v3.26.1
Derivatives
 3 Months Ended
Mar. 31, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives Derivatives
The Company uses foreign currency forward contracts, interest rate swaps and cross-currency swaps to manage risks associated with foreign currency exchange rates, interest rates and net investments in foreign operations. Refer to the Company's 2025 Annual Report for additional details on the Company's derivative instruments both designated and not designated in hedging relationships.
Cash Flow Hedges - For derivative instruments that are designated and qualify as cash flow hedges, the gain or loss on the derivative is reported as a component of other comprehensive income (loss) and reclassified into earnings in the same period during which the hedged transaction affects earnings. Gains and losses on the derivative representing hedge components excluded from the assessment of effectiveness are recognized in current earnings.
Cash Flow Hedging - Foreign Currency Forward Contracts: The Company enters into foreign exchange forward contracts to hedge against the effect of exchange rate fluctuations on cash flows denominated in foreign currencies. These transactions are designated as cash flow hedges. The settlement or extension of these derivatives will result in reclassifications (from accumulated other comprehensive income) to earnings in the period during which the hedged transactions affect earnings. Solventum may de-designate these cash flow hedge relationships in advance of the occurrence of the forecasted transaction. The portion of gains or losses on the derivative instrument previously included in accumulated other comprehensive income (loss) for de-designated hedges remains in accumulated other comprehensive income (loss) until the forecasted transaction occurs or becomes probable of not occurring. Changes in the value of derivative instruments after de-designation are recorded in earnings. The maximum length of time over which Solventum hedges its exposure to the variability in future cash flows of the forecasted transactions is 24 months.
As of March 31, 2026, the Company had a balance of $1 million associated with the after-tax net unrealized loss associated with cash flow hedging instruments recorded in accumulated other comprehensive income. Of the total after-tax net unrealized balance as of March 31, 2026, Solventum expects to reclassify to earnings approximately $2 million after-tax net unrealized loss over the next 12 months based on exchange rates as of March 31, 2026.
Fair Value Hedges - The Company enters into interest rate swaps to manage its exposure to changes in fair value of the Company's fixed-rate debt. Under these arrangements, the Company agrees to exchange, at specific intervals, the difference between fixed and floating interest amounts calculated by reference to an agreed-upon notional principal amount. Gains and losses associated with interest rate swaps and changes in fair value of the hedged debt are recorded to interest expense in the period they occur. For the three months ended March 31, 2026, the gain associated with the designated interest rate swaps and the change in fair value of the hedged debt was not material. There were no derivative instruments designated in fair value hedging relationships for the three months ended March 31, 2025.
In January 2026, the Company entered into an additional $100 million notional fixed-to-floating interest rate swap with a maturity date of March 2031. In February 2026, the Company entered into an additional $100 million notional fixed-to-floating interest rate swap with a maturity date of March 2033. These derivatives were designated as fair value hedges of the Company's Senior Notes.
At March 31, 2026, the total notional amount of interest rate swaps designated as fair value hedges was $300 million.
Net Investment Hedges - The Company enters into cross-currency swaps to hedge portions of the Company’s investment in foreign operations and manage foreign exchange risk. For instruments that are designated and qualify as hedges of net investments in foreign operations and that meet the effectiveness requirements, the net gains and losses attributable to changes in spot exchange rates are recorded in cumulative translation within other comprehensive income. The remainder of the change in value of such instruments is recorded in earnings. Recognition in earnings of amounts previously recorded in cumulative translation is limited to circumstances such as complete or substantially complete liquidation of the net investment in the foreign operation.
For the three months ended March 31, 2026, the pre-tax gain recognized in cumulative translation within other comprehensive income (loss) was $37 million. For the three months ended March 31, 2025, the pre-tax loss recognized in cumulative translation within other comprehensive income (loss) was $11 million.
At March 31, 2026, the total notional amount of cross-currency swaps designated as net investment hedges was approximately $1.2 billion.
Derivatives Not Designated as Hedging Instruments - Derivatives not designated as hedging instruments include foreign currency contracts to offset, in part, the impacts of changes in value of various non-functional currency denominated items including certain intercompany financing balances.
These derivative instruments are not designated in a hedging relationship: therefore, fair value gains and losses on these contracts are recorded in earnings.
Statement of Income Location and Impact of Derivative Instruments
The impact to income related to both derivative instruments designated in cash flow hedging relationships and those not designated as hedging instruments for the three months ended March 31, 2026 and 2025 were not material. The impact from derivative instruments designated in cash flow hedging relationships was reflected within cost of sales and the impact from derivatives not designated as hedging instruments was reflected within other expense (income), net on the condensed consolidated statements of income.    
The amount of gain (loss) excluded from effectiveness testing recognized in income relative to instruments designated in net investment hedge relationships is not material.
Location, Fair Value, and Gross Notional Amounts of Derivative Instruments
The following tables summarize the fair value of Solventum’s derivative instruments and their location in the condensed consolidated balance sheets. Notional amounts below are presented at period end foreign exchange rates.
Gross Notional AmountAssetsLiabilities
 (Millions)LocationFair Value AmountLocationFair Value Amount
March 31,December 31,March 31,December 31,March 31,December 31,
202620252026202520262025
Derivatives designated as hedging instruments
Foreign currency forward contracts$251 $293 Other current assets$4 $3 Other current liabilities$4 $10 
Foreign currency forward contracts80 96 Other assets2 1 Other liabilities— 2 
Interest rate swaps300 100 Other assets— $— Other liabilities3 1 
Cross-currency swaps1,185 1,185 Other assets3 $— Other liabilities37 71 
Total derivatives designated as hedging instruments $1,816 $1,674 $9 $4 $44 $84 
Derivatives not designated as hedging instruments
Foreign currency forward contracts$569 $481 Other current assets$3 $1 Other current liabilities$6 $3 
Fair Value Disclosure: The Company’s derivative assets and liabilities within the scope of ASC 815, Derivatives and Hedging, are required to be recorded at fair value. The Company’s derivatives that are recorded at fair value include foreign currency forward contracts and cross-currency swaps. Solventum has determined that these derivatives are considered Level 2 fair value measurements. Solventum determines fair value using observable inputs including foreign currency exchange rates.
Credit Risk and Offsetting of Assets and Liabilities of Derivative Instruments: The Company is exposed to credit loss in the event of nonperformance by counterparties in forward contracts. However, the Company’s risk is limited to the fair value of the instruments. The Company actively monitors its exposure to credit risk through the use of credit approvals and credit limits, and by selecting major international banks and financial institutions as counterparties. Solventum enters into master netting arrangements with counterparties, which may allow each counterparty to net settle amounts owed between a Solventum entity and the counterparty as a result of multiple, separate derivative transactions. The Company does not anticipate nonperformance by any of these counterparties.
Solventum has elected to present the fair value of derivative assets and liabilities within the Company’s condensed consolidated balance sheets on a gross basis even when derivative transactions are subject to master netting arrangements and may otherwise qualify for net presentation. Solventum determined that the impact of the amount of eligible offsetting derivative assets and liabilities was not material if it had elected to offset the asset and liability balances of derivative instruments, netted in accordance with various criteria in the event of default or termination as stipulated by the terms of netting arrangements with each of the counterparties. For each counterparty, if netted, the Company would offset the asset and liability balances of all derivatives at the end of the reporting period based on the Solventum entity that is a party to the transactions. Derivatives not subject to master netting agreements are not eligible for net presentation. For the periods presented, Solventum has not received cash collateral from derivative counterparties.