Financial information attached. I'm supposed to project for 2015, 2016, and 2017. I do not understand the question or how to do it.

1. Pro-Forma Financial Statements (I/S, B/S and Statement of Cash Flows) with deltas out three years and analysis Each year must have two columns: one with your strategy and one without your strategy.
   1. Include Pro-Forma ratios for the first year out with deltas contrasting from the most current years ratios.

Document and Entity Information (USD $) In Millions, except Share data, unless otherwise specified Entity Information [Line Items] Document Type Amendment Flag Document Period End Date Document Fiscal Year Focus Document Fiscal Period Focus Trading Symbol Entity Registrant Name Entity Central Index Key Current Fiscal Year End Date Entity Well-known Seasoned Issuer Entity Current Reporting Status Entity Voluntary Filers Entity Filer Category Entity Common Stock, Shares Outstanding Entity Public Float 12 Months Ended Dec. 31, 2013 Jan. 31, 2014 Jun. 30, 2013 ' ' ' 31-Dec-13 ' '2013 ' 'FY ' 'MRK ' 'Merck & Co. Inc. ' '0000310158 ' '--12-31 ' 'Yes ' 'Yes ' 'No ' 'Large Accelerated Filer ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' '10-K 'false ' ' 2,940,622,461 ' ' $135,893 Consolidated Statement of Income (USD $) 12 Months Ended In Millions, except Per Share data, unless Dec. 31, 2013 Dec. 31, 2012 Dec. 31, 2011 otherwise specified Income Statement [Abstract] ' ' ' Sales $44,033 $47,267 $48,047 Costs, Expenses and Other ' ' ' Materials and production 16,954 16,446 16,871 Marketing and administrative 11,911 12,776 13,733 Research and development 7,503 8,168 8,467 Restructuring costs 1,709 664 1,306 Equity income from affiliates -404 -642 -610 Other (income) expense, net 815 1,116 946 Total Costs, Expenses and Other 38,488 38,528 40,713 Income Before Taxes 5,545 8,739 7,334 Taxes on Income 1,028 2,440 942 Net Income 4,517 6,299 6,392 Less: Net Income Attributable to Noncontrolling Interests 113 131 120 Net Income Attributable to Merck & Co., Inc. Basic Earnings per Common Share Attributable to Merck & Co., Inc. Common Shareholders (in dollars per share) Earnings per Common Share Assuming Dilution Attributable to Merck & Co., Inc. Common Shareholders (in dollars per share) $4,404 $6,168 $6,272 $1.49 $2.03 $2.04 $1.47 $2 $2.02 Consolidated Statement of Comprehensive 12 Months Ended Income (USD $) In Millions, unless otherwise specified Dec. 31, 2013 Dec. 31, 2012 Dec. 31, 2011 Statement of Comprehensive Income [Abstract] ' ' ' Net Income Attributable to Merck & Co., Inc. Other Comprehensive Income (Loss) Net of Taxes: Net unrealized gain (loss) on derivatives, net of reclassifications Net unrealized (loss) gain on investments, net of reclassifications Benefit plan net gain (loss) and prior service cost (credit), net of amortization Cumulative translation adjustment Other comprehensive income (loss), net of taxes Comprehensive Income Attributable to Merck & Co., Inc. $4,404 ' $6,168 ' $6,272 ' 229 -101 -37 -19 52 -10 2,758 -483 -1,321 -180 -303 434 2,485 -1,550 84 $6,889 $4,618 $6,356 Consolidated Balance Sheet (USD $) Dec. 31, 2013 Dec. 31, 2012 In Millions, unless otherwise specified Current Assets ' ' Cash and cash equivalents $15,621 $13,451 Short-term investments 1,865 2,690 Accounts receivable (net of allowance for doubtful accounts of $146 in 2013 and $163 in 2012) (excludes accounts receivable of $275 in 2013 and $473 in 2012 classified in Other assets - see Note 5) 7,184 Deferred income taxes and other current assets Total current assets Investments Property, Plant and Equipment (at cost) ' Land Buildings Machinery, equipment and office furnishings Other paid-in capital Retained earnings Accumulated other comprehensive loss Stockholders' equity before deduction for treasury stock Less treasury stock, at cost: 649,576,808 shares in 2013 and 550,468,221 shares in 2012 Total Merck & Co., Inc. stockholders equity Noncontrolling Interests Total equity Total Liabilities and Equity 4,789 35,685 9,770 4,509 34,857 7,305 ' 550 13,627 591 13,196 17,188 2,440 33,415 17,385 14,973 12,301 23,801 9,115 105,645 16,030 12,134 29,083 6,723 106,132 ' ' 4,521 2,274 9,501 251 1,321 17,868 20,539 6,776 8,136 Trade accounts payable Accrued and other current liabilities Income taxes payable Dividends payable Total current liabilities Long-Term Debt Deferred Income Taxes Other Noncurrent Liabilities Merck & Co., Inc. Stockholders Equity Common stock, $0.50 par value Authorized 6,500,000,000 shares Issued - 3,577,103,522 shares in 2013 and 2012 6,535 17,106 1,811 33,094 18,121 Construction in progress Property, Plant and Equipment, Gross Less: accumulated depreciation Property, Plant and Equipment, Net, Total Goodwill Other Intangibles, Net Other Assets Total Assets Current Liabilities Loans payable and current portion of longterm debt 7,672 6,226 Inventories (excludes inventories of $1,704 in 2013 and $1,606 in 2012 classified in Other assets - see Note 6) ' 4,315 1,753 9,737 1,200 1,343 18,348 16,254 5,740 10,327 ' 1,788 40,508 39,257 1,788 40,646 39,985 -2,197 -4,682 79,356 77,737 29,591 24,717 49,765 2,561 52,326 $105,645 53,020 2,443 55,463 $106,132 Consolidated Balance Sheet (Parenthetical) (USD $) Dec. 31, 2013 Dec. 31, 2012 In Millions, except Share data, unless otherwise specified Statement of Financial Position [Abstract] Allowance for doubtful accounts Accounts receivable classified in other assets Inventories classified in other assets Common stock, par value Common stock, shares authorized Common stock, shares issued Treasury stock, shares ' ' $146 $163 275 473 $1,704 $1,606 $0.50 $0.50 6,500,000,000 6,500,000,000 3,577,103,522 3,577,103,522 649,576,808 550,468,221 Consolidated Statement of Equity (USD $) In Millions, unless otherwise specified Beginning Balance at Dec. 31, 2010 Increase (Decrease) in Stockholders' Equity [Roll Forward] Net Income Attributable to Merck & Co., Inc. Total $56,805 ' ' Cash dividends declared on common stock Treasury stock shares purchased Supera joint venture formation Net income attributable to noncontrolling interests Net income attributable to noncontrolling interests Share-based compensation plans and other Ending Balance at Dec. 31, 2013 ' ' 84 ' ' ' ' -4,818 ' ' ' -1,921 ' ' ' ' ' 120 ' ' ' ' -120 -38 ' 40,663 ' ' ' ' ' ' -120 ' 1,655 ' 55,463 ' ' ' 131 ' Share-based compensation plans and other 38,990 -3,132 -3 2,426 ' ' 6,168 ' ' ' -1,550 ' ' ' ' -5,173 ' ' ' -2,591 ' ' ' ' ' 131 ' ' ' ' -120 -17 ' 40,646 ' 1,788 ' 4,404 ' ' -5,132 ' -6,516 ' 228 ' ' ' 113 ' -120 ' ' ' 2,485 ' ' 562 -23,792 ' ' 1,401 ' $52,326 $2,429 6,272 ' -5,173 ' -2,591 ' Net income attributable to noncontrolling interests ($22,433) ' -1,550 ' Treasury stock shares purchased Net income attributable to noncontrolling interests ($3,216) Noncontrolling Interest [Member] ' 1,788 ' Treasury Stock [Member] ' 6,168 ' Cash dividends declared on common stock Other comprehensive income (loss), net of taxes ' ' 521 ' 56,943 Other comprehensive income (loss), net of taxes Net Income Attributable to Merck & Co., Inc. ' $37,536 ' -120 ' Share-based compensation plans and other ' 120 ' Net income attributable to noncontrolling interests ' Accumulated Other Comprehensive Loss [Member] Retained Earnings [Member] $40,701 -4,818 ' -1,921 ' Treasury stock shares purchased Net income attributable to noncontrolling interests Ending Balance at Dec. 31, 2012 Increase (Decrease) in Stockholders' Equity [Roll Forward] $1,788 84 ' Cash dividends declared on common stock Net Income Attributable to Merck & Co., Inc. Other Paid-In Capital [Member] 6,272 ' Other comprehensive income (loss), net of taxes Ending Balance at Dec. 31, 2011 Increase (Decrease) in Stockholders' Equity [Roll Forward] Common Stock [Member] 39,985 -4,682 6 2,443 ' ' ' 4,404 ' ' ' 2,485 ' ' ' ' 116 ' -5,132 ' ' ' ' -6,516 ' ' 112 ' ' ' ' 113 ' $1,788 ' 1,666 -24,717 ' ' ' -120 -254 ' $40,508 ' ' $39,257 ($2,197) 1,642 ($29,591) 13 $2,561 12 Months Ended Consolidated Statement of Equity (Parenthetical) (USD $) Dec. 31, 2013 Dec. 31, 2012 Dec. 31, 2011 Statement of Stockholders' Equity [Abstract] Common stock, dividends declared ' ' $1.73 ' $1.69 $1.56 Consolidated Statement of Cash Flows (USD 12 Months Ended $) In Millions, unless otherwise specified Dec. 31, 2013 Dec. 31, 2012 Dec. 31, 2011 Cash Flows from Operating Activities ' ' ' Net income $4,517 $6,299 $6,392 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization Intangible asset impairment charges Gain on disposition of interest in equity method investment ' Cash Flows from Investing Activities Capital expenditures Purchases of securities and other investments 291 669 335 28 216 -1,537 369 323 ' ' 349 -482 -302 -717 -34 -1,747 -1,203 -1,168 -678 182 1,444 -277 -7 -262 11,654 10,022 12,383 ' ' ' -1,548 -1,954 -1,723 -17,991 -12,841 -7,325 16,298 7,783 6,149 0 0 175 -246 0 -373 46 0 323 350 -57 -3,148 Cash inflows (outflows) from net investment hedges Cash and Cash Equivalents at End of Year -136 -610 436 -365 522 -397 -1,421 -132 563 Dispositions of businesses, net of cash divested Cash and Cash Equivalents at Beginning of Year 0 -642 ' Acquisitions of businesses, net of cash acquired Net Increase (Decrease) in Cash and Cash Equivalents 7,427 705 237 -330 276 399 Proceeds from sale of interest in equity method investment Other Net Cash Used in Financing Activities Effect of Exchange Rate Changes on Cash and Cash Equivalents 6,978 200 0 -404 Proceeds from sales of securities and other investments Other Net Cash Used in Investing Activities Cash Flows from Financing Activities Net change in short-term borrowings Payments on debt Proceeds from issuance of debt Purchases of treasury stock Dividends paid to stockholders Other dividends paid Proceeds from exercise of stock options ' 6,988 765 Equity income from affiliates Dividends and distributions from equity affiliates Deferred income taxes Share-based compensation Other Net changes in assets and liabilities: Accounts receivable Inventories Trade accounts payable Accrued and other current liabilities Income taxes payable Noncurrent liabilities Other Net Cash Provided by Operating Activities ' 39 168 -6,805 -86 -30 -2,890 ' ' ' -159 -1,775 6,467 -6,516 -5,157 -120 624 -22 2,562 -2,591 -5,116 -120 1,076 -1,547 0 -1,921 -4,691 -120 1,210 60 -5,990 1,310 86 -3,267 321 -22 -6,904 -346 -30 42 2,170 -80 2,631 13,451 13,531 10,900 $15,621 $13,451 $13,531 12 Months Ended Dec. 31, 2013 Nature of Operations Organization, Consolidation and Presentation of Financial Statements [Abstract] Nature of Operations ' ' Nature of Operations vaccine products marketed either directly by the Company or through joint ventures. Human health pharmaceutical products consist of therapeutic and preventive agents, generally sold by prescription, for the treatment of human disorders. The Company sells these human health pharmaceutical products primarily to drug wholesalers and retailers, hospitals, government agencies and managed health care providers such as health maintenance organizations, pharmacy benefit managers and other institutions. Vaccine products consist of preventive pediatric, adolescent and adult vaccines, primarily administered at physician offices. The Company sells these human health vaccines primarily to physicians, wholesalers, physician distributors and government entities. The Company also has animal health operations that discover, develop, manufacture and market animal health products, including vaccines, which the Company sells to veterinarians, distributors and animal producers. Additionally, the Company has consumer care operations that develop, manufacture and market over-thecounter, foot care and sun care products, which are sold through wholesale and retail drug, food chain and mass merchandiser outlets, as well as club stores and specialty channels. 12 Months Ended Dec. 31, 2013 Summary of Accounting Policies Accounting Policies [Abstract] Summary of Accounting Policies ' ' Summary of Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of the Company and all of its subsidiaries in which a controlling interest is maintained. Intercompany balances and transactions are eliminated. Controlling interest is determined by majority ownership interest and the absence of substantive third-party participating rights or, in the case of variable interest entities, by majority exposure to expected losses, residual returns or both. For those consolidated subsidiaries where Merck ownership is less than 100%, the outside shareholders' interests are shown as Noncontrolling interests in equity. Investments in affiliates over which the Company has significant influence but not a controlling interest, such as interests in entities owned equally by the Company and a third party that are under shared control, are carried on the equity basis. assumed that arises from a contingency cannot be determined, the asset or liability is recognized if probable and reasonably estimable; if these criteria are not met, no asset or liability is recognized. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Accordingly, the Company may be required to value assets at fair value measures that do not reflect the Company's intended use of those assets. Any excess of the purchase price (consideration transferred) over the estimated fair values of net assets acquired is recorded as goodwill. Transaction costs and costs to restructure the acquired company are expensed as incurred. The operating results of the acquired business are reflected in the Company's consolidated financial statements after the date of the merger or acquisition. If the Company determines the assets acquired do not meet the definition of a business under the acquisition method of accounting, the transaction will be accounted for as an acquisition of assets rather than a business combination and, therefore, no goodwill will be recorded. Foreign Currency Translation The net assets of international subsidiaries where the local currencies have been determined to be the functional currencies are translated into U.S. dollars using current exchange rates. The U.S. dollar effects that arise from translating the net assets of these subsidiaries at changing rates are recorded in the foreign currency translation account, which is included in Accumulated other comprehensive income (loss) (\"AOCI\") and reflected as a separate component of equity. For those subsidiaries that operate in highly inflationary economies and for those subsidiaries where the U.S. dollar has been determined to be the functional currency, non-monetary foreign currency assets and liabilities are translated using historical rates, while monetary assets and liabilities are translated at current rates, with the U.S. dollar effects of rate changes included in Other (income) expense, net. Cash Equivalents Cash equivalents are comprised of certain highly liquid investments with original maturities of less than three months. Inventories Inventories are valued at the lower of cost or market. The cost of a substantial majority of domestic pharmaceutical and vaccine inventories is determined using the last-in, first-out (\"LIFO\") method for both financial reporting and tax purposes. The cost of all other inventories is determined using the first-in, first-out (\"FIFO\") method. Inventories consist of currently marketed products and certain products awaiting regulatory approval. In evaluating the recoverability of inventories produced in preparation for product launches, the Company considers the likelihood that revenue will be obtained from the future sale of the related inventory together with the status of the product within the regulatory approval process. substantially the full term of the assets or liabilities. Changes in fair value that are considered temporary are reported net of tax in Other Comprehensive Income (\"OCI\"). For declines in the fair value of equity securities that are considered other-than-temporary, impairment losses are charged to Other (income) expense, net. The Company considers available evidence in evaluating potential impairments of its investments, including the duration and extent to which fair value is less than cost and, for equity securities, the Company's ability and intent to hold the investments. For debt securities, an other-than-temporary impairment has occurred if the Company does not expect to recover the entire amortized cost basis of the debt security. If the Company does not intend to sell the impaired debt security, and it is not more likely than not it will be required to sell the debt security before the recovery of its amortized cost basis, the amount of the other-than-temporary impairment recognized in earnings, recorded in Other (income) expense, net, is limited to the portion attributed to credit loss. The remaining portion of the other-than-temporary impairment related to other factors is recognized in OCI. Realized gains and losses for both debt and equity securities are included in Other (income) expense, net. Revenue Recognition Revenues from sales of products are recognized at the time of delivery when title and risk of loss passes to the customer. Recognition of revenue also requires reasonable assurance of collection of sales proceeds and completion of all performance obligations. Domestically, sales discounts are issued to customers as direct discounts at the point-of-sale or indirectly through an intermediary wholesaler, known as chargebacks, or indirectly in the form of rebates. Additionally, sales are generally made with a limited right of return under certain conditions. Revenues are recorded net of provisions for sales discounts and returns, which are established at the time of sale. In addition, revenues are recorded net of time value of money discounts if collection of accounts receivable is expected to be in excess of one year. Accruals for chargebacks are reflected as a direct reduction to accounts receivable and accruals for rebates are recorded as current liabilities. The accrued balances relative to the provisions for chargebacks and rebates included in Accounts receivable and Accrued and other current liabilities were $87 million and $1.6 billion, respectively, at December 31, 2013 and $120 million and $1.8 billion, respectively, at December 31, 2012. The Company recognizes revenue from the sales of vaccines to the Federal government for placement into vaccine stockpiles in accordance with Securities and Exchange Commission (\"SEC\") Interpretation, Commission Guidance Regarding Accounting for Sales of Vaccines and BioTerror Countermeasures to the Federal Government for Placement into the Pediatric Vaccine Stockpile or the Strategic National Stockpile. Depreciation Depreciation is provided over the estimated useful lives of the assets, principally using the straightline method. For tax purposes, accelerated tax methods are used. The estimated useful lives primarily range from 10 to 50 years for Buildings, and from 3 to 15 years for Machinery, equipment and office furnishings. Depreciation expense was $2.2 billion in 2013, $2.0 billion in 2012 and $2.4 billion in 2011. Advertising and Promotion Costs Advertising and promotion costs are expensed as incurred. The Company recorded advertising and promotion expenses of $2.5 billion, $2.8 billion and $3.1 billion in 2013, 2012 and 2011, respectively. Software Capitalization The Company capitalizes certain costs incurred in connection with obtaining or developing internal-use software including external direct costs of material and services, and payroll costs for employees directly involved with the software development. Capitalized software costs are included in Property, plant and equipment and amortized beginning when the software project is substantially complete and the asset is ready for its intended use. Capitalized software costs associated with projects that are being amortized over 6 to 10 years (including the Company's ongoing multi-year implementation of an enterprise-wide resource planning system) were $529 million and $428 million, at December 31, 2013 and 2012, respectively. All other capitalized software costs are being amortized over periods ranging from 3 to 5 years. Costs incurred during the preliminary project stage and post-implementation stage, as well as maintenance and training costs, are expensed as incurred. Goodwill Goodwill represents the excess of the consideration transferred over the fair value of net assets of businesses purchased. Goodwill is assigned to reporting units and evaluated for impairment on at least an annual basis, or more frequently if impairment indicators exist, by first assessing qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company concludes it is more likely than not that the fair value of a reporting unit is less than its carrying amount, a quantitative fair value test is performed. Based upon the Company's most recent annual impairment test completed as of October 1, 2013, the Company concluded goodwill was not impaired. Acquired Intangibles Acquired intangibles include products and product rights, tradenames and patents, which are recorded at fair value, assigned an estimated useful life, and are amortized primarily on a straight-line basis over their estimated useful lives ranging from 3 to 40 years (see Note 7). The Company periodically evaluates whether current facts or circumstances indicate that the carrying values of its acquired intangibles may not be recoverable. If such circumstances are determined to exist, an estimate of the undiscounted future cash flows of these assets, or appropriate asset groupings, is compared to the carrying value to determine whether an impairment exists. If the asset is determined to be impaired, the loss is measured based on the difference between the carrying value of the intangible asset and its fair value, which is determined based on the net present value of estimated future cash flows. Development In-process research and development (\"IPR&D\") represents the fair value assigned to incomplete research projects that the Company acquires through business combinations which, at the time of acquisition, have not reached technological feasibility. The amounts are capitalized and are accounted for as indefinite-lived intangible assets, subject to impairment testing until completion or abandonment of the projects. Upon successful completion of each project, Merck will make a determination as to the then useful life of the intangible asset, generally determined by the period in which the substantial majority of the cash flows are expected to be generated, and begin amortization. The Company tests IPR&D for impairment at least annually, or more frequently if impairment indicators exist, by first assessing qualitative factors to determine whether it is more likely than not that the fair value of the IPR&D intangible asset is less than its carrying amount. If the Company concludes it is more likely than not that the fair value is less than the carrying amount, a quantitative test that compares the fair value of the IPR&D intangible asset with its carrying value is performed. If the fair value is less than the carrying amount, an impairment loss is recognized in operating results. Research and Development Research and development is expensed as incurred. Upfront and milestone payments due to third parties in connection with research and development collaborations prior to regulatory approval are expensed as incurred. Payments due to third parties upon or subsequent to regulatory approval are capitalized and amortized over the shorter of the remaining license or product patent life. Amounts due from collaborative partners related to development activities are generally reflected as a reduction of research and development expenses when the specific milestone has been achieved. Nonrefundable advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received rather than when the payment is made. Research and development expenses include restructuring costs and IPR&D impairment charges in all periods. Share-Based Compensation The Company expenses all share-based payments to employees over the requisite service period based on the grant-date fair value of the awards. Restructuring Costs The Company records liabilities for costs associated with exit or disposal activities in the period in which the liability is incurred. In accordance with existing benefit arrangements, employee termination costs are accrued when the restructuring actions are probable and estimable. When accruing these costs, the Company will recognize the amount within a range of costs that is the best estimate within the range. When no amount within the range is a better estimate than any other amount, the Company recognizes the minimum amount within the range. Costs for onetime termination benefits in which the employee is required to render service until termination in order to receive the benefits are recognized ratably over the future service period. Contingencies and Legal Defense Costs The Company records accruals for contingencies and legal defense costs expected to be incurred in connection with a loss contingency when it is probable that a liability has been incurred and the amount can be reasonably estimated. Taxes on Income Deferred taxes are recognized for the future tax effects of temporary differences between financial and income tax reporting based on enacted tax laws and rates. The Company evaluates tax positions to determine whether the benefits of tax positions are more likely than not of being sustained upon audit based on the technical merits of the tax position. For tax positions that are more likely than not of being sustained upon audit, the Company recognizes the largest amount of the benefit that is greater than 50% likely of being realized upon ultimate settlement in the financial statements. For tax positions that are not more likely than not of being sustained upon audit, the Company does not recognize any portion of the benefit in the financial statements. The Company recognizes interest and penalties associated with uncertain tax positions as a component of Taxes on income in the Consolidated Statement of Income. Use of Estimates The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States (\"GAAP\") and, accordingly, include certain amounts that are based on management's best estimates and judgments. Estimates are used when accounting for amounts recorded in connection with mergers and acquisitions, including initial fair value determinations of assets and liabilities, primarily IPR&D and other intangible assets, as well as subsequent fair value measurements. Additionally, estimates are used in determining such items as provisions for sales discounts and returns, depreciable and amortizable lives, recoverability of inventories, including those produced in preparation for product launches, amounts recorded for contingencies, environmental liabilities and other reserves, pension and other postretirement benefit plan assumptions, share-based compensation assumptions, restructuring costs, impairments of long-lived assets (including intangible assets and goodwill) and investments, and taxes on income. Because of the uncertainty inherent in such estimates, actual results may differ from these estimates. Reclassifications Certain reclassifications have been made to prior year amounts to conform to the current year presentation. Recently Adopted Accounting Standards In the first quarter of 2013, the Company adopted guidance issued by the Financial Accounting Standards Board (the \"FASB\") that simplifies how an entity tests indefinitelived intangibles for impairment. The amended guidance allows companies to first assess qualitative factors to determine whether it is more-likelythan-not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test. The adoption of this guidance had no impact on the Company's financial position and results of operations. 12 Months Ended Dec. 31, 2013 Restructuring Restructuring and Related Activities [Abstract] Restructuring ' ' Restructuring 2013 Restructuring Program In October 2013, the Company announced a new global restructuring program (the \"2013 Restructuring Program\") as part of a global initiative to sharpen its commercial and research and development focus. As part of the new program, the Company expects to reduce workforce reductions will primarily come from the elimination of positions in sales, administrative and headquarters organizations, as well as research and development. The Company will also reduce its global real estate footprint and continue to improve the efficiency continue to hire employees in strategic growth areas of the business as necessary. The Company recorded total pretax costs of $1.2 billion in 2013 related to this restructuring program. The actions under the 2013 Restructuring Program are expected to be substantially completed by the end of 2015 with the cumulative pretax costs estimated to be appro that approximately two-thirds of the cumulative pretax costs will result in cash outlays, primarily related to employee separation expense. Approximately one-third of the cumulative pretax costs are non-cash, relating primarily to the accelerated depreciation of facilities to b Merger Restructuring Program In 2010, subsequent to the Merck and Schering-Plough Corporation (\"Schering-Plough\") merger (the \"Merger\"), the Company commenced actions under a global restructuring program (the \"Merger Restructuring Program\") designed to streamline the cost structure of the c initiated in 2011. The actions under this program primarily reflect the elimination of positions in sales, administrative and headquarters organizations, as well as from the sale or closure of certain manufacturing and research and development sites and the consolidation of offi On October 1, 2013, the Company sold its active pharmaceutical ingredient (\"API\") manufacturing business, including the related manufacturing facility, in the Netherlands to Aspen Holdings (\"Aspen\") as part of planned manufacturing facility rationalizations under the Mer parties entered into a strategic long-term supply agreement whereby Aspen will supply API to the Company and approximately 960 employees who support the API business were transferred from Merck to Aspen. Also in connection with the sale, Aspen acquired certain effective December 31, 2013. Consideration for the transaction included cash of $705 million and notes receivable with a present value of $198 million at the time of disposition. The notes receivable consist of a $261 million note with a present value of $138 million due i million that is payable over five years beginning on December 31, 2014. Of the cash portion of the consideration, the Company received $172 million in the fourth quarter of 2013. The remaining $533 million was received by the Company in January 2014; therefore, at De within Deferred income taxes and other current assets on the Consolidated Balance Sheet. In conjunction with this transaction, the Company transferred inventory of $420 million, property, plant and equipment of $220 million and cash of $125 million to Aspen, reduced go and other assets by $23 million and recorded $90 million of transaction-related liabilities. This transaction resulted in a loss of $65 million that was recorded within Restructuring costs in 2013. The Company recorded total pretax costs of $1.1 billion in 2013, $951 million in 2012 and $1.8 billion in 2011 related to this restructuring program. Since inception of the Merger Restructuring Program through December 31, 2013, Merck has recorded total pretax accu approximately 26,880 positions comprised of employee separations, as well as the elimination of contractors and vacant positions. Approximately 6,300 position eliminations remain pending under this program as of December 31, 2013, which include the remaining action reported as part of the Merger Restructuring Program as discussed below. The restructuring actions under the Merger Restructuring Program were substantially completed by the end of 2013, with the exception of certain actions, principally manufacturing-related. Subseque manufacturing sites worldwide. The remaining actions under this program will result in additional manufacturing facility rationalizations, which are expected to be substantially completed by 2016. The Company expects the estimated total cumulative pretax costs for this Company estimates that approximately two-thirds of the cumulative pretax costs relate to cash outlays, primarily related to employee separation expense. Approximately one-third of the cumulative pretax costs are non-cash, relating primarily to the accelerated depreciation 2008 Restructuring Program In October 2008, Merck announced a global restructuring program (the \"2008 Restructuring Program\") to reduce its cost structure, increase efficiency, and enhance competitiveness. Pretax costs of $54 million, $48 million and $45 million were recorded in 2013, 2012 Program. Since inception of the 2008 Restructuring Program through June 30, 2013, Merck has recorded total pretax accumulated costs of $1.7 billion and eliminated approximately 6,460 positions comprised of employee separations and the elimination of contractors substantially completed in 2011, with the exception of certain manufacturing-related actions, which are expected to be completed by 2015. As of July 1, 2013, the remaining accrued liability for future separations under the 2008 Restructuring Program was transferred to the under the 2008 Restructuring Program are now being accounted for as part of the Merger Restructuring Program. For segment reporting, restructuring charges are unallocated expenses. The following table summarizes the charges related to restructuring program activities by type of cost: Separation Costs Year Ended December 31, 2013 2013 Restructuring Program Accelerated Depreciation Other Materials and production $ $ 186 $ 7 Marketing and administrative 72 3 76 (1 ) 866 32 866 334 41 151 98 63 3 27 (1 ) 481 284 481 241 384 Research and development Restructuring costs Merger Restructuring Program Materials and production Marketing and administrative Research and development Restructuring costs 2008 Restructuring Program Materials and production (2 ) 6 4 34 12 34 2 18 Marketing and administrative Restructuring costs $ 1,381 $ 577 $ 443 $ $ 92 $ 70 Year Ended December 31, 2012 Merger Restructuring Program Materials and production Marketing and administrative 75 6 53 4 497 154 497 220 234 Research and development Restructuring costs 2008 Restructuring Program Materials and production 7 19 8 1 (8 ) 21 (8 ) 15 41 Marketing and administrative Restructuring costs $ 489 $ 235 $ 275 $ $ 282 $ 17 Year Ended December 31, 2011 Merger Restructuring Program Materials and production Marketing and administrative 108 11 151 (17 ) 1,117 177 1,117 541 188 24 5 4 (6 ) 18 (6 ) 28 23 Research and development Restructuring costs 2008 Restructuring Program Materials and production Research and development Restructuring costs $ 1,111 $ 569 $ 211 Separation costs are associated with actual headcount reductions, as well as those headcount reductions which were probable and could be reasonably estimated. In 2013, approximately 1,540 positions were eliminated under the 2013 Restructuring Program. Position approximately 4,475 in 2013, 3,975 in 2012 and 6,880 in 2011 and positions eliminated under the 2008 Restructuring Program were approximately 55 in 2013, 155 in 2012 and 450 in 2011. These position eliminations were comprised of actual headcount reductions and the Accelerated depreciation costs primarily relate to manufacturing, research and administrative facilities and equipment to be sold or closed as part of the programs. Accelerated depreciation costs represent the difference between the depreciation expense to be recogn anticipated date the site will be closed or divested, and depreciation expense as determined utilizing the useful life prior to the restructuring actions. All of the sites have and will continue to operate up through the respective closure dates and, since future undiscounte values, Merck was required to accelerate depreciation of the site assets rather than record an impairment charge. Anticipated site closure dates, particularly related to manufacturing locations, have been and may continue to be adjusted to reflect changes resulting from reg Other activity in 2013, 2012 and 2011 includes $259 million, $155 million and $72 million, respectively, of asset abandonment, shut-down and other related costs. Additionally, other activity includes certain employee-related costs associated with pension and other p compensation. Other activity also reflects net pretax (losses) gains resulting from sales of facilities and related assets of $(64) million in 2013 (primarily reflecting the loss on the transaction with Aspen discussed above), $28 million in 2012 and $10 million in 2011. Adjustments to the recorded amounts were not material in any period. The following table summarizes the charges and spending relating to restructuring activities by program: Separation Accelerated Costs Depreciation Other 2013 Restructuring Program Restructuring reserves January 1, 2013 $ $ $ Expenses 866 334 41 9 (Payments) receipts, net (121 ) Non-cash activity Restructuring reserves December 31, 2013 (1) (334 ) (27 ) $ 745 $ $ 23 $ 1,144 $ $ 51 Merger Restructuring Program Restructuring reserves January 1, 2012 Expenses 497 220 234 (Payments) receipts, net (942 ) (170 ) Non-cash activity (220 ) (96 ) Restructuring reserves December 31, 2012 699 19 481 241 384 Expenses (Payments) receipts, net (517 ) (258 ) Non-cash activity 62 Restructuring reserves December 31, 2013 (1) 2008 Restructuring Program $ 725 (241 ) $ (133 ) $ 12 Restructuring reserves January 1, 2012 $ 126 $ $ Expenses (8 ) 15 41 (41 ) (21 ) (15 ) (20 ) 77 34 2 18 (49 ) (11 ) (62 ) (2 ) (Payments) receipts, net Non-cash activity Restructuring reserves December 31, 2012 Expenses (Payments) receipts, net Non-cash activity Restructuring reserves December 31, 2013 (1) $ $ (7 ) $ The cash outlays associated with the 2013 Restructuring Program are expected to be substantially completed by the end of 2015. The cash outlays associated with the Merger Restructuring Program were substantially completed by the end of 2013 with the exception of certain actions, principally manufacturingrelated, which are expected to be substantially completed by 2016. Legacy Schering-Plough Program Prior to the Merger, Schering-Plough commenced a Productivity Transformation Program which was designed to reduce and avoid costs and increase productivity. During 2011, the Company recorded $20 million of accelerated depreciation costs included in complete at the end of 2011. expects to reduce its total workforce by approximately 8,500 positions. These ove the efficiency of its manufacturing and supply network. The Company will mated to be approximately $2.5 billion to $3.0 billion. The Company estimates on of facilities to be closed or divested. structure of the combined company. Further actions under this program were consolidation of office facilities. ons under the Merger Restructuring Program. In conjunction with the sale, the n acquired certain branded products from Merck, which transferred to Aspen $138 million due in 2023 and a $67.5 million note with a present value of $60 4; therefore, at December 31, 2013, this amount was recorded as a receivable Aspen, reduced goodwill by $45 million, other intangible assets by $45 million d total pretax accumulated costs of approximately $7.2 billion and eliminated e remaining actions under the 2008 Restructuring Program that are now being related. Subsequent to the Merger, the Company has rationalized a number of tax costs for this program to be approximately $7.4 billion to $7.7 billion. The rated depreciation of facilities to be closed or divested. ded in 2013, 2012 and 2011, respectively, related to the 2008 Restructuring on of contractors and vacant positions. The 2008 Restructuring Program was transferred to the Merger Restructuring Program and any remaining activities Total $ 193 75 75 898 1,241 249 66 26 765 1,106 4 4 46 54 $ 2,401 $ 162 81 57 651 951 26 9 13 48 $ 999 $ 299 119 134 1,294 1,846 29 4 12 45 $ 1,891 Program. Positions eliminated under the Merger Restructuring Program were eductions and the elimination of contractors and vacant positions. ense to be recognized over the revised useful life of the site, based upon the uture undiscounted cash flows were sufficient to recover the respective book resulting from regulatory or other factors. ension and other postretirement benefit plans (see Note 13) and share-based n 2011. Total $ 1,241 (112 ) (361 ) $ 768 $ 1,195 951 (1,112 ) (316 ) 718 1,106 (775 ) (312 ) $ 737 $ 126 48 (62 ) (35 ) 77 54 (60 ) (71 ) $ ed in Materials and production costs for this program which was substantially Acquisitions, Divestitures, Research Collaborations and License Agreements Acquisitions, Divestitures, Research Collaborations and License Agreements Business Combinations [Abstract] Acquisitions Divestitures Research Collaborations And License Agreements 12 Months Ended Dec. 31, 2013 ' ' Acquisitions, Divestitures, Research Collaborations and License Agreements The Company continues its strategy of establishing external alliances to complement its substantial internal research capabilities, including research collaborations, licensing preclinical and clinical compounds and technology platforms to drive both near- and longterm growth. The Company supplements its internal research with a licensing and external alliance strategy focused on the entire spectrum of collaborations from early research to late-stage compounds. These arrangements often include upfront payments and royalty or profit share payments, contingent upon the occurrence of certain future events linked to the success of the asset in development, as well as expense reimbursements or payments to the third party. In September 2013, Merck and AstraZeneca announced a worldwide out-licensing agreement for Merck's oral small molecule inhibitor of WEE1 kinase (MK-1775). MK-1775 is currently being evaluated in Phase 2a clinical studies in combination with standard-ofcare therapies for the treatment of patients with certain types of ovarian cancer. Under the terms of the agreement, AstraZeneca paid Merck a $50 million upfront fee, which the Company recorded as revenue. In addition, Merck will be eligible to receive future payments tied to development and regulatory milestones, plus sales-related payments and tiered royalties. AstraZeneca will be responsible for all future clinical development, manufacturing and marketing. ertugliflozin and ertugliflozin-containing fixed-dose combinations with metformin and with Januvia (sitagliptin) tablets. Merck will continue to retain the rights to its existing portfolio of sitagliptincontaining products. Through the end of 2013, Merck recorded research and development expenses of $125 million for upfront and milestone payments made to Pfizer. Pfizer will be eligible for additional payments associated with the achievement of pre-specified future clinical, regulatory and commercial milestones. The companies will share potential revenues and certain costs 60% to Merck and 40% to Pfizer. Each party will have certain manufacturing and supply obligations. The Company and Pfizer each have the right to terminate the agreement due to a material, uncured breach by, or insolvency of, the other party, or in the event of a safety issue. Pfizer has the right to terminate the agreement upon 12 months notice at any time following the first anniversary of the first commercial sale of a collaboration product, but must assign all rights to ertugliflozin to Merck. Upon termination of the agreement, depending upon the circumstances, the parties have varying rights and obligations with respect to the continued development and commercialization of ertugliflozin and certain payment obligations. Brazilian pharmaceutical company coowned by Cristlia and Eurofarma, established the previously announced joint venture that markets, distributes and sells a portfolio of pharmaceutical and branded generic products from Merck, Cristlia and Eurofarma in Brazil. Merck owns 51% of the joint venture, and Cristlia and Eurofarma collectively own 49%. The transaction was accounted for as an acquisition of a business; accordingly, the assets acquired and liabilities assumed were recorded at their respective fair values. This resulted in Merck recognizing intangible assets for currently marketed products of $89 million, IPR&D of $100 million, goodwill of $103 million, and deferred tax liabilities of $64 million. The Company also recorded increases to Noncontrolling interests and Other paid-in capital in the amounts of $112 million and $116 million, respectively. This transaction closed on February 1, 2013, and accordingly, the results of operations of the acquired business have been included in the Company's results of operations beginning after that date. During the fourth quarter of 2013, as a result of changes in cash flows assumptions for certain compounds, the Company recorded $15 million of impairment charges related to the IPR&D recorded in the Supera transaction. the event of a material uncured breach or insolvency. The agreement may be terminated by Merck at any time in the event that any of the compounds licensed from AiCuris develop an adverse safety profile or any material adverse issue arises related to the development, efficacy or dosing regimen of any of the compounds, and/or in the event that certain patents are invalid and/or unenforceable in certain jurisdictions. Merck (i) may terminate the agreement with respect to certain compounds after successful completion of the first proof of concept clinical trial or (ii) must terminate the agreement with respect to certain compounds if Merck fails to minimally invest in such compounds. In addition, Merck may terminate the agreement as a whole at any time upon six months prior written notice at any time after completion of the first Phase 3 clinical trial for a compound. AiCuris may terminate the agreement in the event that Merck challenges any AiCuris patent covering the compounds licensed from AiCuris. Upon termination of the agreement, depending upon the circumstances, the parties have varying rights and obligations with respect to the continued development and commercialization of compounds and, in the case of termination for cause by Merck, certain royalty obligations. indications. In addition, if vintafolide receives regulatory approval, Merck and Endocyte will share equally profits and losses in the United States. Endocyte will receive a royalty on sales of the product in the rest of the world. Endocyte has retained the right to copromote vintafolide with Merck in the United States and Merck has the exclusive right to promote vintafolide in the rest of world. Endocyte will be responsible for the majority of funding and completion of the PROCEED trial. Merck will be responsible for all other development activities and development costs and have all decision rights for vintafolide. Merck has the right to terminate the agreement on 90 days notice. Merck and Endocyte both have the right to terminate the agreement due to the material breach or insolvency of the other party. Endocyte has the right to terminate the agreement in the event that Merck challenges an Endocyte patent right relating to vintafolide. Upon termination of the agreement, depending upon the circumstances, the parties have varying rights and obligations with respect to the continued development and commercialization of vintafolide and, in the case of termination for cause by Merck, certain royalty obligations and U.S. profit and loss sharing. In May 2011, Merck completed the acquisition of Inspire Pharmaceuticals, Inc. (\"Inspire\"), a specialty pharmaceutical company focused on developing and commercializing ophthalmic products. Under the terms of the merger agreement, Merck acquired all outstanding shares of common stock of Inspire at a price of $5.00 per share in cash for a total of approximately $420 million. The transaction was accounted for as an acquisition of a business; accordingly, the assets acquired and liabilities assumed were recorded at their respective fair values as of the acquisition date. The determination of fair value requires management to make significant estimates and assumptions. In connection with the acquisition, substantially all of the purchase price was allocated to Inspire's product and product right intangible assets and related deferred tax liabilities, a deferred tax asset relating to Inspire's net operating loss carryforwards, and goodwill. In November 2013, Merck sold the U.S. rights to certain ophthalmic products to Akorn, Inc., including AzaSite which was acquired from Inspire in this transaction. In March 2011, the Company sold the Merck BioManufacturing Network, a provider of contract manufacturing and development services for the biopharmaceutical industry and wholly owned by Merck, to Fujifilm Corporation (\"Fujifilm\"). Under the terms of the agreement, Fujifilm purchased all of the equity interests in two Merck subsidiaries which together owned all of the assets of the Merck BioManufacturing Network comprising facilities located in Research Triangle Park, North Carolina and Billingham, United Kingdom. As part of the agreement with Fujifilm, Merck committed to purchase certain development and manufacturing services at fair value from Fujifilm over a three-year period following the closing of the transaction. The transaction resulted in a gain of $127 million in 2011 reflected in Other (income) expense, net. Remicade/Simponi regarding the development, commercialization and distribution of both Remicade and Simponi, extending the Company's rights to exclusively market Remicade to match the duration of the Company's exclusive marketing rights for Simponi. In addition, Schering-Plough and Centocor agreed to share certain development costs relating to Simponi's auto-injector delivery system. On October 6, 2009, the European Commission approved Simponi as a treatment for rheumatoid arthritis and other immune system disorders in two presentations a novel auto-injector and a prefilled syringe. As a result, the Company's marketing rights for both products extend for 15 years from the first commercial sale of Simponi in the European Union (the \"EU\") following the receipt of pricing and reimbursement approval within the EU. All profits derived from Merck's exclusive distribution of the two products are equally divided between Merck and J&J. In April 2011, in connection with an agreement between Merck and J&J to amend the agreement governing the distribution rights to Remicade and Simponi, J&J received a one-time payment from Merck of $500 million, which the Company recorded as a charge to Other (income) expense, net in 2011. Financial Instruments Derivative Instruments and Hedging Activities Disclosure [Abstract] Financial Instruments ' ' Financial Instruments Derivative Instruments and Hedging Activities The Company manages the impact of foreign exchange rate movements and interest rate movements on its earnings, cash flows and fair values of assets and liabilities through operational means and through the use of various financial instruments, including derivative inst A significant portion of the Company's revenues and earnings in foreign affiliates is exposed to changes in foreign exchange rates. The objectives and accounting related to the Company's foreign currency risk management program, as well as its interest rate risk manageme Foreign Currency Risk Management The Company has established revenue hedging, balance sheet risk management and net investment hedging programs to protect against volatility of future foreign currency cash flows and changes in fair value caused by volatility in foreign exchange rates. The objective of the revenue hedging program is to reduce the potential for longer-term unfavorable changes in foreign exchange rates to decrease the U.S. dollar value of future cash flows derived from foreign currency denominated sales, primarily the euro and Japanese sales. The portion of sales hedged is based on assessments of cost-benefit profiles that consider natural offsetting exposures, revenue and exchange rate volatilities and correlations, and the cost of hedging instruments. The hedged anticipated sales are a specified compon total changes in the options' cash flows offset the decline in the expected future U.S. dollar equivalent cash flows of the hedged foreign currency sales. Conversely, if the U.S. dollar weakens, the options' value reduces to zero, but the Company benefits from the increase in t In connection with the Company's revenue hedging program, a purchased collar option strategy may be utilized. With a purchased collar option strategy, the Company writes a local currency call option and purchases a local currency put option. As compared to a purchased at the strike level of the written call. If the U.S. dollar strengthens relative to the currency of the hedged anticipated sales, the written call option value of the collar strategy reduces to zero and the changes in the purchased put cash flows of the collar strategy would offset th The Company may also utilize forward contracts in its revenue hedging program. If the U.S. dollar strengthens relative to the currency of the hedged anticipated sales, the increase in the fair value of the forward contracts offsets the decrease in the expected future U.S. dolla The fair values of these derivative contracts are recorded as either assets (gain positions) or liabilities (loss positions) in the Consolidated Balance Sheet. Changes in the fair value of derivative contracts are recorded each period in either current earnings or OCI, depending flow hedges, but serve as economic hedges of forecasted sales, unrealized gains or losses are recorded in Sales each period. The cash flows from both designated and non-designated contracts are reported as operating activities in the Consolidated Statement of Cash Flows The primary objective of the balance sheet risk management program is to mitigate the exposure of foreign currency denominated net monetary assets of foreign subsidiaries where the U.S. dollar is the functional currency from the effects of volatility in foreign exchange currencies, the Company will enter into forward a currencyto partially offset the effects of exchange on exposures when remeasured at spot ratesto do so based on a cost-benefitdate with that effects of changes in spotof the exposure,in Other (income) expense, net Monetary assets and liabilities denominated in contracts other than the functional currency of a given subsidiary are it is deemed economical in effect on the balance sheet analysis the considers the magnitude rates reported the volatility of the exchange rate and th inception of less than one year. exchange contracts to hedge its net investment in foreign operations against movements in exchange rates. The forward contracts are designated as hedges of the net investment in a foreign operation. The Company hedges a portion of the The Company also uses forward Cash Flows. Foreign exchange risk is also managed through the use of foreign currency debt. The Company's senior unsecured euro-denominated notes have been designated as, and are effective as, economic hedges of the net investment in a foreign operation. Accordingly, foreign cur Interest Rate Risk Management The Company may use interest rate swap contracts on certain investing and borrowing transactions to manage its net exposure to of fixed-rate notes in which reduce its overall cost of borrowing. The of the hedged not use leveraged swaps and, swaps maturing in leverag During 2013, the Company entered into 15 pay-floating, receive-fixed interest rate swap contracts designated as fair value hedgesinterest rate changes and to the notional amounts match the amount Company does fixed-rate notes. There are fourin general, does not2016 w effectively convert the Company's 6.00% fixed-rate notes due in 2017 to floating-rate instruments; and three swaps maturing in 2019, two with notional amounts of $200 million each, and one with a notional amount of $150 million, that effectively convert a portion of the Compan the Consolidated Statement of Cash Flows. There were no interest rate swaps outstanding as of December 31, 2012. During 2011, the Company terminated pay-floating, receive-fixed interest rate swap contracts designated as fair value hedges of fixed-rate notes in which the notional amounts match the amount of th terminated interest rate swap contracts was deferred and is being amortized as a reduction of interest expense over the respective term of the notes. The cash flows from these contracts are reported as operating activities in the Consolidated Statement of Cash Flows. Presented in the table below is the fair value of derivatives on a gross basis segregated between those derivatives that are designated as hedging instruments and those that are not designated as hedging instruments as of December 31: 2013 Fair Value of Derivative Balance Sheet Caption Asset Liability Derivatives Designated as Hedging Instruments Interest rate swap contracts (non-current) Other assets $ 13 $ Interest rate swap contracts (non-current) Other noncurrent liabilities 25 Deferred income taxes and other current assets 493 Other assets 515 19 Foreign exchange contracts (current) Foreign exchange contracts (non-current) Foreign exchange contracts (current) Accrued and other current liabilities $ 1,021 $ 44 $ 69 $ Derivatives Not Designated as Hedging Instruments Foreign exchange contracts (current) Deferred income taxes and other current assets Foreign exchange contracts (non-current) Other assets Accrued and other current liabilities 140 Foreign exchange contracts (current) $ 69 $ 140 $ 1,090 $ 184 As noted above, the Company records its derivatives on a gross basis in the Consolidated Balance Sheet. The Company has master netting agreements with several of its financial institution counterparties (see Concentrations of Credit Risk below). The following table provid 2013 Asset Gross amounts recognized in the consolidated balance sheet $ 1,090 Gross amount subject to offset in master netting arrangements not offset in the consolidated balance sheet $ 291 $ (147 ) (652 ) $ Asse 184 (147 ) Cash collateral (received) posted Net amounts Liability $ 37 $ The table below provides information on the location and pretax gain or loss amounts for derivatives that are: (i) designated in a fair value hedging relationship, (ii) designated in a foreign currency cash flow hedging relationship, (iii) designated in a foreign currency net inve Years Ended December 31 2013 2012 201 Derivatives designated in a fair value hedging relationship Interest rate swap contracts Amount of loss (gain) recognized in Other (income) expense, net on derivatives (1) $ 12 Amount of (gain) loss recognized in Other (income) expense, net on hedged item (1) $ (14 ) 45 $ 50 Derivatives designated in foreign currency cash flow hedging relationships Foreign exchange contracts Amount of loss reclassified from AOCI to Sales Amount of (gain) loss recognized in OCI on derivatives (306 ) 204 Derivatives designated in foreign currency net investment hedging relationships Foreign exchange contracts Amount of gain recognized in Other (income) expense, net on derivatives (2) (10 ) (363 ) (208 ) 183 382 8 Amount of (gain) loss recognized in OCI on derivatives (20 ) 30 Derivatives not designated in a hedging relationship Foreign exchange contracts Amount of loss (gain) recognized in Other (income) expense, net on derivatives (3) Amount of loss recognized in Sales (1) There was $2 million of ineffectiveness on the hedge during 2013. (2) There was no ineffectiveness on the hedge. Represents the amount excluded from hedge effectiveness testing. (3) These derivative contracts mitigate changes in the value of remeasured foreign currency denominated monetary assets and liabilities attributable to changes in foreign currency exchange rates. At December 31, 2013, the Company estimates $66 million of pretax net unrealized gains on derivatives maturing within the next 12 months that hedge foreign currency denominated sales over that same period will be reclassified from AOCI to Sales. The amount ultimately Investments in Debt and Equity Securities Information on available-for-sale investments at December 31 is as follows: 2013 Fair Value Amortized Cost Gain Corporate notes and bonds $ 7,054 $ 7,037 $ Asset-backed securities 1,300 1,303 1,236 1,239 1,206 1,206 476 479 125 126 471 397 U.S. government and agency securities Commercial paper Mortgage-backed securities Foreign government bonds Equity securities $ 11,868 $ 11,787 $ Available-for-sale debt securities included in Short-term investments totaled $1.9 billion at December 31, 2013. Of the remaining debt securities, $8.8 billion mature within five years. At December 31, 2013 and 2012, there were no debt securities pledged as collateral. Fair Value Measurements Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Level 1 Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 Unobservable inputs that are supported by little or no market activity. Level 3 assets are those whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques with significant unobservable inputs, as well as instrumen If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis Financial assets and liabilities measured at fair value on a recurring basis at December 31 are summarized below: Fair Value Measurements Using Quoted Prices In Active Observable Identical Assets Other Markets for Significant Inputs (Level 1) Signifi (Level 2) Unobser Inpu (Leve 2013 Assets Investments Corporate notes and bonds $ Asset-backed securities (1) U.S. government and agency securities $ 7,054 1,300 1,236 1,206 476 125 238 238 11,397 186 47 868 209 13 $ 1,090 Commercial paper Mortgage-backed securities Foreign government bonds (1) Equity securities Other assets Securities held for employee compensation Derivative assets (2) Purchased currency options Forward exchange contracts Interest rate swaps Total assets $ 424 $ 12,534 $ $ $ 134 $ Liabilities Derivative liabilities (2) Forward exchange contracts Written currency options 25 25 Interest rate swaps Total liabilities $ (1) $ 184 $ Primarily all of the asset-backed securities are highly-rated (Standard & Poor's rating of AAA and Moody's Investors Service rating of Aaa), secured primarily by credit card, auto loan, and home equity receivables, with weighted-average lives of primarily 5 years or less. Mortgage-backed securities represent AAA-rated securities issued or unconditionally guaranteed as to payment of principal and interest by U.S. government agencies. (2) The fair value determination of derivatives includes the impact of the credit risk of counterparties to the derivatives and the Company's own credit risk, the effects of which were not significant. There were no transfers between Level 1 and Level 2 during 2013. As of December 31, 2013, Cash and cash equivalents of $15.6 billion included $14.7 billion of cash equivalents (considered Level 2 in the fair value hierarchy). The Company has liabilities related to contingen Other Fair Value Measurements Some of the Company's financial inst