The company is exposed to foreign currency exchange rate and interest rate risks related to its business operations. AbbVie's hedging policy attempts to manage these risks to an acceptable level based on the company's judgment of the appropriate trade-off between risk, opportunity and costs. The company uses derivative and nonderivative instruments to reduce its exposure to foreign currency exchange rates. AbbVie also periodically enters into interest rate swaps in which the company agrees to exchange, at specified intervals, the difference between fixed and floating interest amounts calculated by reference to an agreed-upon notional amount. Derivative instruments are not used for trading purposes or to manage exposure to changes in interest rates for investment securities, and none of the company's outstanding derivative instruments contain credit risk related contingent features; collateral is generally not required.

Various AbbVie foreign subsidiaries enter into foreign currency forward exchange contracts to manage exposures to changes in foreign exchange rates for anticipated intercompany transactions denominated in a currency other than the

functional currency of the local entity. These contracts, with notional amounts totaling $1.9 billion at December 31, 2024 and $1.8 billion at December 31, 2023, are designated as cash flow hedges and are recorded at fair value. The durations of these forward exchange contracts were generally less than 18 months. Accumulated gains and losses as of December 31, 2024 are reclassified from AOCI and included in cost of products sold at the time the products are sold, generally not exceeding six months from the date of settlement.

In 2019, the company entered into treasury rate lock agreements with notional amounts totaling $10.0 billion to hedge exposure to variability in future cash flows resulting from changes in interest rates related to the issuance of long-term debt in connection with the acquisition of Allergan. The treasury rate lock agreements were designated as cash flow hedges and recorded at fair value. The agreements were net settled upon issuance of the senior notes in 2019 and the resulting net gain was included in AOCI. This gain is reclassified to interest expense, net over the term of the related debt.

The company was a party to interest rate swap contracts designated as cash flow hedges that matured in November 2022. The effect of the hedge contracts was to change a floating-rate interest obligation to a fixed rate for that portion of the floating-rate debt. Realized and unrealized gains or losses were included in AOCI and reclassified to interest expense, net over the lives of the floating-rate debt.

In June 2023, the company entered into a cross-currency swap contract that matured in November 2023 with a notional amount totaling €433 million to hedge the company’s exposure to changes in future cash flows of foreign currency denominated debt related to changes in foreign exchange rates. The cross-currency swap contract was designated as a cash flow hedge and effectively converted the interest and principal payments of the related foreign currency denominated debt to U.S. dollars. The unrealized gains and losses on the contract were included in AOCI and reclassified to net foreign exchange loss over the term of the related debt.

The company also enters into foreign currency forward exchange contracts to manage its exposure to foreign currency denominated debt, trade payables, receivables and intercompany loans. These contracts are not designated as hedges and are recorded at fair value. Resulting gains or losses are reflected in net foreign exchange gains or loss in the consolidated statements of earnings and are generally offset by losses or gains on the foreign currency exposure being managed. These contracts had notional amounts totaling $5.9 billion at December 31, 2024 and $7.9 billion at December 31, 2023.

The company also uses foreign currency forward exchange contracts or foreign currency denominated debt to hedge its net investments in certain foreign subsidiaries and affiliates. The company had an aggregate principal amount of senior Euro notes designated as net investment hedges of €3.1 billion at December 31, 2024 and €5.4 billion December 31, 2023. In addition, the company had foreign currency forward exchange contracts designated as net investment hedges with notional amounts totaling €6.2 billion, SEK1.4 billion, CAD500 million and CHF50 million at December 31, 2024 and €4.9 billion, SEK1.4 billion, CAD750 million and CHF50 million at December 31, 2023. The company uses the spot method of assessing hedge effectiveness for derivative instruments designated as net investment hedges. Realized and unrealized gains and losses from these hedges are included in AOCI and the initial fair value of hedge components excluded from the assessment of effectiveness is recognized in interest expense, net over the life of the hedging instrument.

The company is a party to interest rate swap contracts designated as fair value hedges with notional amounts totaling $3.5 billion at December 31, 2024 and $5.0 billion at December 31, 2023. The effect of the hedge contracts is to change a fixed-rate interest obligation to a floating rate for that portion of the debt. AbbVie records the contracts at fair value and adjusts the carrying amount of the fixed-rate debt by an offsetting amount.

The following table summarizes the amounts and location of AbbVie's derivative instruments on the consolidated balance sheets:


	Fair value - Derivatives in asset position					Fair value - Derivatives in liability position
as of December 31 (in millions)	Balance sheet caption	2024		2023		Balance sheet caption	2024		2023
Foreign currency forward exchange contracts
Designated as cash flow hedges	Prepaid expenses and other	$	119	$	12	Accounts payable and accrued liabilities	$	5	$	32


Designated as net investment hedges	Prepaid expenses and other	4		13		Accounts payable and accrued liabilities	—		66
Designated as net investment hedges	Other assets	148		—		Other long-term liabilities	—		69
Not designated as hedges	Prepaid expenses and other	42		41		Accounts payable and accrued liabilities	30		36


Interest rate swap contracts


Designated as fair value hedges	Other assets	—		—		Other long-term liabilities	231		293
Total derivatives		$	313	$	66		$	266	$	496

The following table presents the pre-tax amounts of gains (losses) from derivative instruments recognized in other comprehensive income (loss):


years ended in December 31 (in millions)	2024		2023		2022
Foreign currency forward exchange contracts
Designated as cash flow hedges	$	192	$	(2)	$	103
Designated as net investment hedges	435		(144)		395
Cross-currency swap contracts designated as cash flow hedges	—		(6)		—
Interest rate swap contracts designated as cash flow hedges	—		—		6

Assuming market rates remain constant through contract maturities, the company expects to reclassify pre-tax gains of $126 million into cost of products sold for foreign currency cash flow hedges and pre-tax gains of $21 million into interest expense, net for treasury rate lock agreement cash flow hedges during the next 12 months.

Related to AbbVie’s non-derivative, foreign currency denominated debt designated as net investment hedges, the company recognized in other comprehensive income (loss) pre-tax gains of $305 million in 2024, pre-tax losses of $252 million in 2023 and pre-tax gains of $406 million in 2022.

The following table summarizes the pre-tax amounts and location of derivative instrument net gains (losses) recognized in the consolidated statements of earnings, including the net gains (losses) reclassified out of AOCI into net earnings. See Note 13 for the amount of net gains (losses) reclassified out of AOCI.


years ended December 31 (in millions)	Statement of earnings caption	2024		2023		2022
Foreign currency forward exchange contracts
Designated as cash flow hedges	Cost of products sold	$	73	$	77	$	82
Designated as net investment hedges	Interest expense, net	123		112		94
Not designated as hedges	Net foreign exchange loss	6		33		(156)
Treasury rate lock agreements designated as cash flow hedges	Interest expense, net	23		24		23
Cross-currency swap contracts designated as cash flow hedges	Net foreign exchange loss	—		(6)		—
Interest rate swap contracts
Designated as cash flow hedges	Interest expense, net	—		—		(1)
Designated as fair value hedges	Interest expense, net	62		98		(402)
Debt designated as hedged item in fair value hedges	Interest expense, net	(62)		(98)		402

•Level 2—Valuations based on quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuations in which all significant inputs are observable in the market; and

•Level 3—Valuations using significant inputs that are unobservable in the market and include the use of judgment by the company's management about the assumptions market participants would use in pricing the asset or liability.

The following table summarizes the bases used to measure certain assets and liabilities carried at fair value on a recurring basis on the consolidated balance sheet as of December 31, 2024:


			Basis of fair value measurement
(in millions)	Total		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Assets
Cash and equivalents	$	5,524	$	5,179	$	345	$	—
Money market funds and time deposits	10		—		10		—
Debt securities	33		—		33		—
Equity securities	98		70		28		—

Foreign currency contracts	313		—		313		—

Total assets	$	5,978	$	5,249	$	729	$	—
Liabilities
Interest rate swap contracts	$	231	$	—	$	231	$	—
Foreign currency contracts	35		—		35		—
Financing liability	328		—		—		328
Contingent consideration	21,666		—		—		21,666
Total liabilities	$	22,260	$	—	$	266	$	21,994

The following table summarizes the bases used to measure certain assets and liabilities carried at fair value on a recurring basis on the consolidated balance sheet as of December 31, 2023:


			Basis of fair value measurement
(in millions)	Total		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Assets
Cash and equivalents	$	12,814	$	6,223	$	6,591	$	—
Money market funds and time deposits	10		—		10		—
Debt securities	26		—		26		—
Equity securities	111		86		25		—

Foreign currency contracts	66		—		66		—
Total assets	$	13,027	$	6,309	$	6,718	$	—
Liabilities
Interest rate swap contracts	$	293	$	—	$	293	$	—
Foreign currency contracts	203		—		203		—
Contingent consideration	19,890		—		—		19,890
Total liabilities	$	20,386	$	—	$	496	$	19,890

Money market funds and time deposits are valued using relevant observable market inputs including quoted prices for similar assets and interest rate curves. Equity securities primarily consist of investments for which the fair values were determined by using the published market prices per unit multiplied by the number of units held, without consideration of transaction costs. The derivatives entered into by the company were valued using observable market inputs including published interest rate curves and both forward and spot prices for foreign currencies.

The financing liability is related to funding agreements entered into by Cerevel Therapeutics prior to the acquisition and assumed by AbbVie. The funding agreements represent financial instruments that are accounted for as financing arrangements and the company elected to account for the financing liability in accordance with the fair value option, as permitted under ASC 825 Financial Instruments. The fair value measurement of the financing liability was determined based on significant unobservable inputs. Potential payments are estimated by applying a probability-weighted expected payment model for regulatory milestone payments and a Monte Carlo simulation model for sales milestones and royalty payments, which are then discounted to present value. Changes to the fair value of the financing liability can result from changes to one

or a number of inputs, including discount rates, estimated probabilities and timing of achieving milestones and estimated amounts of future sales. The change in fair value recognized in net earnings is recorded in other expense, net in the consolidated statements of earnings and included a charge of $82 million in 2024. The change in fair value attributable to instrument-specific credit risk is recognized in other comprehensive loss and was not significant.

The fair value measurements of the contingent consideration liabilities were determined based on significant unobservable inputs, including the discount rate, estimated probabilities and timing of achieving specified development, regulatory and commercial milestones and the estimated amount of future sales of the acquired products. The potential contingent consideration payments are estimated by applying a probability-weighted expected payment model for contingent milestone payments and a Monte Carlo simulation model for contingent royalty payments, which are then discounted to present value. Changes to the fair value of the contingent consideration liabilities can result from changes to one or a number of inputs, including discount rates, the probabilities of achieving the milestones, the time required to achieve the milestones and estimated future sales. Significant judgment is employed in determining the appropriateness of certain of these inputs. Changes to the inputs described above could have a material impact on the company's financial position and results of operations in any given period.

The fair value of the company's contingent consideration liabilities was calculated using the following significant unobservable inputs:


	2024		2023
years ended December 31 (in millions)	Range	Weighted Average(a)	Range	Weighted Average(a)
Discount rate	4.6% - 5.2%	4.8%	4.3% - 5.9%	4.5	%

Probability of payment for royalties by indication(b)	100%	100%	89% - 100%	99	%

Projected year of payments	2025 - 2034	2029	2024 - 2034	2027

There have been no transfers of assets or liabilities into or out of Level 3 of the fair value hierarchy. The following table presents the changes in fair value of contingent consideration liabilities which are measured using Level 3 inputs:


years ended December 31 (in millions)	2024		2023		2022
Beginning balance	$	19,890	$	16,384	$	14,887
Additions(a)	—		—		32
Change in fair value recognized in net earnings	3,771		5,128		2,761
Payments	(1,995)		(1,622)		(1,296)
Ending balance	$	21,666	$	19,890	$	16,384

The change in fair value recognized in net earnings is recorded in other expense, net in the consolidated statements of earnings and included charges of $3.8 billion in 2024, $5.1 billion in 2023 and $2.8 billion in 2022. In 2024, the change in fair value reflected higher estimated Skyrizi sales and the passage of time, partially offset by higher discount rates. In 2023, the change in fair value reflected higher estimated Skyrizi sales driven by stronger market share uptake, the passage of time and lower discount rates. In 2022, the change in fair value reflected higher estimated Skyrizi sales driven by stronger market share uptake and the passage of time, partially offset by higher discount rates.

Contingent consideration payments of amounts up to the initial acquisition date fair value are classified as cash outflows from financing activities and payments of amounts in excess of the initial acquisition date fair value are classified as cash outflows from operating activities in the consolidated statements of cash flows.

Certain financial instruments are carried at historical cost or some basis other than fair value. The book values, approximate fair values and bases used to measure the approximate fair values of certain financial instruments as of December 31, 2024 are shown in the table below:


					Basis of fair value measurement
(in millions)	Book value		Approximate fair values		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Liabilities

Current portion of long-term debt and finance lease obligations, excluding fair value hedges	$	6,797	$	6,767	$	6,620	$	147	$	—
Long-term debt and finance lease obligations, excluding fair value hedges and financing liability	60,243		55,836		53,441		2,395		—
Total liabilities	$	67,040	$	62,603	$	60,061	$	2,542	$	—

The book values, approximate fair values and bases used to measure the approximate fair values of certain financial instruments as of December 31, 2023 are shown in the table below:


					Basis of fair value measurement
(in millions)	Book value		Approximate fair values		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Liabilities

Current portion of long-term debt and finance lease obligations, excluding fair value hedges	$	7,191	$	7,069	$	6,862	$	207	$	—
Long-term debt and finance lease obligations, excluding fair value hedges	52,460		49,541		48,983		558		—
Total liabilities	$	59,651	$	56,610	$	55,845	$	765	$	—

AbbVie also holds investments in equity securities that do not have readily determinable fair values. The company records these investments at cost and remeasures them to fair value based on certain observable price changes or impairment events as they occur. The carrying amount of these investments was $169 million as of December 31, 2024 and $159 million as of December 31, 2023. No significant cumulative upward or downward adjustments have been recorded for these investments as of December 31, 2024.

Of total net accounts receivable, three U.S. wholesalers accounted for 81% as of December 31, 2024 and December 31, 2023, and substantially all of AbbVie's pharmaceutical product net revenues in the United States were to these three wholesalers.