Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

**

		Page
Consolidated Statement of Earnings			50
Consolidated Statement of Comprehensive Income			51
Consolidated Statement of Cash Flows			52
Consolidated Balance Sheet			53
Consolidated Statement of Shareholders' Investment			55
Notes to Consolidated Financial Statements			56
Management Report on Internal Control Over Financial Reporting			95
Report of Independent Registered Public Accounting Firm			96
Report of Independent Registered Public Accounting Firm			97

** Abbott Laboratories and Subsidiaries

Consolidated Statement of Earnings (in millions except per share data) **

		Year Ended December 31
		2018			2017			2016
Net Sales		$	30,578		$	27,390		$	20,853
​	​	​	​	​	​	​	​	​	​	​
Cost of products sold, excluding amortization of intangible assets			12,706			12,409			9,094
Amortization of intangible assets			2,178			1,975			550
Research and development			2,300			2,260			1,447
Selling, general and administrative			9,744			9,182			6,736
​	​	​	​	​	​	​	​	​	​	​
Total Operating Cost and Expenses			26,928			25,826			17,827
​	​	​	​	​	​	​	​	​	​	​
Operating Earnings			3,650			1,564			3,026
Interest expense			826			904			431
Interest income			(105	)		(124	)		(99	)
Net foreign exchange (gain) loss			28			(34	)		495
Debt extinguishment costs			167			—			—
Other (income) expense, net			(139	)		(1,413	)		786
​	​	​	​	​	​	​	​	​	​	​
Earnings from Continuing Operations Before Taxes			2,873			2,231			1,413
Taxes on Earnings from Continuing Operations			539			1,878			350
​	​	​	​	​	​	​	​	​	​	​
Earnings from Continuing Operations			2,334			353			1,063
Earnings from Discontinued Operations, net of taxes			34			124			321
Gain on sale of Discontinued Operations, net of taxes			—			—			16
​	​	​	​	​	​	​	​	​	​	​
Net Earnings from Discontinued Operations, net of taxes			34			124			337
​	​	​	​	​	​	​	​	​	​	​
Net Earnings		$	2,368		$	477		$	1,400
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​
Basic Earnings Per Common Share —
Continuing Operations		$	1.32		$	0.20		$	0.71
Discontinued Operations			0.02			0.07			0.23
Net Earnings		$	1.34		$	0.27		$	0.94
Diluted Earnings Per Common Share —
Continuing Operations		$	1.31		$	0.20		$	0.71
Discontinued Operations			0.02			0.07			0.23
Net Earnings		$	1.33		$	0.27		$	0.94
Average Number of Common Shares Outstanding Used for Basic Earnings Per Common Share			1,758			1,740			1,477
Dilutive Common Stock Options			12			9			6
​	​	​	​	​	​	​	​	​	​	​
Average Number of Common Shares Outstanding Plus Dilutive Common Stock Options			1,770			1,749			1,483
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​
Outstanding Common Stock Options Having No Dilutive Effect			—			—			5
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​	​	​	​	​	​	​	​	​	​	​

The accompanying notes to consolidated financial statements are an integral part of this statement.

** Abbott Laboratories and Subsidiaries

Consolidated Statement of Comprehensive Income (in millions) **

		Year Ended December 31
		2018			2017			2016
Net Earnings		$	2,368		$	477		$	1,400
​	​	​	​	​	​	​	​	​	​	​
Foreign currency translation gain (loss) adjustments			(1,460	)		1,365			(130	)
Net actuarial gains (losses) and prior service cost and credits and amortization of net actuarial losses and prior service cost and credits, net of taxes of $47 in 2018, $(61) in 2017 and $(125) in 2016			132			(243	)		(326	)
Unrealized gains (losses) on marketable equity securities, net of taxes of $(76) in 2017 and $(28) in 2016			—			64			(134	)
Net gains (losses) on derivative instruments designated as cash flow hedges, net of taxes of $50 in 2018, $(43) in 2017 and $(4) in 2016			136			(134	)		(15	)
​	​	​	​	​	​	​	​	​	​	​
Other Comprehensive Income (Loss)			(1,192	)		1,052			(605	)
​	​	​	​	​	​	​	​	​	​	​
Comprehensive Income		$	1,176		$	1,529		$	795
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​
Supplemental Accumulated Other Comprehensive Income (Loss) Information, net of tax as of December 31:
Cumulative foreign currency translation (loss) adjustments		$	(4,912	)	$	(3,452	)	$	(4,959	)
Net actuarial (losses) and prior service (cost) and credits			(2,726	)		(2,521	)		(2,284	)
Cumulative unrealized gains (losses) on marketable equity securities			—			(5	)		(69	)
Cumulative gains (losses) on derivative instruments designated as cash flow hedges			52			(84	)		49
​	​	​	​	​	​	​	​	​	​	​
Accumulated other comprehensive income (loss)		$	(7,586	)	$	(6,062	)	$	(7,263	)
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​
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The accompanying notes to consolidated financial statements are an integral part of this statement.

** Abbott Laboratories and Subsidiaries

Consolidated Statement of Cash Flows (in millions) **

		Year Ended December 31
		2018			2017			2016
Cash Flow From (Used in) Operating activities:
Net earnings		$	2,368		$	477		$	1,400
Adjustments to reconcile earnings to net cash from operating activities —
Depreciation			1,100			1,046			803
Amortization of intangible assets			2,178			1,975			550
Share-based compensation			477			406			310
Impact of currency devaluation			—			—			480
Amortization of inventory step-up			32			907			—
Investing and financing losses, net			126			47			86
Loss on extinguishment of debt			167			—			—
Amortization of bridge financing fees			—			5			165
Gains on sale of businesses			—			(1,163	)		(25	)
Mylan N.V. equity investment adjustment			—			—			947
Gain on sale of Mylan N.V. shares			—			(45	)		—
Trade receivables			(190	)		(207	)		(177	)
Inventories			(514	)		249			(98	)
Prepaid expenses and other assets			23			109			113
Trade accounts payable and other liabilities			747			615			(652	)
Income taxes			(214	)		1,149			(699	)
​	​	​	​	​	​	​	​	​	​	​
Net Cash From Operating Activities			6,300			5,570			3,203
​	​	​	​	​	​	​	​	​	​	​
Cash Flow From (Used in) Investing Activities:
Acquisitions of property and equipment			(1,394	)		(1,135	)		(1,121	)
Acquisitions of businesses and technologies, net of cash acquired			—			(17,183	)		(80	)
Proceeds from business dispositions			48			6,042			25
Proceeds from the sale of Mylan N.V. shares			—			2,704			—
Purchases of investment securities			(131	)		(210	)		(2,823	)
Proceeds from sales of investment securities			73			129			3,709
Other			48			35			42
​	​	​	​	​	​	​	​	​	​	​
Net Cash From (Used in) Investing Activities			(1,356	)		(9,618	)		(248	)
​	​	​	​	​	​	​	​	​	​	​
Cash Flow From (Used in) Financing Activities:
Proceeds from issuance of (repayments of) short-term debt and other			(26	)		(1,034	)		(1,767	)
Proceeds from issuance of long-term debt and debt with maturities over 3 months			4,009			6,742			14,934
Repayments of long-term debt and debt with maturities over 3 months			(12,433	)		(8,650	)		(12	)
Payment of bridge financing fees			—			—			(170	)
Purchase of Alere preferred stock			—			(710	)		—
Acquisition and contingent consideration payments related to business acquisitions			—			(13	)		(25	)
Purchases of common shares			(238	)		(117	)		(522	)
Proceeds from stock options exercised			271			350			248
Dividends paid			(1,974	)		(1,849	)		(1,539	)
​	​	​	​	​	​	​	​	​	​	​
Net Cash From (Used in) Financing Activities			(10,391	)		(5,281	)		11,147
​	​	​	​	​	​	​	​	​	​	​
Effect of exchange rate changes on cash and cash equivalents			(116	)		116			(483	)
​	​	​	​	​	​	​	​	​	​	​
Net Increase (Decrease) in Cash and Cash Equivalents			(5,563	)		(9,213	)		13,619
Cash and Cash Equivalents, Beginning of Year			9,407			18,620			5,001
​	​	​	​	​	​	​	​	​	​	​
Cash and Cash Equivalents, End of Year		$	3,844		$	9,407		$	18,620
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Supplemental Cash Flow Information:
Income taxes paid		$	740		$	570		$	620
Interest paid			845			917			181

The accompanying notes to consolidated financial statements are an integral part of this statement.

** Abbott Laboratories and Subsidiaries**

Consolidated Balance Sheet (dollars in millions)

		December 31
		2018			2017
Assets
Current Assets:
Cash and cash equivalents		$	3,844		$	9,407
Investments, primarily bank time deposits and U.S. treasury bills			242			203
Trade receivables, less allowances of — 2018: $314; 2017: $294			5,182			5,249
Inventories:
Finished products			2,407			2,339
Work in process			499			472
Materials			890			790
​	​	​	​	​	​	​	​
Total inventories			3,796			3,601
Other prepaid expenses and receivables			1,559			1,667
Current assets held for disposition			9			20
​	​	​	​	​	​	​	​
Total Current Assets			14,632			20,147
​	​	​	​	​	​	​	​
Investments			897			883
Property and Equipment, at Cost:
Land			501			526
Buildings			3,555			3,613
Equipment			10,756			10,394
Construction in progress			894			732
​	​	​	​	​	​	​	​
			15,706			15,265
Less: accumulated depreciation and amortization			8,143			7,658
​	​	​	​	​	​	​	​
Net Property and Equipment			7,563			7,607
​	​	​	​	​	​	​	​
Intangible Assets, net of amortization			18,942			21,473
Goodwill			23,254			24,020
Deferred Income Taxes and Other Assets			1,868			1,944
Non-current Assets Held for Disposition			17			176
​	​	​	​	​	​	​	​
		$	67,173		$	76,250
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** Abbott Laboratories and Subsidiaries

Consolidated Balance Sheet (dollars in millions) **

		December 31
		2018			2017
Liabilities and Shareholders' Investment
Current Liabilities:
Short-term borrowings		$	200		$	206
Trade accounts payable			2,975			2,402
Salaries, wages and commissions			1,182			1,187
Other accrued liabilities			3,780			3,811
Dividends payable			563			489
Income taxes payable			305			309
Current portion of long-term debt			7			508
​	​	​	​	​	​	​	​
Total Current Liabilities			9,012			8,912
​	​	​	​	​	​	​	​
Long-term Debt			19,359			27,210
Post-employment obligations and other long-term liabilities			8,080			9,030
Commitments and Contingencies
Shareholders' Investment:
Preferred shares, one dollar par value Authorized — 1,000,000 shares, none issued			—			—
Common shares, without par value Authorized — 2,400,000,000 shares Issued at stated capital amount — Shares: 2018: 1,971,189,465; 2017: 1,965,908,188			23,512			23,206
Common shares held in treasury, at cost — Shares: 2018: 215,570,043; 2017: 222,305,719			(9,962	)		(10,225	)
Earnings employed in the business			24,560			23,978
Accumulated other comprehensive income (loss)			(7,586	)		(6,062	)
​	​	​	​	​	​	​	​
Total Abbott Shareholders' Investment			30,524			30,897
Noncontrolling Interests in Subsidiaries			198			201
​	​	​	​	​	​	​	​
Total Shareholders' Investment			30,722			31,098
​	​	​	​	​	​	​	​
		$	67,173		$	76,250
​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​

The accompanying notes to consolidated financial statements are an integral part of this statement.

** Abbott Laboratories and Subsidiaries

Consolidated Statement of Shareholders' Investment (in millions except shares and per share data) **

		Year Ended December 31
		2018			2017			2016
Common Shares:
Beginning of Year
Shares: 2018: 1,965,908,188; 2017: 1,707,475,455; 2016: 1,702,017,390		$	23,206		$	13,027		$	12,734
Issued under incentive stock programs
Shares: 2018: 5,281,277; 2017: 8,834,924; 2016: 5,458,065			163			242			222
Issued for St. Jude Medical acquisition
Shares: 2017: 249,597,809			—			9,835			—
Share-based compensation			479			406			311
Issuance of restricted stock awards			(336	)		(304	)		(240	)
​	​	​	​	​	​	​	​	​	​	​
End of Year
Shares: 2018: 1,971,189,465; 2017: 1,965,908,188; 2016: 1,707,475,455		$	23,512		$	23,206		$	13,027
​	​	​	​	​	​	​	​	​	​	​
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Common Shares Held in Treasury:
Beginning of Year
Shares: 2018: 222,305,719; 2017: 234,606,250; 2016: 229,352,338		$	(10,225	)	$	(10,791	)	$	(10,622	)
Issued under incentive stock programs
Shares: 2018: 8,870,735; 2017: 8,696,320; 2016: 5,398,469			408			400			250
Issued for St. Jude Medical acquisition
Shares: 2017: 3,906,848			—			180			—
Purchased
Shares: 2018: 2,135,059; 2017: 302,637; 2016: 10,652,381			(145	)		(14	)		(419	)
​	​	​	​	​	​	​	​	​	​	​
End of Year
Shares: 2018: 215,570,043; 2017: 222,305,719; 2016: 234,606,250		$	(9,962	)	$	(10,225	)	$	(10,791	)
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​
Earnings Employed in the Business:
Beginning of Year		$	23,978		$	25,565		$	25,757
Net earnings			2,368			477			1,400
Cash dividends declared on common shares (per share — 2018: $1.16; 2017: $1.075; 2016: $1.045)			(2,047	)		(1,947	)		(1,547	)
Effect of common and treasury share transactions			(90	)		(117	)		(45	)
Impact of adoption of new accounting standards			351			—			—
​	​	​	​	​	​	​	​	​	​	​
End of Year		$	24,560		$	23,978		$	25,565
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​
Accumulated Other Comprehensive Income (Loss):
Beginning of Year		$	(6,062	)	$	(7,263	)	$	(6,658	)
Business dispositions / separation			—			149			—
Other comprehensive income (loss)			(1,192	)		1,052			(605	)
Impact of adoption of new accounting standards			(332	)		—			—
​	​	​	​	​	​	​	​	​	​	​
End of Year		$	(7,586	)	$	(6,062	)	$	(7,263	)
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​
Noncontrolling Interest in Subsidiaries:
Beginning of Year		$	201		$	179		$	115
Noncontrolling Interests' share of income, business combinations, net of distributions and share repurchases			(3	)		22			64
​	​	​	​	​	​	​	​	​	​	​
End of Year		$	198		$	201		$	179
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The accompanying notes to consolidated financial statements are an integral part of this statement.

** Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements **

Note 1 — Summary of Significant Accounting Policies

NATURE OF BUSINESS — Abbott's principal business is the discovery, development, manufacture and sale of a broad line of health care products.

BASIS OF CONSOLIDATION — The consolidated financial statements include the accounts of the parent company and subsidiaries, after elimination of intercompany transactions.

USE OF ESTIMATES — The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States and necessarily include amounts based on estimates and assumptions by management. Actual results could differ from those amounts. Significant estimates include amounts for sales rebates; income taxes; pension and other post-employment benefits, including certain asset values that are based on significant unobservable inputs; valuation of intangible assets; litigation; derivative financial instruments; and inventory and accounts receivable exposures.

FOREIGN CURRENCY TRANSLATION — The statements of earnings of foreign subsidiaries whose functional currencies are other than the U.S. dollar are translated into U.S. dollars using average exchange rates for the period. The net assets of foreign subsidiaries whose functional currencies are other than the U.S. dollar are translated into U.S. dollars using exchange rates as of the balance sheet date. 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 adjustment account, which is included in equity as a component of Accumulated other comprehensive income (loss). Transaction gains and losses are recorded on the Net foreign exchange (gain) loss line of the Consolidated Statement of Earnings.

REVENUE RECOGNITION — Revenue from product sales is recognized upon the transfer of control, which is generally upon shipment or delivery, depending on the delivery terms set forth in the customer contract. Provisions for discounts, rebates and sales incentives to customers, and returns and other adjustments are provided for in the period the related sales are recorded. Sales incentives to customers are not material. Historical data is readily available and reliable, and is used for estimating the amount of the reduction in gross sales. Revenue from the launch of a new product, from an improved version of an existing product, or for shipments in excess of a customer's normal requirements are recorded when the conditions noted above are met. In those situations, management records a returns reserve for such revenue, if necessary. In certain of Abbott's businesses, primarily within diagnostics, Abbott participates in selling arrangements that include multiple performance obligations (e.g., instruments, reagents, procedures, and service agreements). The total transaction price of the contract is allocated to each performance obligation in an amount based on the estimated relative standalone selling prices of the promised goods or services underlying each performance obligation. Sales of product rights for marketable products are recorded as revenue upon disposition of the rights.

INCOME TAXES — Deferred income taxes are provided for the tax effect of differences between the tax bases of assets and liabilities and their reported amounts in the financial statements at the enacted statutory rate to be in effect when the taxes are paid. No additional income taxes have been provided for any remaining undistributed foreign earnings not subject to the transition tax related to the U.S. Tax Cuts and Jobs Act, or any additional outside basis differences that exist, as these amounts continue to be indefinitely reinvested in foreign operations. Interest and penalties on income tax obligations are included in taxes on earnings.

EARNINGS PER SHARE — Unvested restricted stock units and awards that contain non-forfeitable rights to dividends are treated as participating securities and are included in the computation of earnings per share under the two-class method. Under the two-class method, net earnings are allocated between

** Abbott Laboratories and Subsidiaries**

Notes to Consolidated Financial Statements (Continued)

Note 1 — Summary of Significant Accounting Policies (Continued)

common shares and participating securities. Earnings from Continuing Operations allocated to common shares in 2018, 2017 and 2016 were $2.320 billion, $346 million and $1.057 billion, respectively. Net earnings allocated to common shares in 2018, 2017 and 2016 were $2.353 billion, $468 million and $1.393 billion, respectively.

PENSION AND POST-EMPLOYMENT BENEFITS — Abbott accrues for the actuarially determined cost of pension and post-employment benefits over the service attribution periods of the employees. Abbott must develop long-term assumptions, the most significant of which are the health care cost trend rates, discount rates and the expected return on plan assets. Differences between the expected long-term return on plan assets and the actual return are amortized over a five-year period. Actuarial losses and gains are amortized over the remaining service attribution periods of the employees under the corridor method.

FAIR VALUE MEASUREMENTS — For assets and liabilities that are measured using quoted prices in active markets, total fair value is the published market price per unit multiplied by the number of units held without consideration of transaction costs. Assets and liabilities that are measured using significant other observable inputs are valued by reference to similar assets or liabilities, adjusted for contract restrictions and other terms specific to that asset or liability. For these items, a significant portion of fair value is derived by reference to quoted prices of similar assets or liabilities in active markets. For all remaining assets and liabilities, fair value is derived using a fair value model, such as a discounted cash flow model or Black-Scholes model. Purchased intangible assets are recorded at fair value. The fair value of significant purchased intangible assets is based on independent appraisals. Abbott uses a discounted cash flow model to value intangible assets. The discounted cash flow model requires assumptions about the timing and amount of future net cash flows, risk, the cost of capital, terminal values and market participants. Intangible assets are reviewed for impairment on a quarterly basis. Goodwill and indefinite-lived intangible assets are tested for impairment at least annually.

SHARE-BASED COMPENSATION — The fair value of stock options and restricted stock awards and units are amortized over their requisite service period, which could be shorter than the vesting period if an employee is retirement eligible, with a charge to compensation expense.

In March 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-09, Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 modifies several aspects of the accounting for share-based payment transactions, including the accounting for income taxes and classification on the statement of cash flows. Abbott adopted the standard in the first quarter of 2017 and the following changes were made to the presentation of Abbott's financial statements:

All excess tax benefits or tax deficiencies are now recognized as income tax benefit or expense as applicable. Previously, Abbott recorded the benefits to Shareholders' Investment. The tax benefit recorded in Abbott's Consolidated Statement of Earnings for 2018 and 2017 was $90 million and $120 million, respectively. The standard did not permit retrospective presentation of this benefit in prior years.

The tax benefit or deficiency is required to be classified as an operating activity in the statement of cash flows. Previously, it was required to be classified within financing activities. Abbott has adopted this standard on a prospective basis and has not revised the classification of the excess tax benefit in the 2016 Consolidated Statement of Cash Flows.

** Abbott Laboratories and Subsidiaries**

Notes to Consolidated Financial Statements (Continued)

Note 1 — Summary of Significant Accounting Policies (Continued)

LITIGATION — Abbott accounts for litigation losses in accordance with FASB ASC No. 450, "Contingencies." Under ASC No. 450, loss contingency provisions are recorded for probable losses at management's best estimate of a loss, or when a best estimate cannot be made, a minimum loss contingency amount is recorded. Legal fees are recorded as incurred.

CASH, CASH EQUIVALENTS AND INVESTMENTS — Cash equivalents consist of bank time deposits, U.S. government securities money market funds and U.S. treasury bills with original maturities of three months or less. Abbott holds certain investments with a carrying value of approximately $325 million that are accounted for under the equity method of accounting. Investments held in a rabbi trust and investments in publicly traded equity securities are recorded at fair value and changes in fair value are recorded in earnings. Investments in equity securities that are not traded on public stock exchanges are recorded at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer. Investments in debt securities are classified as held-to-maturity, as management has both the intent and ability to hold these securities to maturity, and are reported at cost, net of any unamortized premium or discount. Income relating to these securities is reported as interest income.

TRADE RECEIVABLE VALUATIONS — Accounts receivable are stated at their net realizable value. The allowance against gross trade receivables reflects the best estimate of probable losses inherent in the receivables portfolio determined on the basis of historical experience, specific allowances for known troubled accounts and other currently available information. Accounts receivable are charged off after all reasonable means to collect the full amount (including litigation, where appropriate) have been exhausted.

INVENTORIES — Inventories are stated at the lower of cost (first-in, first-out basis) or net realizable value. Cost includes material and conversion costs.

PROPERTY AND EQUIPMENT — Depreciation and amortization are provided on a straight-line basis over the estimated useful lives of the assets. The following table shows estimated useful lives of property and equipment:

Classification		Estimated Useful Lives
Buildings		10 to 50 years (average 27 years)
Equipment		3 to 20 years (average 11 years)

PRODUCT LIABILITY — Abbott accrues for product liability claims when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated based on existing information. The liabilities are adjusted quarterly as additional information becomes available. Receivables for insurance recoveries for product liability claims are recorded as assets, on an undiscounted basis, when it is probable that a recovery will be realized. Product liability losses are self-insured.

RESEARCH AND DEVELOPMENT COSTS — Internal research and development costs are expensed as incurred. Clinical trial costs incurred by third parties are expensed as the contracted work is performed. Where contingent milestone payments are due to third parties under research and development arrangements, the milestone payment obligations are expensed when the milestone results are achieved.

ACQUIRED IN-PROCESS AND COLLABORATIONS RESEARCH AND DEVELOPMENT (IPR&D) — The initial costs of rights to IPR&D projects obtained in an asset acquisition are expensed as

** Abbott Laboratories and Subsidiaries**

Notes to Consolidated Financial Statements (Continued)

Note 1 — Summary of Significant Accounting Policies (Continued)

IPR&D unless the project has an alternative future use. These costs include initial payments incurred prior to regulatory approval in connection with research and development collaboration agreements that provide rights to develop, manufacture, market and/or sell pharmaceutical products. The fair value of IPR&D projects acquired in a business combination are capitalized and accounted for as indefinite-lived intangible assets until completed and are then amortized over the remaining useful life. Collaborations are not significant.

CONCENTRATION OF RISK AND GUARANTEES — Due to the nature of its operations, Abbott is not subject to significant concentration risks relating to customers, products or geographic locations. Product warranties are not significant.

Abbott has no material exposures to off-balance sheet arrangements; no special purpose entities; nor activities that include non-exchange-traded contracts accounted for at fair value. Abbott has periodically entered into agreements in the ordinary course of business, such as assignment of product rights, with other companies, which has resulted in Abbott becoming secondarily liable for obligations that Abbott was previously primarily liable. Since Abbott no longer maintains a business relationship with the other parties, Abbott is unable to develop an estimate of the maximum potential amount of future payments, if any, under these obligations. Based upon past experience, the likelihood of payments under these agreements is remote. Abbott periodically acquires a business or product rights in which Abbott agrees to pay contingent consideration based on attaining certain thresholds or based on the occurrence of certain events.

Note 2 — New Accounting Standards

Recently Adopted Accounting Standards

In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which allows companies to reclassify stranded tax effects resulting from the 2017 Tax Cuts and Jobs Act, from accumulated other comprehensive income (loss) to retained earnings (Earnings employed in the business). Abbott adopted the new standard at the beginning of the fourth quarter of 2018. As a result of the adoption of the new standard, approximately $337 million of stranded tax effects were reclassified from Accumulated other comprehensive income (loss) to Earnings employed in the business.

In August 2017, the FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities, which makes changes to the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. The standard would have become effective for Abbott beginning in the first quarter of 2019, with early adoption permitted. Abbott elected to early adopt ASU 2017-12 in the fourth quarter of 2018. The impact of adopting the standard is not significant to Abbott's Consolidated Balance Sheet and Consolidated Statement of Earnings.

In March 2017, the FASB issued ASU 2017-07, Compensation — Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost which changes the financial statement presentation requirements for pension and other postretirement benefit expense. While service cost continues to be reported in the same financial statement line items as other current employee compensation costs, the ASU requires all other components of pension and other postretirement benefit expense to be presented separately from service cost, and outside any subtotal of income from operations. The standard was adopted by Abbott beginning in the first quarter of 2018. The change in the presentation of the components of pension cost per year was applied retrospectively. As a

** Abbott Laboratories and Subsidiaries**

Notes to Consolidated Financial Statements (Continued)

Note 2 — New Accounting Standards (Continued)

result, approximately $160 million of net pension-related income per year was moved from the operating lines of the Consolidated Statement of Earnings to non-operating income for 2017 and 2016.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows: Restricted Cash, which requires that restricted cash be included with cash and cash equivalents when reconciling the beginning and end-of-period total amounts shown on the statement of cash flows. Abbott adopted this standard beginning in the first quarter of 2018, and applied the guidance retrospectively to all periods presented. Abbott did not have any restricted cash balances in the periods presented except for $75 million of restricted cash acquired as part of the Alere Inc. (Alere) acquisition in October 2017. The restrictions on this cash were eliminated prior to the end of 2017.

In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory, which requires the recognition of the income tax effects of intercompany sales and transfers of assets, other than inventory, in the period in which the transfer occurs. Abbott adopted the standard on January 1, 2018, using a modified retrospective approach and recorded a cumulative catch-up adjustment to Earnings employed in the business in the Consolidated Balance Sheet that was not significant.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments, which clarifies how companies should present and classify certain cash receipts and cash payments in the statement of cash flows. The ASU became effective for Abbott in the first quarter of 2018 and did not have a material impact to the Company's Consolidated Statement of Cash Flows.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments — Recognition and Measurement of Financial Assets and Financial Liabilities, which provides new guidance for the recognition, measurement, presentation, and disclosure of financial assets and liabilities. Abbott adopted the standard on January 1, 2018. Under the new standard, changes in the fair value of equity investments with readily determinable fair values are recorded in Other (income) expense, net within the Consolidated Statement of Earnings. Previously, such fair value changes were recorded in other comprehensive income. Abbott has elected the measurement alternative allowed by ASU 2016-01 for its equity investments without readily determinable fair values. These investments are measured at cost, less any impairment, plus or minus any changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer. Changes in the measurement of these investments are being recorded in Other (income) expense, net within the Consolidated Statement of Earnings. As part of the adoption, the cumulative-effect adjustment to Earnings employed in the business in the Consolidated Balance Sheet for net unrealized losses on equity investments that were recorded in Accumulated other comprehensive income (loss) as of December 31, 2017 was not significant.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which provides a single comprehensive model for accounting for revenue from contracts with customers and supersedes nearly all previously existing revenue recognition guidance. The core principle of the ASU is that an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Abbott adopted the new standard as of January 1, 2018, using the modified retrospective approach method. Under this method, entities recognize the cumulative effect of applying the new standard at the date of initial application with no restatement of comparative periods presented. The cumulative effect of applying the new standard resulted in an increase to Earnings employed in the business in the

** Abbott Laboratories and Subsidiaries**

Notes to Consolidated Financial Statements (Continued)

Note 2 — New Accounting Standards (Continued)

Consolidated Balance Sheet of $23 million which was recorded on January 1, 2018. The new standard has been applied only to those contracts that were not completed as of January 1, 2018. The impact of adopting ASU 2014-09 was not significant to individual financial statement line items in the Consolidated Balance Sheet and Consolidated Statement of Earnings.

Recent Accounting Standards Not Yet Adopted

In February 2016, the FASB issued ASU 2016-02, Leases, which requires lessees to recognize assets and liabilities for most leases on the balance sheet. The standard becomes effective for Abbott beginning in the first quarter of 2019. Abbott completed a detailed review of its leases. Abbott will use the modified retrospective approach with the package of practical expedients which allows Abbott to carry forward the historical lease classification for leases existing at, or entered into after the beginning of the period of adoption and to account for lease and non-lease components as a single lease component for its lessee arrangements. Abbott does not expect the new lease accounting standard to have a material impact on the amounts reported in the Consolidated Statement of Earnings. As a result of adopting ASU 2016-02, Abbott expects to record approximately $800 million to $900 million of right of use assets and lease liabilities for operating leases on the Consolidated Balance Sheet.

Note 3 — Revenue

Abbott's revenues are derived primarily from the sale of a broad line of health care products under short-term receivable arrangements. Patent protection and licenses, technological and performance features, and inclusion of Abbott's products under a contract most impact which products are sold; price controls, competition and rebates most impact the net selling prices of products; and foreign currency translation impacts the measurement of net sales and costs. Abbott's products are generally sold directly to retailers, wholesalers, distributors, hospitals, health care facilities, laboratories, physicians' offices and government agencies throughout the world. Abbott has four reportable segments: Established Pharmaceutical Products, Diagnostic Products, Nutritional Products, and Cardiovascular and Neuromodulation Products. Diabetes Care is a non-reportable segment and is included in Other in the following table.

** Abbott Laboratories and Subsidiaries**

Notes to Consolidated Financial Statements (Continued)

Note 3 — Revenue (Continued)

The following tables provide detail by sales category:

		2018									2017
(in millions)		U.S.			Int'l			Total			U.S.			Int'l			Total
Established Pharmaceutical Products —
Key Emerging Markets		$	—		$	3,363		$	3,363		$	—		$	3,307		$	3,307
Other			—			1,059			1,059			—			980			980
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total			—			4,422			4,422			—			4,287			4,287
Nutritionals —
Pediatric Nutritionals			1,843			2,254			4,097			1,777			2,112			3,889
Adult Nutritionals			1,232			1,900			3,132			1,254			1,782			3,036
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total			3,075			4,154			7,229			3,031			3,894			6,925
Diagnostics —
Core Laboratory			985			3,401			4,386			921			3,142			4,063
Molecular			152			332			484			160			303			463
Point of Care			432			121			553			440			110			550
Rapid Diagnostics			1,148			924			2,072			296			244			540
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total			2,717			4,778			7,495			1,817			3,799			5,616
Cardiovascular and Neuromodulation —
Rhythm Management			1,019			1,072			2,091			1,030			1,073			2,103
Electrophysiology			764			904			1,668			609			773			1,382
Heart Failure			467			179			646			491			152			643
Vascular			1,126			1,803			2,929			1,180			1,712			2,892
Structural Heart			488			751			1,239			432			651			1,083
Neuromodulation			690			174			864			636			172			808
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total			4,554			4,883			9,437			4,378			4,533			8,911
Other			493			1,502			1,995			447			1,204			1,651
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total		$	10,839		$	19,739		$	30,578		$	9,673		$	17,717		$	27,390
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​

Abbott recognizes revenue from product sales upon the transfer of control, which is generally upon shipment or delivery, depending on the delivery terms set forth in the customer contract. For maintenance agreements that provide service beyond Abbott's standard warranty and other service agreements, revenue is recognized ratably over the contract term. A time-based measure of progress appropriately reflects the transfer of services to the customer. Payment terms between Abbott and its customers vary by the type of customer, country of sale, and the products or services offered. The term between invoicing and the payment due date is not significant.

Management exercises judgment in estimating variable consideration. Provisions for discounts, rebates and sales incentives to customers, and returns and other adjustments are provided for in the period the related sales are recorded. Sales incentives to customers are not material. Historical data is readily available and reliable, and is used for estimating the amount of the reduction in gross sales. Abbott

** Abbott Laboratories and Subsidiaries**

Notes to Consolidated Financial Statements (Continued)

Note 3 — Revenue (Continued)

provides rebates to government agencies, wholesalers, group purchasing organizations and other private entities.

Rebate amounts are usually based upon the volume of purchases using contractual or statutory prices for a product. Factors used in the rebate calculations include the identification of which products have been sold subject to a rebate, which customer or government agency price terms apply, and the estimated lag time between sale and payment of a rebate. Using historical trends, adjusted for current changes, Abbott estimates the amount of the rebate that will be paid, and records the liability as a reduction of gross sales when Abbott records its sale of the product. Settlement of the rebate generally occurs from one to six months after sale. Abbott regularly analyzes the historical rebate trends and makes adjustments to reserves for changes in trends and terms of rebate programs. Historically, adjustments to prior years' rebate accruals have not been material to net income.

Other allowances charged against gross sales include cash discounts and returns, which are not significant. Cash discounts are known within 15 to 30 days of sale, and therefore can be reliably estimated. Returns can be reliably estimated because Abbott's historical returns are low, and because sales return terms and other sales terms have remained relatively unchanged for several periods. Product warranties are also not significant.

Abbott also applies judgment in determining the timing of revenue recognition related to contracts that include multiple performance obligations. The total transaction price of the contract is allocated to each performance obligation in an amount based on the estimated relative standalone selling prices of the promised goods or services underlying each performance obligation. For goods or services for which observable standalone selling prices are not available, Abbott uses an expected cost plus a margin approach to estimate the standalone selling price of each performance obligation.

Remaining Performance Obligations

As of December 31, 2018, the estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) was approximately $2.9 billion in the Diagnostic Products segment and approximately $410 million in the Cardiovascular and Neuromodulation Products segment. Abbott expects to recognize revenue on approximately 60 percent of these remaining performance obligations over the next 24 months, approximately 16 percent over the subsequent 12 months and the remainder thereafter.

These performance obligations primarily reflect the future sale of reagents/consumables in contracts with minimum purchase obligations, extended warranty or service obligations related to previously sold equipment, and remote monitoring services related to previously implanted devices. Abbott has applied the practical expedient described in Accounting Standards Codification (ASC) 606-10-50-14 and has not included remaining performance obligations related to contracts with original expected durations of one year or less in the amounts above.

Assets Recognized for Costs to Obtain a Contract with a Customer

Abbott has applied the practical expedient in ASC 340-40-25-4 and records as an expense the incremental costs of obtaining contracts with customers in the period of occurrence when the amortization period of the asset that Abbott otherwise would have recognized is one year or less. Upfront commission fees paid to sales personnel as a result of obtaining or renewing contracts with customers are incremental

** Abbott Laboratories and Subsidiaries**

Notes to Consolidated Financial Statements (Continued)

Note 3 — Revenue (Continued)

to obtaining the contract. Abbott capitalizes these amounts as contract costs. Capitalized commission fees are amortized based on the contract duration to which the assets relate which ranges from two to ten years. The amounts as of December 31, 2018, were not significant.

Additionally, the cost of transmitters provided to customers that use Abbott's remote monitoring service with respect to certain medical devices are capitalized as contract costs. Capitalized transmitter costs are amortized based on the timing of the transfer of services to which the assets relate, which typically ranges from eight to ten years. The amounts as of December 31, 2018, were not significant.

Other Contract Assets and Liabilities

Abbott discloses Trade receivables separately in the Consolidated Balance Sheet at their net realizable value. Contract assets primarily relate to Abbott's conditional right to consideration for work completed but not billed at the reporting date. Contract assets at the beginning and end of the period, as well as the changes in the balance, were not significant.

Contract liabilities primarily relate to payments received from customers in advance of performance under the contract. Abbott's contract liabilities arise primarily in the Cardiovascular and Neuromodulation reportable segment when payment is received upfront for various multi-period extended service arrangements. Changes in the contract liabilities during the period are as follows:

(in millions)
Contract Liabilities
Balance at January 1, 2018		$	198
Unearned revenue from cash received during the period			304
Revenue recognized that was included in contract liability balance at beginning of period			(243	)
​	​	​	​	​
Balance at December 31, 2018		$	259
​	​	​	​	​
​	​	​	​	​
​	​	​	​	​

Note 4 — Discontinued Operations and Assets Held for Disposition

On February 27, 2015, Abbott completed the sale of its developed markets branded generics pharmaceuticals business to Mylan Inc. (Mylan) for 110 million ordinary shares (or approximately 22 percent) of a newly formed entity (Mylan N.V.) that combined Mylan's existing business and Abbott's developed markets branded generics pharmaceuticals business.

In April 2015, Abbott sold 40.25 million of the 110 million ordinary shares of Mylan N.V. received in the sale of the developed markets branded generics pharmaceuticals business to Mylan. In 2015, Abbott recorded a pretax gain of $207 million on $2.29 billion in net proceeds from the sale of these shares. In 2017, Abbott sold 69.75 million ordinary shares of Mylan N.V. and received $2.704 billion in proceeds. Abbott recorded a $45 million gain from the sale of these ordinary shares in 2017, which was recognized in the Other (income) expense, net line of the Consolidated Statement of Earnings. Abbott no longer has an ownership interest in Mylan N.V.

On February 10, 2015, Abbott completed the sale of its animal health business to Zoetis Inc. Abbott received cash proceeds of $230 million and reported an after tax gain on the sale of approximately $130 million. In the first quarter of 2016, Abbott received an additional $25 million of proceeds due to the expiration of a holdback agreement associated with the sale of this business and reported an after-tax gain of $16 million.

** Abbott Laboratories and Subsidiaries**

Notes to Consolidated Financial Statements (Continued)

Note 4 — Discontinued Operations and Assets Held for Disposition (Continued)

As a result of the disposition of the above businesses, the operating results of these businesses up to the date of sale are reported as part of discontinued operations on the Earnings from Discontinued Operations, net of taxes line in the Consolidated Statement of Earnings.

On January 1, 2013, Abbott completed the separation of AbbVie Inc. (AbbVie), which was formed to hold Abbott's research-based proprietary pharmaceuticals business. Abbott has retained all liabilities for all U.S. federal and foreign income taxes on income prior to the separation, as well as certain non-income taxes attributable to AbbVie's business. AbbVie generally will be liable for all other taxes attributable to its business.

The net earnings of discontinued operations include income tax benefits of $39 million in 2018, $109 million in 2017 and $325 million in 2016. These tax benefits primarily relate to the resolution of various tax positions related to AbbVie's operations for years prior to the separation.

In September 2016, Abbott announced that it entered into a definitive agreement to sell Abbott Medical Optics (AMO), its vision care business, to Johnson & Johnson for $4.325 billion in cash, subject to customary purchase price adjustments for cash, debt and working capital. The decision to sell AMO reflected Abbott's proactive shaping of its portfolio in line with its strategic priorities. In February 2017, Abbott completed the sale of AMO to Johnson & Johnson and recognized a pre-tax gain of $1.163 billion including working capital adjustments, which was reported in the Other (income) expense, net line of the Consolidated Statement of Earnings in 2017. Abbott recorded an after-tax gain of $728 million in 2017 related to the sale of AMO. The operating results of AMO up to the date of sale continued to be included in Earnings from continuing operations as the business did not qualify for reporting as discontinued operations. For 2017 and 2016, the AMO earnings (losses) before taxes included in Abbott's consolidated earnings were $(18) million and $30 million, respectively.

As discussed in Note 7 — Business Acquisitions, in conjunction with the acquisition of Alere, Abbott sold the Triage MeterPro cardiovascular and toxicology business and the assets and liabilities related to its B-type Natriuretic Peptide assay business run on Beckman Coulter analyzers to Quidel Corporation (Quidel). The legal transfer of certain assets related to these businesses did not occur at the close of the sale to Quidel due to, among other factors, the time required to transfer marketing authorizations and other regulatory requirements in various countries. Under the terms of the sale agreement with Abbott, Quidel is subject to the risks and entitled to the benefits generated by these operations and assets. The assets presented as held for disposition in the Consolidated Balance Sheet as of December 31, 2018 and 2017, primarily relate to the businesses sold to Quidel.

** Abbott Laboratories and Subsidiaries**

Notes to Consolidated Financial Statements (Continued)

Note 4 — Discontinued Operations and Assets Held for Disposition (Continued)

The following is a summary of the assets held for disposition as of December 31, 2018 and 2017:

(in millions)		December 31, 2018			December 31, 2017
Trade receivables, net		$	6		$	12
Total inventories			3			8
​	​	​	​	​	​	​	​
Current assets held for disposition			9			20
​	​	​	​	​	​	​	​
Net property and equipment			—			56
Intangible assets, net of amortization			—			18
Goodwill			17			102
​	​	​	​	​	​	​	​
Non-current assets held for disposition			17			176
​	​	​	​	​	​	​	​
Total assets held for disposition		$	26		$	196
​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​

Note 5 — Supplemental Financial Information

Other (income) expense, net, for 2018, 2017 and 2016 includes approximately $160 million of income related to the non-service cost components of the net periodic benefit costs associated with the pension and post-retirement medical plans. These amounts are being reported in other (income) expense as a result of the adoption of the new accounting standard for recognizing pension cost. Other (income) expense, net, for 2017 includes a pre-tax gain of $1.163 billion related to the sale of AMO to Johnson & Johnson. See Note 4 — Discontinued Operations and Assets Held for Disposition for further discussion of this sale. In 2017, Abbott sold 69.75 million ordinary shares of Mylan N.V. and received $2.704 billion in proceeds and recorded a $45 million pre-tax gain related to the sale of these ordinary shares. Other (income) expense, net, for 2016 includes expense of $947 million to adjust Abbott's holding of Mylan N.V. ordinary shares due to a decline in the fair value of the securities which was considered by Abbott to be other than temporary.

The detail of various balance sheet components is as follows:

(in millions)		December 31, 2018			December 31, 2017
Long-term Investments:
Equity securities		$	856		$	797
Other			41			86
​	​	​	​	​	​	​	​
Total		$	897		$	883
​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​

Abbott's equity securities as of December 31, 2018 and December 31, 2017, include $307 million and $363 million, respectively, of investments in mutual funds that are held in a rabbi trust acquired as part of the St. Jude Medical, Inc. (St. Jude Medical) business acquisition. These investments, which are specifically designated as available for the purpose of paying benefits under a deferred compensation plan, are not available for general corporate purposes and are subject to creditor claims in the event of insolvency.

Abbott also holds certain investments as of December 31, 2018 with a carrying value of approximately $325 million that are accounted for under the equity method of accounting and other equity investments with a carrying value of $211 million that do not have a readily determinable fair value. The $211 million

** Abbott Laboratories and Subsidiaries**

Notes to Consolidated Financial Statements (Continued)

Note 5 — Supplemental Financial Information (Continued)

carrying value includes an unrealized gain of approximately $50 million on an investment. The gain was recorded in the second quarter of 2018 and relates to an observable price change for a similar investment of the same issuer.

(in millions)		December 31, 2018			December 31, 2017
Other Accrued Liabilities:
Accrued rebates payable to government agencies		$	166		$	124
Accrued other rebates (a)			608			498
All other			3,006			3,189
​	​	​	​	​	​	​	​
Total		$	3,780		$	3,811
​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​

(a)

Accrued wholesaler chargeback rebates of $197 million and $178 million at December 31, 2018 and 2017, respectively, are netted in trade receivables because Abbott's customers are invoiced at a higher catalog price but only remit to Abbott their contract price for the products.

(in millions)		December 31, 2018			December 31, 2017
Post-employment Obligations and Other Long-term Liabilities:
Defined benefit pension plans and post-employment medical and dental plans for significant plans		$	2,040		$	2,169
Deferred income taxes			2,056			2,006
All other (b)			3,984			4,855
​	​	​	​	​	​	​	​
Total		$	8,080		$	9,030
​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​

(b)

2018 includes approximately $465 million of net unrecognized tax benefits, as well as approximately $65 million of acquisition consideration payable. 2017 includes approximately $835 million of net unrecognized tax benefits, as well as approximately $100 million of acquisition consideration payable.

Since January 2010, Venezuela has been designated as a highly inflationary economy under U.S. GAAP. On February 17, 2016, the Venezuelan government announced that its three-tier exchange rate system would be reduced to two rates renamed the DIPRO and DICOM rates. The DIPRO was the official rate for food and medicine imports and was adjusted from 6.3 to 10 bolivars per U.S. dollar. The DICOM rate was a floating market rate published daily by the Venezuelan central bank, which at the end of the first quarter of 2016 was approximately 263 bolivars per U.S. dollar. As a result of decreasing government approvals to convert bolivars to U.S. dollars to pay for intercompany accounts, as well as the accelerating deterioration of economic conditions in the country, Abbott concluded that it was appropriate to move to the DICOM rate at the end of the first quarter of 2016. As a result, Abbott recorded a foreign currency exchange loss of $480 million in 2016 to revalue its net monetary assets in Venezuela. After the revaluation, Abbott's investment in its Venezuelan operations was not significant.

** Abbott Laboratories and Subsidiaries**

Notes to Consolidated Financial Statements (Continued)

Note 6 — Accumulated Other Comprehensive Income (Loss)

The components of the changes in accumulated other comprehensive income (loss) from continuing operations, net of income taxes, are as follows: (in millions)

		Cumulative Foreign Currency Translation Adjustments			Net Actuarial Losses and Prior Service Costs and Credits			Cumulative Unrealized Gains (Losses) on Marketable Equity Securities			Cumulative Gains (Losses) on Derivative Instruments Designated as Cash Flow Hedges			Total
Balance at December 31, 2016		$	(4,959	)	$	(2,284	)	$	(69	)	$	49		$	(7,263	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Impact of business dispositions			142			6			—			1			149
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Other comprehensive income (loss) before reclassifications			1,365			(333	)		182			(170	)		1,044
(Income) loss amounts reclassified from accumulated other comprehensive income (a)			—			90			(118	)		36			8
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net current period other comprehensive income (loss)			1,365			(243	)		64			(134	)		1,052
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Balance at December 31, 2017			(3,452	)		(2,521	)		(5	)		(84	)		(6,062	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Impact of adoption of new accounting standards			—			(337	)		5			—			(332	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Other comprehensive income (loss) before reclassifications			(1,488	)		(18	)		—			58			(1,448	)
(Income) loss amounts reclassified from accumulated other comprehensive income (a)			28			150			—			78			256
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net current period other comprehensive income (loss)			(1,460	)		132			—			136			(1,192	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Balance at December 31, 2018		$	(4,912	)	$	(2,726	)	$	—		$	52		$	(7,586	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​

(a)

Reclassified amounts for foreign currency translation adjustments are recorded in the Consolidated Statement of Earnings as Net Foreign exchange (gain) loss; gains (losses) on marketable equity securities are recorded as Other (income) expense and gains/losses related to cash flow hedges are recorded as Cost of products sold. Net actuarial losses and prior service cost is included as a component of net periodic benefit cost — see Note 14 for additional information.

Note 7 — Business Acquisitions

On January 4, 2017, Abbott completed the acquisition of St. Jude Medical, a global medical device manufacturer, for approximately $23.6 billion, including approximately $13.6 billion in cash and approximately $10 billion in Abbott common shares, which represented approximately 254 million shares of Abbott common stock, based on Abbott's closing stock price on the acquisition date. As part of the acquisition, approximately $5.9 billion of St. Jude Medical's debt was assumed, repaid or refinanced by Abbott. The acquisition provides expanded opportunities for future growth and is an important part of the company's ongoing effort to develop a strong, diverse portfolio of devices, diagnostics, nutritionals and branded generic pharmaceuticals. The combined business competes in nearly every area of the cardiovascular device market, as well as in the neuromodulation market.

** Abbott Laboratories and Subsidiaries**

Notes to Consolidated Financial Statements (Continued)

Note 7 — Business Acquisitions (Continued)

Under the terms of the agreement, for each St. Jude Medical common share, St. Jude Medical shareholders received $46.75 in cash and 0.8708 of an Abbott common share. At an Abbott stock price of $39.36, which reflects the closing price on January 4, 2017, this represented a value of approximately $81 per St. Jude Medical common share and total purchase consideration of $23.6 billion. The cash portion of the acquisition was funded through a combination of medium and long-term debt issued in November 2016 and a $2.0 billion 120-day senior unsecured bridge term loan facility which was subsequently repaid.

The final allocation of the fair value of the St. Jude Medical acquisition is shown in the table below.

(in billions)
Acquired intangible assets, non-deductible		$	15.5
Goodwill, non-deductible			13.1
Acquired net tangible assets			3.0
Deferred income taxes recorded at acquisition			(2.7	)
Net debt			(5.3	)
​	​	​	​	​
Total final allocation of fair value		$	23.6
​	​	​	​	​
​	​	​	​	​
​	​	​	​	​

The goodwill is primarily attributable to expected synergies from combining operations, as well as intangible assets that do not qualify for separate recognition. The goodwill is identifiable to the Cardiovascular and Neuromodulation Products reportable segment. The acquired tangible assets consist primarily of trade accounts receivable of approximately $1.1 billion, inventory of approximately $1.7 billion, other current assets of $176 million, property and equipment of approximately $1.5 billion, and other long-term assets of approximately $455 million. The acquired tangible liabilities consist of trade accounts payable and other current liabilities of approximately $1.1 billion and other non-current liabilities of approximately $870 million.

In 2016, Abbott and St. Jude Medical agreed to sell certain businesses to Terumo Corporation (Terumo) for approximately $1.12 billion. The sale included the St. Jude Medical Angio-Seal™ and Femoseal™ vascular closure and Abbott's Vado® Steerable Sheath businesses. The sale closed on January 20, 2017 and no gain or loss was recorded in the Consolidated Statement of Earnings.

On October 3, 2017, Abbott acquired Alere, a diagnostic device and service provider, for $51.00 per common share in cash, which equated to a purchase price of approximately $4.5 billion. As part of the acquisition, Abbott tendered for Alere's preferred shares for a total value of approximately $0.7 billion. In addition, approximately $3.0 billion of Alere's debt was assumed and subsequently repaid. The acquisition establishes Abbott as a leader in point of care testing, expands Abbott's global diagnostics presence and provides access to new products, channels and geographies. Abbott utilized a combination of cash on hand and debt to fund the acquisition. See Note 11 — Debt and Lines of Credit for further details regarding the debt utilized for the acquisition.

** Abbott Laboratories and Subsidiaries**

Notes to Consolidated Financial Statements (Continued)

Note 7 — Business Acquisitions (Continued)

The final allocation of the fair value of the Alere acquisition is shown in the table below.

(in billions)
Acquired intangible assets, non-deductible		$	3.5
Goodwill, non-deductible			3.7
Acquired net tangible assets			1.0
Deferred income taxes recorded at acquisition			(0.4	)
Net debt			(2.6	)
Preferred stock			(0.7	)
​	​	​	​	​
Total final allocation of fair value		$	4.5
​	​	​	​	​
​	​	​	​	​
​	​	​	​	​

The goodwill is primarily attributable to expected synergies from combining operations, as well as intangible assets that do not qualify for separate recognition. The goodwill is identifiable to the Diagnostic Products reportable segment. The approximate value of the acquired tangible assets is $430 million of trade accounts receivable, $425 million of inventory, $225 million of other current assets, $540 million of property and equipment, and $210 million of other long-term assets. The approximate value of the acquired tangible liabilities is $675 million of trade accounts payable and other current liabilities and $145 million of other non-current liabilities.

In the third quarter of 2017, Alere entered into agreements to sell its Triage MeterPro cardiovascular and toxicology business and the assets and liabilities related to its B-type Natriuretic Peptide assay business run on Beckman Coulter analyzers to Quidel. The transactions with Quidel reflect a total purchase price of $400 million payable at the close of the transaction, $240 million payable in six annual installments beginning approximately six months after the close of the transaction, and contingent consideration with a maximum value of $40 million. In the third quarter of 2017, Alere entered into an agreement with Siemens Diagnostics Holding II B.V. (Siemens) to sell its subsidiary, Epocal Inc., for approximately $200 million payable at the close of the transaction. Alere agreed to divest these businesses in connection with the review by the Federal Trade Commission and the European Commission of Abbott's agreement to acquire Alere. The sale to Quidel closed on October 6, 2017, and the sale to Siemens closed on October 31, 2017. No gain or loss on these sales was recorded in the Consolidated Statement of Earnings.

In 2017, consolidated Abbott results include $6.5 billion of sales and a pre-tax loss of approximately $1.3 billion related to the St. Jude Medical and Alere acquisitions, including approximately $1.5 billion of intangible amortization and $907 million of inventory step-up amortization. The pre-tax loss excludes acquisition, integration and restructuring-related costs.

If the acquisitions of St. Jude Medical and Alere had occurred at the beginning of 2016, unaudited pro forma consolidated net sales would have been approximately $28.9 billion and the unaudited pro forma consolidated net loss from continuing operations would have been approximately $485 million in 2016. This includes amortization of approximately $940 million of inventory step-up and $1.7 billion of intangibles related to St. Jude Medical and Alere. For 2017, unaudited pro forma consolidated net sales would have been approximately $28.9 billion and unaudited pro forma consolidated net earnings from continuing operations would have been approximately $750 million, which includes $225 million of intangible amortization related to Alere. The unaudited pro forma consolidated net earnings from continuing operations for 2017 exclude inventory step-up amortization related to St. Jude Medical and Alere of approximately $907 million which was recorded in 2017 but included in the 2016 unaudited pro

** Abbott Laboratories and Subsidiaries**

Notes to Consolidated Financial Statements (Continued)

Note 7 — Business Acquisitions (Continued)

forma results as noted above. The unaudited pro forma information is not necessarily indicative of the consolidated results of operations that would have been realized had the St. Jude Medical and Alere acquisitions been completed as of the beginning of 2016, nor is it meant to be indicative of future results of operations that the combined entity will experience.

On July 17, 2017, Abbott commenced a tender offer to purchase for cash the 1.77 million outstanding shares of Alere's Series B Convertible Perpetual Preferred Stock at a price of $402 per share, plus accrued but unpaid dividends to, but not including, the settlement date of the tender offer. This tender offer was subject to the satisfaction of certain conditions, including Abbott's acquisition of Alere and upon there being validly tendered (and not properly withdrawn) at the expiration date of the tender offer that number of shares of Preferred Stock that equaled at least a majority of the Preferred Stock issued and outstanding at the expiration of the tender offer. The tender offer expired on October 3, 2017. All conditions to the offer were satisfied and Abbott accepted for payment the 1.748 million shares of Preferred Stock that were validly tendered (and not properly withdrawn). The remaining shares were cashed out for an amount equal to the $400.00 per share liquidation preference of such shares, plus accrued but unpaid dividends, without interest. Payment for all of the shares of Preferred Stock was made in the fourth quarter of 2017.

Note 8 — Goodwill and Intangible Assets

The total amount of goodwill reported was $23.3 billion at December 31, 2018 and $24.0 billion at December 31, 2017. The amounts reported at December 31, 2018 and 2017 exclude goodwill reported in non-current assets held for disposition. In 2018, foreign currency translation adjustments decreased goodwill by approximately $440 million. Purchase price accounting adjustments associated with the Alere acquisition decreased goodwill by $326 million in 2018. Goodwill increased by $17.2 billion in 2017 due to the completion of the St. Jude Medical and Alere acquisitions, partially offset by a decrease of $1.5 billion due to the sale of certain businesses to Terumo, Quidel and Siemens. Foreign currency translation increased goodwill by $653 million in 2017. The amount of goodwill related to reportable segments at December 31, 2018 was $3.0 billion for the Established Pharmaceutical Products segment, $286 million for the Nutritional Products segment, $3.7 billion for the Diagnostic Products segment, and $15.3 billion for the Cardiovascular and Neuromodulation Products segment. In 2018 and 2017, there were no significant reductions of goodwill relating to impairments.

The gross amount of amortizable intangible assets, primarily product rights and technology was $25.7 billion and $25.6 billion as of December 31, 2018 and 2017, respectively, and accumulated amortization was $10.4 billion and $8.1 billion as of December 31, 2018 and 2017, respectively. In 2018, purchase price allocation adjustments increased intangible assets by $280 million and foreign currency translation adjustments decreased intangible assets by $281 million. In 2017, the gross amount of amortizable intangible assets increased by approximately $14.5 billion due to the completion of the St. Jude Medical and Alere acquisitions, partially offset by a decrease of $210 million due to the sale of certain businesses to Quidel and Siemens.

Indefinite-lived intangible assets, which relate to in-process research and development acquired in a business combination, were approximately $3.6 billion and $3.9 billion at December 31, 2018 and 2017, respectively. The decrease in indefinite-lived intangible assets in 2018 primarily relates to purchase price allocation adjustments associated with the Alere acquisition. In 2017, in-process research and development increased by $4.5 billion due to the completion of the St. Jude Medical and Alere acquisitions, a portion of which became amortizable during the year. In 2017, Abbott also recorded a $53 million impairment of an

** Abbott Laboratories and Subsidiaries**

Notes to Consolidated Financial Statements (Continued)

Note 8 — Goodwill and Intangible Assets (Continued)

in-process research and development project related to the Cardiovascular and Neuromodulation Products segment.

The estimated annual amortization expense for intangible assets recorded at December 31, 2018 is approximately $2.0 billion in 2019, $2.2 billion in 2020, $2.1 billion in 2021, $2.0 billion in 2022 and $2.0 billion in 2023. Amortizable intangible assets are amortized over 2 to 20 years (weighted average 12 years).

Note 9 — Restructuring Plans

In 2017 and 2018, Abbott management approved restructuring plans as part of the integration of the acquisitions of St. Jude Medical into the Cardiovascular and Neuromodulation Products segment, and Alere into the Diagnostic Products segment, in order to leverage economies of scale and reduce costs. Abbott recorded employee related severance and other charges of approximately $52 million in 2018 and $187 million in 2017. Approximately $5 million in 2018 and 2017 is recorded in Cost of products sold, approximately $10 million in 2018 is recorded in Research and development, and approximately $37 million in 2018 and $182 million in 2017 are recorded in Selling, general and administrative expense. Abbott also assumed restructuring liabilities of approximately $23 million as part of the St Jude Medical and Alere acquisitions. The following summarizes the activity related to these actions and the status of the related accruals:

(in millions)
Liabilities assumed as part of business acquisitions		$	23
Restructuring charges			187
Payments and other adjustments			(142	)
​	​	​	​	​
Accrued balance at December 31, 2017			68
Restructuring charges			52
Payments and other adjustments			(79	)
​	​	​	​	​
Accrued balance at December 31, 2018		$	41
​	​	​	​	​
​	​	​	​	​
​	​	​	​	​

From 2016 to 2018, Abbott management approved plans to streamline operations in order to reduce costs and improve efficiencies in various Abbott businesses including the nutritional, established pharmaceuticals and vascular businesses. Abbott recorded employee related severance and other charges of approximately $28 million in 2018, $120 million in 2017 and $32 million in 2016. Approximately $10 million in 2018, $7 million in 2017, and $9 million in 2016 are recorded in Cost of products sold, approximately $2 million in 2018, $77 million in 2017 and $5 million in 2016 are recorded in Research and development and approximately $16 million in 2018, $36 million in 2017 and $18 million in 2016 are recorded in Selling, general and administrative expense. Additional charges of approximately $2 million in 2017 and 2016 were recorded primarily for accelerated depreciation.

** Abbott Laboratories and Subsidiaries**

Notes to Consolidated Financial Statements (Continued)

Note 9 — Restructuring Plans (Continued)

The following summarizes the activity for these restructurings:

(in millions)
Restructuring charges		$	32
Payments and other adjustments			(15	)
​	​	​	​	​
Accrued balance at December 31, 2016			17
Restructuring charges			120
Payments and other adjustments			(18	)
​	​	​	​	​
Accrued balance at December 31, 2017			119
Restructuring charges			28
Payments and other adjustments			(77	)
​	​	​	​	​
Accrued balance at December 31, 2018		$	70
​	​	​	​	​
​	​	​	​	​
​	​	​	​	​

Note 10 — Incentive Stock Program

The 2017 Incentive Stock Program authorizes the granting of nonqualified stock options, restricted stock awards, restricted stock units, performance awards, foreign benefits and other share-based awards. Stock options and restricted stock awards and units comprise the majority of benefits that have been granted and are currently outstanding under this program and a prior program. In 2018, Abbott granted 5,760,221 stock options, 871,331 restricted stock awards and 8,093,546 restricted stock units under this program.

Under Abbott's stock incentive programs, the purchase price of shares under option must be at least equal to the fair market value of the common stock on the date of grant, and the maximum term of an option is 10 years. Options generally vest equally over three years. Restricted stock awards generally vest over 3 years, with no more than one-third of the award vesting in any one year upon Abbott reaching a minimum return on equity target. Restricted stock units vest over three years and upon vesting, the recipient receives one share of Abbott stock for each vested restricted stock unit. The aggregate fair market value of restricted stock awards and units is recognized as expense over the requisite service period, which may be shorter than the vesting period if an employee is retirement eligible. Forfeitures are estimated at the time of grant. Restricted stock awards and settlement of vested restricted stock units are issued out of treasury shares. Abbott generally issues new shares for exercises of stock options. As a policy, Abbott does not purchase its shares relating to its share-based programs.

In April 2017, Abbott's shareholders authorized the 2017 Incentive Stock Program under which a maximum of 170 million shares were available for issuance. At December 31, 2018, approximately 144 million shares remained available for future issuance.

In connection with the completion of the St. Jude Medical acquisition in the first quarter of 2017, unvested St. Jude Medical stock options and restricted stock units were assumed by Abbott and converted into Abbott options and restricted stock units (as applicable) of substantially equivalent value, in accordance with the merger agreement. The number of shares underlying the converted options was 7,364,571 at a weighted average exercise price of $30.50. The number of restricted stock units converted was 2,324,500 at a weighted average grant date fair value of $37.69.

** Abbott Laboratories and Subsidiaries**

Notes to Consolidated Financial Statements (Continued)

Note 10 — Incentive Stock Program (Continued)

The number of restricted stock awards and units outstanding and the weighted-average grant-date fair value at December 31, 2018 and December 31, 2017 was 15,952,602 and $52.11 and 15,518,719 and $42.82, respectively. The number of restricted stock awards and units, and the weighted-average grant-date fair value, that were granted, vested and lapsed during 2018 were 8,964,877 and $60.10, 7,522,375 and $42.85 and 1,008,619 and $49.27, respectively. The fair market value of restricted stock awards and units vested in 2018, 2017 and 2016 was $458 million, $348 million and $225 million, respectively.

		Options Outstanding									Exercisable Options
		Shares			Weighted Average Exercise Price			Weighted Average Remaining Life (Years)			Shares			Weighted Average Exercise Price			Weighted Average Remaining Life (Years)
December 31, 2017			35,813,800		$	36.85			5.8			22,216,890		$	34.54			4.7
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Granted			5,760,221			60.02
Exercised			(7,690,569	)		30.34
Lapsed			(808,839	)		44.77
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
December 31, 2018			33,074,613		$	42.21			6.3			21,660,783		$	38.05			5.3
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​

The aggregate intrinsic value of options outstanding and exercisable at December 31, 2018 were $996 million and $743 million, respectively. The total intrinsic value of options exercised in 2018, 2017 and 2016 was $249 million, $233 million and $98 million, respectively. The total unrecognized compensation cost related to all share-based compensation plans at December 31, 2018 amounted to approximately $364 million, which is expected to be recognized over the next three years.

Total non-cash stock compensation expense charged against income from continuing operations in 2018, 2017 and 2016 for share-based plans totaled approximately $477 million, $406 million and $310 million, respectively, and the tax benefit recognized was approximately $185 million, $242 million and $100 million, respectively. The decrease in the tax benefit in 2018 primarily relates to the Tax Cuts and Jobs Act (TCJA), which reduces the U.S. federal corporate tax rate from 35% to 21%. The increase in the 2017 tax benefit primarily relates to the $120 million of tax benefit recorded in income after the adoption of ASU 2016-09. Stock compensation cost capitalized as part of inventory is not significant.

The fair value of an option granted in 2018, 2017 and 2016 was $10.93, $6.54, and $4.38, respectively. The fair value of an option grant was estimated using the Black-Scholes option-pricing model with the following assumptions:

		2018			2017			2016
Risk-free interest rate			2.7	%		2.1	%		1.4	%
Average life of options (years)			6.0			6.0			6.0
Volatility			19.0	%		18.0	%		17.0	%
Dividend yield			1.9	%		2.4	%		2.7	%

The risk-free interest rate is based on the rates available at the time of the grant for zero-coupon U.S. government issues with a remaining term equal to the option's expected life. The average life of an option is based on both historical and projected exercise and lapsing data. Expected volatility is based on implied volatilities from traded options on Abbott's stock and historical volatility of Abbott's stock over the expected life of the option. Dividend yield is based on the option's exercise price and annual dividend rate at the time of grant.

** Abbott Laboratories and Subsidiaries**

Notes to Consolidated Financial Statements (Continued)

Note 11 — Debt and Lines of Credit

The following is a summary of long-term debt at December 31: (in millions)

		2018			2017
5.125% Notes, due 2019		$	—		$	947
2.35% Notes, due 2019			—			2,850
2.50% Line of credit borrowing due 2019			—			1,150
0.00% Notes, due 2020			1,300			—
2.80% Notes, due 2020			500			500
4.125% Notes, due 2020			—			597
2.00% Notes, due 2020			—			750
2.90% Notes, due 2021			2,850			2,850
2.55% Notes, due 2022			750			750
2.62% Term loan due 2022			—			2,800
0.875% Notes, due 2023			1,303			—
3.25% Notes, due 2023			—			900
3.40% Notes, due 2023			1,050			1,500
3.875% Notes, due 2025			500			500
2.95% Notes, due 2025			1,000			1,000
1.50% Notes, due 2026			1,300			—
3.75% Notes, due 2026			1,700			3,000
4.75% Notes, due 2036			1,650			1,650
6.15% Notes, due 2037			547			547
6.00% Notes, due 2039			515			515
5.30% Notes, due 2040			694			694
4.75% Notes, due 2043			700			700
4.90% Notes, due 2046			3,250			3,250
Unamortized debt issuance costs			(102	)		(119	)
Other, including fair value adjustments relating to interest rate hedge contracts designated as fair value hedges			(148	)		(121	)
​	​	​	​	​	​	​	​
Total, net of current maturities			19,359			27,210
Current maturities of long-term debt			7			508
​	​	​	​	​	​	​	​
Total carrying amount		$	19,366		$	27,718
​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​

On February 16, 2018, the board of directors authorized the early redemption of up to $5 billion of outstanding long-term notes. Redemptions under this authorization include the following:

$0.947 billion principal amount of its 5.125% Notes due 2019 — redeemed on March 22, 2018

$1.055 billion of the $2.850 billion principal amount of its 2.35% Notes due 2019 — redeemed on March 22, 2018

$1.300 billion of the $1.795 billion outstanding principal amount of its 2.35% Notes due 2019 — redeemed on June 22, 2018

$0.495 billion outstanding principal amount of its 2.35% Notes due 2019 — redeemed on September 28, 2018

** Abbott Laboratories and Subsidiaries**

Notes to Consolidated Financial Statements (Continued)

Note 11 — Debt and Lines of Credit (Continued)

On January 25, 2019, Abbott gave notice to the holders of its 2.80% Notes due 2020, that it will redeem the $500 million outstanding principal amount of these notes on February 24, 2019. After the redemption of the 2.80% Notes, approximately $700 million of the $5 billion debt redemption authorization noted above will remain available.

Abbott incurred a net charge of $14 million related to the March 22, 2018 early repayment of debt.

On September 17, 2018, Abbott repaid upon maturity the $500 million aggregate principal amount outstanding of the 2.00% Senior Notes due 2018.

On September 27, 2018, Abbott's wholly owned subsidiary, Abbott Ireland Financing DAC, completed a euro debt offering of €3.420 billion of long-term debt consisting of €1.140 billion of non-interest bearing Senior Notes due 2020 at 99.727% of par value; €1.140 billion of 0.875% Senior Notes due 2023 at 99.912% of par value; and €1.140 billion of 1.50% Senior Notes due 2026 at 99.723% of par value. The proceeds equated to approximately $4 billion. The notes are guaranteed by Abbott.

On October 28, 2018, Abbott redeemed approximately $4 billion of debt, which included $750 million principal amount of its 2.00% Notes due 2020; $597 million principal amount of its 4.125% Notes due 2020; $900 million principal amount of its 3.25% Notes due 2023; $450 million principal amount of its 3.4% Notes due 2023; and $1.300 billion principal amount of its 3.75% Notes due 2026. These amounts are in addition to the $5 billion authorization discussed above. In conjunction with the redemption, Abbott unwound approximately $1.1 billion in interest rate swaps relating to the 3.40% Note due in 2023 and the 3.75% Note due in 2026. Abbott incurred a net charge of $153 million related to the early repayment of this debt and the unwinding of related interest rate swaps.

On November 30, 2018, Abbott entered into a Five Year Credit Agreement (Revolving Credit Agreement) and terminated the 2014 revolving credit agreement. There were no outstanding borrowings under the 2014 revolving credit agreement at the time of its termination. The Revolving Credit Agreement provides Abbott with the ability to borrow up to $5 billion on an unsecured basis. Any borrowings under the Revolving Credit Agreement will mature and be payable on November 30, 2023. Any borrowings under the Revolving Credit Agreement will bear interest, at Abbott's option, based on either a base rate or Eurodollar rate, plus an applicable margin based on Abbott's credit ratings.

In the first quarter of 2017, as part of the acquisition of St. Jude Medical, Abbott's long-term debt increased due to the assumption of outstanding debt previously issued by St. Jude Medical. Abbott exchanged certain St. Jude Medical debt obligations with an aggregate principal amount of approximately $2.9 billion for debt issued by Abbott which consists of:

		Principal Amount
2.00% Senior Notes due 2018		$	473.8 million
2.80% Senior Notes due 2020		$	483.7 million
3.25% Senior Notes due 2023		$	818.4 million
3.875% Senior Notes due 2025		$	490.7 million
4.75% Senior Notes due 2043		$	639.1 million

Following this exchange, approximately $194.2 million of existing St. Jude Medical notes remained outstanding across the five series of existing notes which have the same coupons and maturities as those listed above. There were no significant costs associated with the exchange of debt. In addition, during the

** Abbott Laboratories and Subsidiaries**

Notes to Consolidated Financial Statements (Continued)

Note 11 — Debt and Lines of Credit (Continued)

first quarter of 2017, Abbott assumed and subsequently repaid approximately $2.8 billion of various St. Jude Medical debt obligations.

On January 4, 2017, as part of funding the cash portion of the St. Jude Medical acquisition, Abbott borrowed $2.0 billion under a 120-day senior unsecured bridge term loan facility. This facility was repaid during the first quarter of 2017.

In 2017, Abbott issued 364-day yen-denominated debt, of which $199 million and $195 million was outstanding at December 31, 2018 and 2017, respectively. In 2017, Abbott also paid off a $479 million yen-denominated short-term borrowing during the year.

On July 31, 2017, Abbott entered into a 5-year term loan agreement that allowed Abbott to borrow up to $2.8 billion on an unsecured basis for the acquisition of Alere. On October 3, 2017, Abbott borrowed $2.8 billion under this term loan agreement to finance the acquisition of Alere, to repay certain indebtedness of Abbott and Alere, and to pay fees and expenses in connection with the acquisition. Borrowings under the term loan bore interest based on a Eurodollar rate, plus an applicable margin based on Abbott's credit ratings. Abbott paid off this term loan on January 5, 2018.

On October 3, 2017 Abbott borrowed $1.7 billion under its lines of credit. Proceeds from such borrowing were used to finance the acquisition of Alere, to repay certain indebtedness of Abbott and Alere, and to pay fees and expenses in connection with the acquisition. These lines of credit were part of a 2014 revolving credit agreement that provided Abbott with the ability to borrow up to $5 billion on an unsecured basis. Advances under the revolving credit agreement, including the $1.7 billion borrowing in October 2017, were scheduled to mature and be payable on July 10, 2019. The $1.7 billion borrowing bore interest based on a Eurodollar rate, plus an applicable margin based on Abbott's credit ratings. Prior to October 3, 2017, no amounts were previously drawn under the revolving credit agreement. In the fourth quarter of 2017, Abbott paid off $550 million on the revolving loan. Abbott paid off the remaining balance on this revolving loan on January 5, 2018.

In the fourth quarter of 2017, in conjunction with the acquisition of Alere, Abbott assumed and subsequently repaid $3.0 billion of Alere's debt.

In November 2016, Abbott issued $15.1 billion of medium and long-term debt to primarily fund the cash portion of the acquisition of St. Jude Medical. Abbott issued $2.85 billion of 2.35% Senior Notes due November 22, 2019; $2.85 billion of 2.90% Senior Notes due November 30, 2021; $1.50 billion of 3.40% Senior Notes due November 30, 2023; $3.00 billion of 3.75% Senior Notes due November 30, 2026; $1.65 billion of 4.75% Senior Notes due November 30, 2036; and $3.25 billion of 4.90% Senior Notes due November 30, 2046. In November 2016, Abbott also entered into interest rate swap contracts totaling $3.0 billion related to the new debt, which have the effect of changing Abbott's obligation from a fixed interest rate to a variable interest rate obligation on the related debt instruments.

In February 2016, Abbott obtained a commitment for a 364-day senior unsecured bridge term loan facility for an amount not to exceed $9 billion in conjunction with its pending acquisition of Alere. This commitment, which was automatically extended for up to 90 days on January 29, 2017, expired on April 30, 2017 and was not renewed since Abbott did not need this bridge facility to finance the Alere acquisition. The fees associated with the bridge facilities were recognized in interest expense.

** Abbott Laboratories and Subsidiaries**

Notes to Consolidated Financial Statements (Continued)

Note 11 — Debt and Lines of Credit (Continued)

Principal payments required on long-term debt outstanding at December 31, 2018 are $7 million in 2019, $1.8 billion in 2020, $2.9 billion in 2021, $750 million in 2022, $2.3 billion in 2023 and $11.8 billion in 2024 and thereafter.

At December 31, 2018, Abbott's long-term debt rating was BBB by Standard & Poor's Corporation and Baa1 by Moody's. Abbott has readily available financial resources, including lines of credit of $5.0 billion which expire in 2023 and support commercial paper borrowing arrangements. Abbott's weighted-average interest rate on short-term borrowings was 0.4% at December 31, 2018, 0.3% at December 31, 2017 and 0.6% at December 31, 2016.

Note 12 — Financial Instruments, Derivatives and Fair Value Measures

Certain Abbott foreign subsidiaries enter into foreign currency forward exchange contracts to manage exposures to changes in foreign exchange rates for anticipated intercompany purchases by those subsidiaries whose functional currencies are not the U.S. dollar. These contracts, with gross notional amounts totaling $5.1 billion at December 31, 2018, and $3.3 billion at December 31, 2017, are designated as cash flow hedges of the variability of the cash flows due to changes in foreign exchange rates and are recorded at fair value. Accumulated gains and losses as of December 31, 2018 will be included in Cost of products sold at the time the products are sold, generally through the next twelve to eighteen months.

Abbott enters into foreign currency forward exchange contracts to manage currency exposures for foreign currency denominated third-party trade payables and receivables, and for intercompany loans and trade accounts payable where the receivable or payable is denominated in a currency other than the functional currency of the entity. For intercompany loans, the contracts require Abbott to sell or buy foreign currencies, primarily European currencies, in exchange for primarily U.S. dollars and European currencies. For intercompany and trade payables and receivables, the currency exposures are primarily the U.S. dollar and European currencies. At December 31, 2018, 2017 and 2016, Abbott held gross notional amounts of $13.6 billion, $20.1 billion and $14.9 billion, respectively, of such foreign currency forward exchange contracts.

In March 2017, Abbott repaid its $479 million foreign denominated short-term debt which was designated as a hedge of the net investment in a foreign subsidiary. At December 31, 2016, the value of this short-term debt was $454 million and changes in the fair value of the debt up through the date of repayment due to changes in exchange rates were recorded in Accumulated other comprehensive income (loss), net of tax.

Abbott is a party to interest rate hedge contracts totaling approximately $2.9 billion at December 31, 2018, $4.0 billion at December 31, 2017 and $5.5 billion at December 31, 2016, to manage its exposure to changes in the fair value of fixed-rate debt. These contracts are designated as fair value hedges of the variability of the fair value of fixed-rate debt due to changes in the long-term benchmark interest rates. The effect of the hedge is to change a fixed-rate interest obligation to a variable rate for that portion of the debt. Abbott records the contracts at fair value and adjusts the carrying amount of the fixed-rate debt by an offsetting amount.

In October 2018, Abbott unwound approximately $1.1 billion in interest rate swaps relating to the 3.40% Note due in 2023 and the 3.75% Note due in 2026. As a part of the unwinding, Abbott paid approximately $90 million in cash, which was included in the Financing Activities section of the Consolidated Statement of Cash Flows in 2018.

** Abbott Laboratories and Subsidiaries**

Notes to Consolidated Financial Statements (Continued)

Note 12 — Financial Instruments, Derivatives and Fair Value Measures (Continued)

In the second quarter of 2017, Abbott unwound approximately $1.5 billion in interest rate swaps relating to the 2.00% Note due in 2020 and the 2.55% Note due in 2022. The proceeds received were not significant.

In December 2016, Abbott unwound approximately $1.5 billion in interest rate swaps relating to the 4.125% Note due in 2020 and the 5.125% Note due in 2019. As part of the unwinding, Abbott received approximately $55 million in cash, which was included in the Financing Activities section of the Consolidated Statement of Cash Flows in 2016.

The following table summarizes the amounts and location of certain derivative financial instruments as of December 31:

		Fair Value — Assets								Fair Value — Liabilities
(in millions)		2018			2017			Balance Sheet Caption		2018			2017			Balance Sheet Caption
Interest rate swaps designated as fair value hedges		$	—		$	—		Deferred income taxes and other assets		$	100		$	93		Post-employment obligations and other long-term liabilities
Foreign currency forward exchange contracts —
Hedging instruments			81			21		Other prepaid expenses and receivables			44			106		Other accrued liabilities
Others not designated as hedges			33			117		Other prepaid expenses and receivables			51			99		Other accrued liabilities
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
		$	114		$	138				$	195		$	298
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​

The following table summarizes the activity for foreign currency forward exchange contracts designated as cash flow hedges, debt designated as a hedge of net investment in a foreign subsidiary and certain other derivative financial instruments, as well as the amounts and location of income (expense) and gain (loss) reclassified into income.

		Gain (loss) Recognized in Other Comprehensive Income (loss)									Income (expense) and Gain (loss) Reclassified into Income
		Income Statement Caption
(in millions)		2018			2017			2016			2018			2017			2016
Foreign currency forward exchange contracts designated as cash flow hedges		$	73		$	(226	)	$	49		$	(114	)	$	(48	)	$	48		Cost of products sold
Debt designated as a hedge of net investment in a foreign subsidiary			—			(25	)		(15	)		n/a			n/a			n/a		n/a
Interest rate swaps designated as fair value hedges			n/a			n/a			n/a			(97	)		(24	)		(127	)	Interest expense

Losses of $100 million and $64 million, and gains of $8 million were recognized in 2018, 2017 and 2016, respectively, related to foreign currency forward exchange contracts not designated as hedges. These amounts are reported in the Consolidated Statement of Earnings on the Net foreign exchange (gain) loss line.

The interest rate swaps are designated as fair value hedges of the variability of the fair value of fixed-rate debt due to changes in the long-term benchmark interest rates. The hedged debt is marked to market, offsetting the effect of marking the interest rate swaps to market.

The carrying values and fair values of certain financial instruments as of December 31 are shown in the table below. The carrying values of all other financial instruments approximate their estimated fair values.

** Abbott Laboratories and Subsidiaries**

Notes to Consolidated Financial Statements (Continued)

Note 12 — Financial Instruments, Derivatives and Fair Value Measures (Continued)

The counterparties to financial instruments consist of select major international financial institutions. Abbott does not expect any losses from nonperformance by these counterparties.

		2018						2017
(in millions)		Carrying Value			Fair Value			Carrying Value			Fair Value
Long-term Investment Securities:
Equity securities		$	856		$	856		$	797		$	797
Other			41			41			86			86
Total Long-Term Debt			(19,366	)		(19,871	)		(27,718	)		(29,018	)
Foreign Currency Forward Exchange Contracts:
Receivable position			114			114			138			138
(Payable) position			(95	)		(95	)		(205	)		(205	)
Interest Rate Hedge Contracts:
(Payable) position			(100	)		(100	)		(93	)		(93	)

The following table summarizes the bases used to measure certain assets and liabilities at fair value on a recurring basis in the balance sheet:

					Basis of Fair Value Measurement
(in millions)		Outstanding Balances			Quoted Prices in Active Markets			Significant Other Observable Inputs			Significant Unobservable Inputs
December 31, 2018:
Equity securities		$	320		$	320		$	—		$	—
Foreign currency forward exchange contracts			114			—			114			—
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total Assets		$	434		$	320		$	114		$	—
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Fair value of hedged long-term debt		$	2,743		$	—		$	2,743		$	—
Interest rate swap financial instruments			100			—			100			—
Foreign currency forward exchange contracts			95			—			95			—
Contingent consideration related to business combinations			71			—			—			71
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total Liabilities		$	3,009		$	—		$	2,938		$	71
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
December 31, 2017:
Equity securities		$	374		$	374		$	—		$	—
Foreign currency forward exchange contracts			138			—			138			—
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total Assets		$	512		$	374		$	138		$	—
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Fair value of hedged long-term debt		$	3,898		$	—		$	3,898		$	—
Interest rate swap financial instruments			93			—			93			—
Foreign currency forward exchange contracts			205			—			205			—
Contingent consideration related to business combinations			120			—			—			120
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total Liabilities		$	4,316		$	—		$	4,196		$	120
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​

The fair value of foreign currency forward exchange contracts is determined using a market approach, which utilizes values for comparable derivative instruments. The fair value of the debt was determined based

** Abbott Laboratories and Subsidiaries**

Notes to Consolidated Financial Statements (Continued)

Note 12 — Financial Instruments, Derivatives and Fair Value Measures (Continued)

on the face value of the debt adjusted for the fair value of the interest rate swaps, which is based on a discounted cash flow analysis using significant other observable inputs.

Contingent consideration relates to businesses acquired by Abbott. The fair value of the contingent consideration was determined based on independent appraisals, at the time of the business acquisition, adjusted for the time value of money and other changes in fair value. The maximum amount for certain contingent consideration is not determinable as it is based on a percent of certain sales. Excluding such contingent consideration, the maximum amount estimated to be due is approximately $480 million, which is dependent upon attaining certain sales thresholds or based on the occurrence of certain events, such as regulatory approvals.

Note 13 — Litigation and Environmental Matters

Abbott has been identified as a potentially responsible party for investigation and cleanup costs at a number of locations in the United States and Puerto Rico under federal and state remediation laws and is investigating potential contamination at a number of company-owned locations. Abbott has recorded an estimated cleanup cost for each site for which management believes Abbott has a probable loss exposure. No individual site cleanup exposure is expected to exceed $4 million, and the aggregate cleanup exposure is not expected to exceed $10 million.

Abbott is involved in various claims and legal proceedings, and Abbott estimates the range of possible loss for its legal proceedings and environmental exposures to be from approximately $125 million to $165 million. The recorded accrual balance at December 31, 2018 for these proceedings and exposures was approximately $145 million. This accrual represents management's best estimate of probable loss, as defined by FASB ASC No. 450, "Contingencies." Within the next year, legal proceedings may occur that may result in a change in the estimated loss accrued by Abbott. While it is not feasible to predict the outcome of all such proceedings and exposures with certainty, management believes that their ultimate disposition should not have a material adverse effect on Abbott's financial position, cash flows, or results of operations.

** Abbott Laboratories and Subsidiaries**

Notes to Consolidated Financial Statements (Continued)

Note 14 — Post-Employment Benefits

Retirement plans consist of defined benefit, defined contribution and medical and dental plans. Information for Abbott's major defined benefit plans and post-employment medical and dental benefit plans is as follows:

		Defined Benefit Plans						Medical and Dental Plans
(in millions)		2018			2017			2018			2017
Projected benefit obligations, January 1		$	9,953		$	8,517		$	1,393		$	1,274
Service cost — benefits earned during the year			293			283			26			25
Interest cost on projected benefit obligations			308			287			48			45
(Gains) losses, primarily changes in discount rates, plan design changes, law changes and differences between actual and estimated health care costs			(1,044	)		752			(106	)		149
Benefits paid			(295	)		(276	)		(68	)		(80	)
Other, including foreign currency translation			(122	)		390			(1	)		(20	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Projected benefit obligations, December 31		$	9,093		$	9,953		$	1,292		$	1,393
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Plan assets at fair value, January 1		$	9,298		$	7,542		$	419		$	416
Actual return (loss) on plans' assets			(450	)		1,107			(20	)		65
Company contributions			114			645			12			12
Benefits paid			(295	)		(276	)		(60	)		(74	)
Other, including foreign currency translation			(114	)		280			—			—
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Plan assets at fair value, December 31		$	8,553		$	9,298		$	351		$	419
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Projected benefit obligations greater than plan assets, December 31		$	(540	)	$	(655	)	$	(941	)	$	(974	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Long-term assets		$	583		$	563		$	—		$	—
Short-term liabilities			(23	)		(21	)		(1	)		(2	)
Long-term liabilities			(1,100	)		(1,197	)		(940	)		(972	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net liability		$	(540	)	$	(655	)	$	(941	)	$	(974	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Amounts Recognized in Accumulated Other Comprehensive Income (loss):
Actuarial losses, net		$	3,326		$	3,466		$	361		$	456
Prior service cost (credits)			(2	)		(9	)		(163	)		(208	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total		$	3,324		$	3,457		$	198		$	248
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​

The projected benefit obligations for non-U.S. defined benefit plans was $2.7 billion and $3.0 billion at December 31, 2018 and 2017, respectively. The accumulated benefit obligations for all defined benefit plans were $8.3 billion and $8.9 billion at December 31, 2018 and 2017, respectively.

** Abbott Laboratories and Subsidiaries**

Notes to Consolidated Financial Statements (Continued)

Note 14 — Post-Employment Benefits (Continued)

For plans where the accumulated benefit obligations exceeded plan assets at December 31, 2018 and 2017, the aggregate accumulated benefit obligations, the projected benefit obligations and the aggregate plan assets were as follows:

(in millions)		2018			2017
Accumulated benefit obligation		$	1,265		$	1,664
Projected benefit obligation			1,362			1,892
Fair value of plan assets			375			696

The components of the net periodic benefit cost were as follows:

		Defined Benefit Plans									Medical and Dental Plans
(in millions)		2018			2017			2016			2018			2017			2016
Service cost — benefits earned during the year		$	293		$	283		$	263		$	26		$	25		$	26
Interest cost on projected benefit obligations			308			287			288			48			45			43
Expected return on plans' assets			(680	)		(613	)		(565	)		(33	)		(33	)		(35	)
Amortization of actuarial losses			205			163			129			33			23			16
Amortization of prior service cost (credits)			1			1			—			(45	)		(45	)		(45	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total cost		$	127		$	121		$	115		$	29		$	15		$	5
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​

In 2017, Abbott recognized a $10 million curtailment gain related to the sale of AMO.

Other comprehensive income (loss) for each respective year includes the amortization of actuarial losses and prior service costs (credits) as noted in the previous table. Other comprehensive income (loss) for each respective year also includes: net actuarial losses of $86 million for defined benefit plans and a gain of $53 million for medical and dental plans in 2018; net actuarial losses of $247 million for defined benefit plans and $97 million for medical and dental plans in 2017; net actuarial losses of $571 million for defined benefit plans and $20 million for medical and dental plans in 2016.

The pretax amount of actuarial losses and prior service cost (credits) included in Accumulated other comprehensive income (loss) at December 31, 2018 that is expected to be recognized in the net periodic benefit cost in 2019 is $130 million and $1 million of expense, respectively, for defined benefit pension plans and $24 million of expense and $32 million of income, respectively, for medical and dental plans.

The weighted average assumptions used to determine benefit obligations for defined benefit plans and medical and dental plans are as follows:

		2018			2017			2016
Discount rate			4.0	%		3.4	%		3.9	%
Expected aggregate average long-term change in compensation			4.3	%		4.4	%		4.3	%

** Abbott Laboratories and Subsidiaries**

Notes to Consolidated Financial Statements (Continued)

Note 14 — Post-Employment Benefits (Continued)

The weighted average assumptions used to determine the net cost for defined benefit plans and medical and dental plans are as follows:

		2018			2017			2016
Discount rate			3.4	%		3.9	%		4.3	%
Expected return on plan assets			7.7	%		7.6	%		7.6	%
Expected aggregate average long-term change in compensation			4.4	%		4.3	%		4.3	%

The assumed health care cost trend rates for medical and dental plans at December 31 were as follows:

		2018			2017			2016
Health care cost trend rate assumed for the next year			9	%		9	%		8	%
Rate that the cost trend rate gradually declines to			5	%		5	%		5	%
Year that rate reaches the assumed ultimate rate			2025			2027			2027

The discount rates used to measure liabilities were determined based on high-quality fixed income securities that match the duration of the expected retiree benefits. The health care cost trend rates represent Abbott's expected annual rates of change in the cost of health care benefits and are forward projections of health care costs as of the measurement date. A one-percentage point increase/(decrease) in the assumed health care cost trend rate would increase/(decrease) the accumulated post-employment benefit obligations as of December 31, 2018, by $157 million /$(131) million, and the total of the service and interest cost components of net post-employment health care cost for the year then ended by approximately $12 million/$(10) million.

** Abbott Laboratories and Subsidiaries**

Notes to Consolidated Financial Statements (Continued)

Note 14 — Post-Employment Benefits (Continued)

The following table summarizes the basis used to measure the defined benefit and medical and dental plan assets at fair value:

					Basis of Fair Value Measurement
(in millions)		Outstanding Balances			Quoted Prices in Active Markets			Significant Other Observable Inputs			Significant Unobservable Inputs			Measured at NAV (k)
December 31, 2018:
Equities:
U.S. large cap (a)		$	2,168		$	1,319		$	5		$	—		$	844
U.S. mid and small cap (b)			515			226			—			—			289
International (c)			1,671			370			—			—			1,301
Fixed income securities:
U.S. government securities (d)			476			51			269			—			156
Corporate debt instruments (e)			1,150			269			701			—			180
Non-U.S. government securities (f)			405			5			—			—			400
Other (g)			199			15			55			—			129
Absolute return funds (h)			1,684			448			—			—			1,236
Commodities (i)			59			—			—			4			55
Cash and Cash Equivalents			192			123			—			—			69
Other (j)			385			11			—			—			374
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
		$	8,904		$	2,837		$	1,030		$	4		$	5,033
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
December 31, 2017:
Equities:
U.S. large cap (a)		$	2,506		$	1,600		$	—		$	—		$	906
U.S. mid and small cap (b)			670			243			—			—			427
International (c)			1,937			448			—			—			1,489
Fixed income securities:
U.S. government securities (d)			510			11			286			—			213
Corporate debt instruments (e)			930			107			411			—			412
Non-U.S. government securities (f)			625			222			—			—			403
Other (g)			216			93			27			—			96
Absolute return funds (h)			1,814			135			—			—			1,679
Commodities (i)			60			—			—			4			56
Cash and Cash Equivalents			178			12			—			—			166
Other (j)			271			7			—			—			264
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
		$	9,717		$	2,878		$	724		$	4		$	6,111
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​

(a)

A mix of index funds and actively managed equity accounts that are benchmarked to various large cap indices.

(b)

A mix of index funds and actively managed equity accounts that are benchmarked to various mid and small cap indices.

** Abbott Laboratories and Subsidiaries**

Notes to Consolidated Financial Statements (Continued)

Note 14 — Post-Employment Benefits (Continued)

(c)

A mix of index funds and actively managed pooled investment funds that are benchmarked to various non-U.S. equity indices in both developed and emerging markets.

(d)

A mix of index funds and actively managed accounts that are benchmarked to various U.S. government bond indices.

(e)

A mix of index funds and actively managed accounts that are benchmarked to various corporate bond indices.

(f)

Primarily United Kingdom, Japan and Irish government-issued bonds. In 2017, included Netherlands bonds.

(g)

Primarily asset backed securities and an actively managed, diversified fixed income vehicle benchmarked to the one-month Libor / Euribor.

(h)

Primarily funds invested by managers that have a global mandate with the flexibility to allocate capital broadly across a wide range of asset classes and strategies including, but not limited to equities, fixed income, commodities, interest rate futures, currencies and other securities to outperform an agreed upon benchmark with specific return and volatility targets.

(i)

Primarily investments in liquid commodity future contracts and private energy funds.

(j)

Primarily investments in private funds, such as private equity, private credit and private real estate.

(k)

In accordance with ASU 2015-07, investments measured at fair value using the NAV practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheet.

Equities that are valued using quoted prices are valued at the published market prices. Equities in a common collective trust or a registered investment company that are valued using significant other observable inputs are valued at the net asset value (NAV) provided by the fund administrator. The NAV is based on the value of the underlying assets owned by the fund minus its liabilities. For approximately half of these funds, investments may be redeemed once per month, with a required 7 to 30 day notice period. For the remaining funds, daily redemption of an investment is allowed. Fixed income securities that are valued using significant other observable inputs are valued at prices obtained from independent financial service industry recognized vendors. Abbott did not have any unfunded commitments related to fixed income funds at December 31, 2018 and 2017. For the majority of these funds, investments may be redeemed either weekly or monthly, with a required 2 to 14 day notice period. For the remaining funds, investments may be generally redeemed daily.

Absolute return funds and commodities are valued at the NAV provided by the fund administrator. All private funds are valued at the NAV provided by the fund on a one-quarter lag adjusted for known cash flows and significant events through the reporting date. Abbott did not have any unfunded commitments related to absolute return funds at December 31, 2018 and 2017. Investments in these funds may be generally redeemed monthly or quarterly with required notice periods ranging from 5 to 45 days. For approximately $100 million of the absolute return funds, redemptions are subject to a 25 percent gate. For commodities, investments in the private energy funds cannot be redeemed but the funds will make distributions through liquidation. The estimate of the liquidation period for each fund ranges from 2019 to 2022. Abbott's unfunded commitments in these funds as of December 31, 2018 and 2017 were not

** Abbott Laboratories and Subsidiaries**

Notes to Consolidated Financial Statements (Continued)

Note 14 — Post-Employment Benefits (Continued)

significant. Investments in the private funds (excluding private energy funds) cannot be redeemed but the funds will make distributions through liquidation. The estimate of the liquidation period for each fund ranges from 2019 to 2028. Abbott's unfunded commitment in these funds was $518 million and $489 million as of December 31, 2018 and 2017, respectively.

The investment mix of equity securities, fixed income and other asset allocation strategies is based upon achieving a desired return, as well as balancing higher return, more volatile equity securities with lower return, less volatile fixed income securities. Investment allocations are made across a range of markets, industry sectors, capitalization sizes, and in the case of fixed income securities, maturities and credit quality. The plans do not directly hold any securities of Abbott. There are no known significant concentrations of risk in the plans' assets. Abbott's medical and dental plans' assets are invested in a similar mix as the pension plan assets. The actual asset allocation percentages at year end are consistent with the company's targeted asset allocation percentages.

The plans' expected return on assets, as shown above is based on management's expectations of long-term average rates of return to be achieved by the underlying investment portfolios. In establishing this assumption, management considers historical and expected returns for the asset classes in which the plans are invested, as well as current economic and capital market conditions.

Abbott funds its domestic pension plans according to IRS funding limitations. International pension plans are funded according to similar regulations. Abbott funded $114 million in 2018 and $645 million in 2017 to defined pension plans. Abbott expects to contribute approximately $380 million to its pension plans in 2019.

Total benefit payments expected to be paid to participants, which includes payments funded from company assets, as well as paid from the plans, are as follows:

(in millions)		Defined Benefit Plans			Medical and Dental Plans
2019		$	306		$	74
2020			317			77
2021			333			78
2022			351			79
2023			369			80
2024 to 2028			2,160			418

The Abbott Stock Retirement Plan is the principal defined contribution plan. Abbott's contributions to this plan were $146 million in 2018, $79 million in 2017 and $83 million in 2016. The 2018 contributions include amounts related to participants of the St. Jude Medical Retirement Plan which was terminated in January 2018.

Note 15 — Taxes on Earnings from Continuing Operations

Taxes on earnings from continuing operations reflect the annual effective rates, including charges for interest and penalties. Deferred income taxes reflect the tax consequences on future years of differences between the tax bases of assets and liabilities and their financial reporting amounts.

The Tax Cuts and Jobs Act (TCJA) was enacted in the U.S. on December 22, 2017. The TCJA reduces the U.S. federal corporate tax rate from 35% to 21%, requires companies to pay a one-time transition tax

** Abbott Laboratories and Subsidiaries**

Notes to Consolidated Financial Statements (Continued)

Note 15 — Taxes on Earnings from Continuing Operations (Continued)

on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign sourced earnings. As of December 31, 2018, Abbott has completed its accounting for all of the enactment date income tax effects of the TCJA. If additional regulations issued by the U.S. Department of the Treasury after December 31, 2018 result in a change in judgment, the effect of such regulations will be accounted for in the period in which the regulations are finalized.

Effective for fiscal years beginning after December 31, 2017, the TCJA subjects taxpayers to tax on global intangible low-taxed income (GILTI) earned by certain foreign subsidiaries. In January 2018, the FASB staff provided guidance that an entity may make an accounting policy election to either recognize deferred taxes related to items that will give rise to GILTI in future years or provide for the tax expense related to GILTI in the year that the tax is incurred. Abbott has elected to treat the GILTI tax as a period expense and provide for the tax in the year that the tax is incurred.

In the fourth quarter of 2017, Abbott recorded an estimate of net tax expense of $1.46 billion for the impact of the TCJA, which was included in Taxes on Earnings from Continuing Operations in the Consolidated Statement of Earnings. The estimate was provisional and included a charge of approximately $2.89 billion for the transition tax, partially offset by a net benefit of approximately $1.42 billion for the remeasurement of deferred tax assets and liabilities, and a net benefit of approximately $10 million related to certain other impacts of the TCJA. In 2018, Abbott recorded $130 million of additional tax expense which increased the final tax expense related to the TCJA to $1.59 billion. The $130 million of additional tax expense reflects a $120 million increase in the transition tax from $2.89 billion to $3.01 billion and a $10 million reduction in the net benefit related to the remeasurement of deferred tax assets and liabilities.

The one-time transition tax is based on Abbott's total post-1986 earnings and profits (E&P) that were previously deferred from U.S. income taxes. The tax computation also requires the determination of the amount of post-1986 E&P considered held in cash and other specified assets. As of December 31, 2018, the remaining balance of Abbott's transition tax obligation is approximately $1.58 billion, which will be paid over the next eight years as allowed by the TCJA.

In 2018, taxes on earnings from continuing operations includes $98 million of net tax expense related to the settlement of Abbott's 2014-2016 federal income tax audit in the U.S., partial settlement of the former St. Jude Medical consolidated group's 2014 and 2015 federal income tax returns in the U.S. and audit settlements in various countries. In 2017, taxes on earnings from continuing operations included $435 million of tax expense related to the gain on the sale of the AMO business. In 2016, taxes on earnings from continuing operations included the impact of a net tax benefit of approximately $225 million, primarily as a result of the resolution of various tax positions from prior years, partially offset by the unfavorable impact of non-deductible foreign exchange losses related to Venezuela and the adjustment of the Mylan N.V. equity investment, as well as the recognition of deferred taxes associated with the then pending sale of AMO.

Undistributed foreign earnings remain indefinitely reinvested in foreign operations. Determining the amount of unrecognized deferred tax liability related to any remaining undistributed foreign earnings not subject to the transition tax and additional outside basis difference in its foreign entities is not practicable. In the U.S., Abbott's federal income tax returns through 2016 are settled except for the federal income tax returns of the former Alere consolidated group which are settled through 2014 and the former St. Jude Medical consolidated group which are settled through 2013. There are numerous other income tax jurisdictions for which tax returns are not yet settled, none of which are individually significant. Reserves for interest and penalties are not significant.

** Abbott Laboratories and Subsidiaries**

Notes to Consolidated Financial Statements (Continued)

Note 15 — Taxes on Earnings from Continuing Operations (Continued)

Earnings from continuing operations before taxes, and the related provisions for taxes on earnings from continuing operations, were as follows:

(in millions)		2018			2017			2016
Earnings From Continuing Operations Before Taxes:
Domestic		$	(430	)	$	308		$	306
Foreign			3,303			1,923			1,107
​	​	​	​	​	​	​	​	​	​	​
Total		$	2,873		$	2,231		$	1,413
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​
Taxes on Earnings From Continuing Operations:
Current:
Domestic		$	(812	)	$	2,260		$	71
Foreign			606			508			406
​	​	​	​	​	​	​	​	​	​	​
Total current			(206	)		2,768			477
​	​	​	​	​	​	​	​	​	​	​
Deferred:
Domestic			832			(679	)		(147	)
Foreign			(87	)		(211	)		20
​	​	​	​	​	​	​	​	​	​	​
Total deferred			745			(890	)		(127	)
​	​	​	​	​	​	​	​	​	​	​
Total		$	539		$	1,878		$	350
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​

Differences between the effective income tax rate and the U.S. statutory tax rate were as follows:

		2018			2017			2016
Statutory tax rate on earnings from continuing operations			21.0	%		35.0	%		35.0	%
Impact of foreign operations			(5.4	)		(16.3	)		(17.8	)
Impact of TCJA and other related items			6.3			65.5			—
Foreign-derived intangible income benefit			(1.9	)		—			—
Domestic impairment loss			(2.1	)		—			—
Excess tax benefits related to stock compensation			(3.1	)		(5.4	)		—
Research tax credit			(1.8	)		(1.9	)		(1.8	)
Resolution of certain tax positions pertaining to prior years			3.4			—			(16.1	)
Mylan share adjustment			—			—			25.5
State taxes, net of federal benefit			0.4			0.5			(1.3	)
Federal tax cost on sale of Mylan N.V. shares			—			3.4			—
All other, net			2.0			3.4			1.3
​	​	​	​	​	​	​	​	​	​	​
Effective tax rate on earnings from continuing operations			18.8	%		84.2	%		24.8	%
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​

Impact of foreign operations is primarily derived from operations in Puerto Rico, Switzerland, Ireland, the Netherlands, Costa Rica, and Singapore.

** Abbott Laboratories and Subsidiaries**

Notes to Consolidated Financial Statements (Continued)

Note 15 — Taxes on Earnings from Continuing Operations (Continued)

The tax effect of the differences that give rise to deferred tax assets and liabilities were as follows:

(in millions)		2018			2017
Deferred tax assets:
Compensation and employee benefits		$	829		$	881
Other, primarily reserves not currently deductible, and NOL's and credit carryforwards			2,546			2,857
Trade receivable reserves			196			185
Inventory reserves			97			152
Deferred intercompany profit			203			249
​	​	​	​	​	​	​	​
Total deferred tax assets before valuation allowance			3,871			4,324
Valuation allowance			(1,363	)		(1,355	)
​	​	​	​	​	​	​	​
Total deferred tax assets			2,508			2,969
​	​	​	​	​	​	​	​
Deferred tax liabilities:
Depreciation			(226	)		(200	)
Other, primarily the excess of book basis over tax basis of intangible assets			(3,557	)		(3,385	)
​	​	​	​	​	​	​	​
Total deferred tax liabilities			(3,783	)		(3,585	)
​	​	​	​	​	​	​	​
Total net deferred tax assets (liabilities)		$	(1,275	)	$	(616	)
​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​

Abbott has incurred losses in a foreign jurisdiction where realization of the future economic benefit is so remote that the benefit is not reflected as a deferred tax asset.

The following table summarizes the gross amounts of unrecognized tax benefits without regard to reduction in tax liabilities or additions to deferred tax assets and liabilities if such unrecognized tax benefits were settled:

(in millions)		2018			2017
January 1		$	1,440		$	972
Decrease in tax positions due to acquisitions			(13	)		—
Increase in tax positions due to acquisitions			—			479
Increase due to current year tax positions			164			187
Increase due to prior year tax positions			235			76
Decrease due to prior year tax positions			(611	)		(176	)
Settlements			(91	)		(57	)
Lapse of statute			(4	)		(41	)
​	​	​	​	​	​	​	​
December 31		$	1,120		$	1,440
​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​

The total amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate is approximately $1.02 billion. Abbott believes that it is reasonably possible that the recorded amount of gross unrecognized tax benefits may decrease within a range of $125 million to $350 million, including cash adjustments, within the next twelve months as a result of concluding various domestic and international tax matters.

** Abbott Laboratories and Subsidiaries**

Notes to Consolidated Financial Statements (Continued)

Note 16 — Segment and Geographic Area Information

Abbott's principal business is the discovery, development, manufacture and sale of a broad line of health care products. Abbott's products are generally sold directly to retailers, wholesalers, hospitals, health care facilities, laboratories, physicians' offices and government agencies throughout the world. On January 4, 2017, Abbott completed the acquisition of St. Jude Medical. Beginning with the first quarter of 2017, Abbott's cardiovascular and neuromodulation business includes the results of its historical Vascular Products segment and the results of the businesses acquired from St. Jude Medical from the date of acquisition. On October 3, 2017, Abbott completed the acquisition of Alere. Beginning with the fourth quarter of 2017, Abbott's Diagnostic Products reportable segment includes the results of Alere from the date of acquisition.

Abbott's reportable segments are as follows:

Established Pharmaceutical Products — International sales of a broad line of branded generic pharmaceutical products.

Nutritional Products — Worldwide sales of a broad line of adult and pediatric nutritional products.

Diagnostic Products — Worldwide sales of diagnostic systems and tests for blood banks, hospitals, commercial laboratories and alternate-care testing sites. For segment reporting purposes, the Core Laboratories Diagnostics, Rapid Diagnostics, Molecular Diagnostics and Point of Care divisions are aggregated and reported as the Diagnostic Products segment. Rapid Diagnostics is the business acquired from Alere.

Cardiovascular and Neuromodulation Products — Worldwide sales of rhythm management, electrophysiology, heart failure, vascular, structural heart and neuromodulation products. For segment reporting purposes, the Cardiac Arrhythmias & Heart Failure, Vascular, Neuromodulation and Structural Heart divisions are aggregated and reported as the Cardiovascular and Neuromodulation segment.

Non-reportable segments include AMO through the date of sale and Diabetes Care.

Abbott's underlying accounting records are maintained on a legal entity basis for government and public reporting requirements. Segment disclosures are on a performance basis consistent with internal management reporting. The cost of some corporate functions and the cost of certain employee benefits are charged to segments at predetermined rates that approximate cost. Remaining costs, if any, are not allocated to segments. In addition, intangible asset amortization is not allocated to operating segments, and intangible assets and goodwill are not included in the measure of each segment's assets.

** Abbott Laboratories and Subsidiaries**

Notes to Consolidated Financial Statements (Continued)

Note 16 — Segment and Geographic Area Information (Continued)

The following segment information has been prepared in accordance with the internal accounting policies of Abbott, as described above, and are not presented in accordance with generally accepted accounting principles applied to the consolidated financial statements.

		Net Sales to External Customers (a)									Operating Earnings (a)
(in millions)		2018			2017			2016			2018			2017			2016
Established Pharmaceuticals		$	4,422		$	4,287		$	3,859		$	894		$	848		$	723
Nutritionals			7,229			6,925			6,899			1,652			1,589			1,660
Diagnostics			7,495			5,616			4,813			1,868			1,468			1,194
Cardiovascular and Neuromodulation			9,437			8,911			2,896			2,990			2,720			1,037
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total Reportable Segments			28,583			25,739			18,467		$	7,404		$	6,625		$	4,614
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Other			1,995			1,651			2,386
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total		$	30,578		$	27,390		$	20,853
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​

(a)

Net sales were unfavorably affected by the relatively stronger U.S. dollar in 2018 and 2016. Operating earnings were unfavorably affected by the impact of foreign exchange in 2018, 2017 and 2016.

	(in millions)		2018			2017			2016
	Total Reportable Segment Operating Earnings		$	7,404		$	6,625		$	4,614
	Corporate functions and benefit plans costs			(618	)		(506	)		(411	)
	Non-reportable segments			510			306			304
	Net interest expense			(721	)		(780	)		(332	)
	Loss on extinguishment of debt			(167	)		—			—
	Share-based compensation			(477	)		(406	)		(310	)
	Amortization of intangible assets			(2,178	)		(1,975	)		(550	)
	Other, net (b)			(880	)		(1,033	)		(1,902	)
​	​	​	​	​	​	​	​	​	​	​	​
	Earnings from Continuing Operations before Taxes		$	2,873		$	2,231		$	1,413
​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​

(b)

Other, net includes inventory step-up amortization, integration costs associated with the acquisition of St. Jude Medical and Alere, and restructuring charges in 2018. In 2017, Other, net includes inventory step-up amortization, integration costs associated with the acquisition of St. Jude Medical and Alere, and restructuring charges, partially offset by the gain on the sale of the AMO business. In 2016, Other, net includes the $947 million adjustment of the Mylan equity investment and $480 million of foreign currency exchange loss related to operations in Venezuela. Charges for restructuring actions and other cost reduction initiatives were approximately $153 million in 2018, $384 million in 2017 and $167 million in 2016.

** Abbott Laboratories and Subsidiaries**

Notes to Consolidated Financial Statements (Continued)

Note 16 — Segment and Geographic Area Information (Continued)

		Depreciation									Additions to Property, Plant and Equipment (c)									Total Assets
(in millions)		2018			2017			2016			2018			2017			2016			2018			2017			2016
Established Pharmaceuticals		$	92		$	90		$	71		$	131		$	181		$	150		$	2,664		$	2,728		$	2,486
Nutritionals			150			164			160			86			147			199			3,071			3,160			3,189
Diagnostics			397			300			267			609			374			379			4,464			4,226			2,945
Cardiovascular and Neuromodulation			248			298			69			183			206			23			4,910			5,074			1,425
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total Reportable Segments			887			852			567			1,009			908			751		$	15,109		$	15,188		$	10,045
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Other			213			194			236			385			227			370
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total		$	1,100		$	1,046		$	803		$	1,394		$	1,135		$	1,121
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​

(c)

Amounts exclude property, plant and equipment acquired through business acquisitions.

(in millions)		2018			2017			2016
Total Reportable Segment Assets		$	15,109		$	15,188		$	10,045
Cash and investments			4,983			10,493			21,722
Non-reportable segments			991			740			1,280
Goodwill and intangible assets (d)			42,196			45,493			12,222
All other (d)			3,894			4,336			7,397
​	​	​	​	​	​	​	​	​	​	​
Total Assets		$	67,173		$	76,250		$	52,666
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​

(d)

Goodwill and intangible assets related to AMO are included in the All other line in 2016.

		Net Sales to External Customers (e)
(in millions)		2018			2017			2016
United States		$	10,839		$	9,673		$	6,486
China			2,311			2,146			1,728
Germany			1,619			1,366			1,044
India			1,333			1,237			1,114
Japan			1,326			1,255			924
Switzerland			1,005			841			766
The Netherlands			930			929			830
All Other Countries			11,215			9,943			7,961
​	​	​	​	​	​	​	​	​	​	​
Consolidated		$	30,578		$	27,390		$	20,853
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​

(e)

Sales by country are based on the country that sold the product.

Long-lived assets on a geographic basis primarily include property, plant and equipment. It excludes goodwill, intangible assets, deferred tax assets, and financial instruments. At December 31, 2018 and 2017, long-lived assets totaled $8.7 billion and $8.9 billion, respectively, and in the United States such assets totaled $4.3 billion and $4.5 billion, respectively. Long-lived asset balances associated with other countries were not material on an individual country basis in either of the two years.

** Abbott Laboratories and Subsidiaries**

Notes to Consolidated Financial Statements (Continued)

Note 17 — Quarterly Results (Unaudited)

(in millions except per share data)		2018			2017
First Quarter
Continuing Operations:
Net Sales		$	7,390		$	6,335
Gross Profit			3,739			2,751
Earnings from Continuing Operations			409			386
Basic Earnings per Common Share			0.23			0.22
Diluted Earnings per Common Share			0.23			0.22
Net Earnings			418			419
Basic Earnings Per Common Share (a)			0.24			0.24
Diluted Earnings Per Common Share (a)			0.23			0.24
Market Price Per Share-High			64.60			45.84
Market Price Per Share-Low			55.58			38.34
Second Quarter
Continuing Operations:
Net Sales		$	7,767		$	6,637
Gross Profit			3,923			3,056
Earnings from Continuing Operations			718			270
Basic Earnings per Common Share			0.41			0.15
Diluted Earnings per Common Share			0.40			0.15
Net Earnings			733			283
Basic Earnings Per Common Share (a)			0.42			0.16
Diluted Earnings Per Common Share (a)			0.41			0.16
Market Price Per Share-High			63.85			49.59
Market Price Per Share-Low			56.81			42.31
Third Quarter
Continuing Operations:
Net Sales		$	7,656		$	6,829
Gross Profit			3,946			3,452
Earnings from Continuing Operations			552			561
Basic Earnings per Common Share			0.31			0.32
Diluted Earnings per Common Share			0.31			0.32
Net Earnings			563			603
Basic Earnings Per Common Share (a)			0.32			0.34
Diluted Earnings Per Common Share (a)			0.32			0.34
Market Price Per Share-High			73.58			54.80
Market Price Per Share-Low			60.32			47.83
Fourth Quarter
Continuing Operations:
Net Sales		$	7,765		$	7,589
Gross Profit			4,086			3,747
Earnings (Loss) from Continuing Operations			655			(864	)
Basic Earnings (Loss) per Common Share			0.37			(0.50	)
Diluted Earnings (Loss) per Common Share			0.37			(0.50	)
Net Earnings (Loss)			654			(828	)
Basic Earnings (Loss) Per Common Share (a)			0.37			(0.48	)
Diluted Earnings (Loss) Per Common Share (a)			0.37			(0.48	)
Market Price Per Share-High			74.92			57.77
Market Price Per Share-Low			65.44			53.20

(a)

The sum of the four quarters of earnings per share for 2018 and 2017 may not add to the full year earnings per share amount due to rounding and/or the use of quarter-to-date weighted average shares to calculate the earnings per share amount in each respective quarter.

**Management Report on Internal Control Over Financial Reporting **

The management of Abbott Laboratories is responsible for establishing and maintaining adequate internal control over financial reporting. Abbott's internal control system was designed to provide reasonable assurance to the company's management and board of directors regarding the preparation and fair presentation of published financial statements.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Abbott's management assessed the effectiveness of the company's internal control over financial reporting as of December 31, 2018. In making this assessment, it used the criteria set forth in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our assessment, we believe that, as of December 31, 2018, the company's internal control over financial reporting was effective based on those criteria.

Abbott's independent registered public accounting firm has issued an audit report on their assessment of the effectiveness of the company's internal control over financial reporting. This report appears on page 97.

Miles D. White Chairman of the Board and Chief Executive Officer

Brian B. Yoor Executive Vice President, Finance and Chief Financial Officer

Robert E. Funck Senior Vice President, Finance and Controller

February 22, 2019

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of Abbott Laboratories

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Abbott Laboratories and subsidiaries (the Company) as of December 31, 2018 and 2017, the related consolidated statements of earnings, comprehensive income, shareholders' investment and cash flows for each of the three years in the period ended December 31, 2018, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 22, 2019 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young LLP

We have served as the Company's auditor since 2013.

Chicago, Illinois February 22, 2019

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of Abbott Laboratories

Opinion on Internal Control over Financial Reporting

We have audited Abbott Laboratories and subsidiaries' internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Abbott Laboratories and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2018 and 2017, the related consolidated statements of earnings, comprehensive income, shareholders' investment and cash flows for each of the three years in the period ended December 31, 2018, and the related notes of the Company and our report dated February 22, 2019 expressed an unqualified opinion thereon.

Basis for Opinion

The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Chicago, Illinois February 22, 2019