261—6,2614,547
Derivatives not designated as hedging instruments:     
Assets:     
Forward foreign exchange contracts $—38—3850
Liabilities:     
Forward foreign exchange contracts—46—4617
Available For Sale Other Investments:
Equity investments(3)
665——665451
Debt securities(4)
—2,854—2,8547,216
Other Liabilities
Contingent Consideration(5)
$7537531,217
Gross to Net Derivative Reconciliation20252024
(Dollars in Millions)
Total Gross Assets$1,3132,194
Credit Support Agreements (CSA)(1,308)(2,172)
Total Net Asset522
Total Gross Liabilities6,3074,564
Credit Support Agreements (CSA)(5,903)(4,412)
Total Net Liabilities$404152
Summarized information about changes in liabilities for contingent consideration is as follows:
202520242023
(Dollars in Millions)
Beginning Balance
$1,2171,0921,120
Changes in estimated fair value(6)
(387)8829
Additions(7)
—112—
Payments/Other
(77)(75)(57)
Ending Balance(5)
$7531,2171,092
(1)2024 assets and liabilities are all classified as Level 2 with the exception of equity investments of $451 million, which are classified as Level 1 and contingent consideration of $1,217 million, classified as Level 3.
(2)Includes cross currency interest rate swaps and interest rate swaps.
(3)Classified as non-current other assets.
(4)Classified as cash equivalents and current marketable securities.
(5)Includes $753 million, $1,217 million and $1,092 million, classified as non-current other liabilities as of December 28, 2025,
December 29, 2024 and December 31, 2023, respectively.
(6)In fiscal year 2025, the Company recorded a reduction of $364 million to the CVR liability associated with the 2022 Abiomed acquisition based on the reduced probability of the achievement of certain developmental and commercial milestones by the dates required in the CVR agreement. The remaining CVR balance is $0.4 billion.
(7)In fiscal year 2024, the Company recorded $105 million of contingent consideration related to Proteologix.
As of December 28, 2025 and December 29, 2024, cash and cash equivalents includes money market funds of $5,993 million and $6,123 million, respectively, which would be considered level 1 in the fair value hierarchy

See Notes 2 and 7 for financial assets and liabilities held at carrying amount on the Consolidated Balance Sheet.