ABTAbbott Laboratories

Many of these factors may manifest individually or collectively, For example, the global economy has been impacted by geopolitical tensions focused on trade, which has increased uncertainty for global businesses such as Russia’s invasion of Ukraine Abbott. The U.S. government has imposed tariffs on imports into the U.S., and it may impose additional tariffs in the future. Some countries may retaliate with trade protection measures, including reciprocal tariffs. These tariffs or other trade protection measures could have a negative impact on macroeconomic conditions, including inflation rates, foreign currency exchange rates, and interest rates, as well as causing potential disruptions to Abbott’s global supply chain, which could adversely affect its business. Additionally, the ongoing Russia-Ukraine conflict has resulted in political instability, sanctions, economic and currency volatility, inflation higher inflation, heightened cybersecurity risks, and other operational and supply chain disruptions. To date, Abbott has been able to manage these disruptions without material impact to its results of operations. However, it is difficult to predict the future implications and consequences of the situation conflict on local, regional regional, or global economies and Abbott’s operations. There could be additional sanctions, economic volatility, cybersecurity threats, political instability, transportation and other supply disruptions, as well as collection default or liquidity risks or limited availability of resources to conduct essential business processes that could have a material adverse impact to Abbott’s operations and financial condition. The resolution and long-term impact of this matter are uncertain and difficult to predict.

Pension and Post-Employment Benefits — Abbott offers pension benefits and post-employment health care healthcare to many of its employees. Abbott engages outside actuaries to assist in the determination of the obligations and costs under these programs. Abbott must develop long-term assumptions, the most significant of which are the health care healthcare cost trend rates, discount rates rates, and the expected return on plan assets. 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 healthcare cost trend rates represent Abbott’s expected annual rates of change in the cost of health care healthcare benefits and are a forward projection of health care healthcare costs as of the measurement date. A difference between the assumed rates and the actual rates, which will not be known for years, can be significant in relation to the obligations and the annual cost recorded for these programs. The net actuarial gains for Abbott's defined benefit plans in 2025 reflect the impact of actual asset returns during the year in excess of expected returns and the impact of higher discount rates on the measurement of plan liabilities. The net actuarial losses for Abbott's medical and dental plans primarily reflect an increase in claims. At December 31, 2025, pretax net actuarial gains (losses) and prior service costs and credits recognized in Accumulated other comprehensive income (loss) were net gains of $152 million for Abbott’s defined benefit plans and net losses of $189 million for Abbott’s medical and dental plans. Actuarial losses and gains are amortized over the remaining service attribution periods of the employees under the corridor method, in accordance with the rules for accounting for post-employment benefits. Differences between the expected long-term return on plan assets and the actual annual return are amortized over a five-year period.

In November 2022, Abbott learned that the United States Department of Justice, Justice (DOJ), through the United States Attorney’s Office for the Western District of Michigan, is conducting a criminal investigation related to Abbott’s manufacturing of powdered infant formula. In December 2022, Abbott received a subpoena from the Enforcement Division of the Commission requesting information relating to Abbott’s powder infant formula business and related public disclosures. In January 2023, Abbott received a civil investigative demand from the United States Federal Trade Commission seeking information in connection with its investigation of companies who participate in bids for WIC infant formula contracts. In addition, multiple civil lawsuits have been filed against Abbott relating to Abbott’s manufacturing of certain powder powdered infant formula products. Six shareholder derivative lawsuits against certain of Abbott’s current and former directors and officers are pending in a consolidated proceeding, In re Abbott Laboratories Infant Formula Shareholder Derivative Litigation, in the U.S. District Court for the Northern District of Illinois. The consolidated lawsuit seeks monetary damages from the defendants to Abbott. In re Abbott Laboratories Infant Formula Shareholder Derivative Litigation includes: Thomas P. DiNapoli, Controller of the State of New York, as Administrative Head of the New York State and Local Retirement System, and as Trustee of the New York State Common Retirement Fund, and International Brotherhood of Teamsters Local No. 710 Pension Fund and Southeastern Pennsylvania Transportation Authority, both filed in June 2023; David Hamilton filed in April 2023; Matthew Steele filed in February 2023; Ilene Lippman filed in January 2023; and Leon Martin filed in October 2022. In August 2024, the court granted in part and denied in part the defendants’ motion to dismiss, allowing the securities and breach of fiduciary duty claims to move forward. In September 2024, Abbott’s board Board of directors Directors established an independent and disinterested special litigation committee to investigate and evaluate the asserted claims. In November 2024, the special litigation committee filed a motion to stay the case in order to conduct its investigation. In February 2025, the court granted in part and denied in part the committee's motion, allowing written discovery to proceed. In November 2025, the DOJ intervened, in part, in a civil qui tam lawsuit previously filed under seal against Abbott by three private individuals in the U.S. District Court for the Western District of Michigan. The DOJ’s intervention is related to Abbott’s manufacturing of powdered infant formula products at its facility in Sturgis, Michigan. The DOJ alleges certain violations of the Federal False Claims Act and unjust enrichment, and it seeks various damages, including statutory penalties and disgorgement of profits. In December 2025, the Attorneys General of several states filed a consolidated complaint-in-intervention in the same lawsuit alleging violations of certain state laws, including false claims acts, and seeking damages and penalties.

BASIS OF CONSOLIDATION — The consolidated financial statements include the accounts of the parent company company, subsidiaries, and subsidiaries, after elimination any variable interest entities for which Abbott is the primary beneficiary. Intercompany transactions are eliminated in consolidation. Investments in affiliates over which Abbott has a significant influence, but not a controlling interest, are accounted for using the equity method of intercompany transactions. accounting.