Note 6 Fair values

Recurring fair value measures

The fair values of financial assets and liabilities measured at fair value on a recurring basis were as follows:

December 31, 2015 ($ in millions)

Level 1

Level 2

Level 3

Total fair value

Assets

 

 

 

 

Available-for-sale securities in “Cash and equivalents”:

 

 

 

 

Debt securities — Corporate

11

11

Available-for-sale securities in “Marketable securities and short-term investments”:

 

 

 

Equity securities

667

667

Debt securities — U.S. government obligations

121

121

Debt securities — Other government obligations

2

2

Debt securities — Corporate

508

508

Derivative assets — current in “Other current assets”

1

296

297

Derivative assets — non-current in “Other non-current assets”

186

186

Total

122

1,670

1,792

 

 

 

 

 

Liabilities

 

 

 

 

Derivative liabilities — current in “Other current liabilities”

3

315

318

Derivative liabilities — non-current in “Other non-current liabilities”

134

134

Total

3

449

452

 

 

 

 

 

 

 

 

 

 

December 31, 2014 ($ in millions)

Level 1

Level 2

Level 3

Total fair value

Assets

 

 

 

 

Available-for-sale securities in “Cash and equivalents”:

 

 

 

 

Debt securities — Corporate

85

85

Available-for-sale securities in “Marketable securities and short-term investments”:

 

 

 

Equity securities

110

110

Debt securities — U.S. government obligations

136

136

Debt securities — Other government obligations

2

2

Debt securities — Corporate

652

652

Derivative assets — current in “Other current assets”

289

289

Derivative assets — non-current in “Other non-current assets”

189

189

Total

136

1,327

1,463

 

 

 

 

 

Liabilities

 

 

 

 

Derivative liabilities — current in “Other current liabilities”

438

438

Derivative liabilities — non-current in “Other non-current liabilities”

108

108

Total

546

546

The Company uses the following methods and assumptions in estimating fair values of financial assets and liabilities measured at fair value on a recurring basis:

  • Available-for-sale securities in “Cash and equivalents”, “Marketable securities and short-term investments” and “Other non-current assets”: If quoted market prices in active markets for identical assets are available, these are considered Level 1 inputs; however, when markets are not active, these inputs are considered Level 2. If such quoted market prices are not available, fair value is determined using market prices for similar assets or present value techniques, applying an appropriate risk-free interest rate adjusted for nonperformance risk. The inputs used in present value techniques are observable and fall into the Level 2 category.
  • Derivatives: The fair values of derivative instruments are determined using quoted prices of identical instruments from an active market, if available (Level 1). If quoted prices are not available, price quotes for similar instruments, appropriately adjusted, or present value techniques, based on available market data, or option pricing models are used. Cash-settled call options hedging the Company’s WAR liability are valued based on bid prices of the equivalent listed warrant. The fair values obtained using price quotes for similar instruments or valuation techniques represent a Level 2 input unless significant unobservable inputs are used.

Non-recurring fair value measures

There were no significant non-recurring fair value measurements during 2015 and 2014.

Disclosure about financial instruments carried on a cost basis

The fair values of financial instruments carried on a cost basis were as follows:

December 31, 2015 ($ in millions)

Carrying value

Level 1

Level 2

Level 3

Total fair value

Assets

 

 

 

 

 

Cash and equivalents (excluding available-for-sale securities with original maturities up to 3 months):

 

 

 

 

 

Cash

1,837

1,837

1,837

Time deposits

2,717

2,717

2,717

Marketable securities and short-term investments (excluding available-for-sale securities):

 

 

 

 

 

Time deposits

104

104

104

Receivables under reverse repurchase agreements

224

224

224

Other short-term investments

7

7

7

Other non-current assets:

 

 

 

 

 

Loans granted

29

30

30

Held-to-maturity securities

99

110

110

Restricted cash and cash deposits

176

55

138

193

 

 

 

 

 

 

Liabilities

 

 

 

 

 

Short-term debt and current maturities of long-term debt (excluding capital lease obligations)

1,427

614

817

1,431

Long-term debt (excluding capital lease obligations)

5,889

5,307

751

6,058

Non-current deposit liabilities in “Other non-current liabilities”

215

244

244

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2014 ($ in millions)

Carrying value

Level 1

Level 2

Level 3

Total fair value

Assets

 

 

 

 

 

Cash and equivalents (excluding available-for-sale securities with original maturities up to 3 months):

 

 

 

 

 

Cash

2,218

2,218

2,218

Time deposits

3,140

3,140

3,140

Marketable securities and short-term investments (excluding available-for-sale securities):

 

 

 

 

 

Time deposits

200

200

200

Receivables under reverse repurchase agreements

219

219

219

Other short-term investments

6

6

6

Other non-current assets:

 

 

 

 

 

Loans granted

41

44

44

Held-to-maturity securities

95

109

109

Restricted cash and cash deposits

198

64

161

225

 

 

 

 

 

 

Liabilities

 

 

 

 

 

Short-term debt and current maturities of long-term debt (excluding capital lease obligations)

324

115

209

324

Long-term debt (excluding capital lease obligations)

7,198

6,148

1,404

7,552

Non-current deposit liabilities in “Other non-current liabilities”

222

267

267

The Company uses the following methods and assumptions in estimating fair values of financial instruments carried on a cost basis:

  • Cash and equivalents (excluding available-for-sale securities with original maturities up to 3 months), and Marketable securities and short-term investments (excluding available-for-sale securities): The carrying amounts approximate the fair values as the items are short-term in nature.
  • Other non-current assets: Includes (i) loans granted whose fair values are based on the carrying amount adjusted using a present value technique to reflect a premium or discount based on current market interest rates (Level 2 inputs), (ii) held-to-maturity securities (see Note 4) whose fair values are based on quoted market prices in inactive markets (Level 2 inputs), (iii) restricted cash whose fair values approximate the carrying amounts (Level 1) and (iv) cash deposits pledged in respect of certain non-current deposit liabilities whose fair values are determined using a discounted cash flow methodology based on current market interest rates (Level 2 inputs).
  • Short-term debt and current maturities of long-term debt (excluding capital lease obligations): Short-term debt includes commercial paper, bank borrowings and overdrafts. The carrying amounts of short-term debt and current maturities of long-term debt, excluding capital lease obligations, approximate their fair values.
  • Long-term debt (excluding capital lease obligations): Fair values of outstanding bonds are determined using quoted market prices (Level 1 inputs), if available. For other bonds and other long-term debt, the fair values are determined using a discounted cash flow methodology based upon borrowing rates of similar debt instruments and reflecting appropriate adjustments for non-performance risk (Level 2 inputs).
  • Non-current deposit liabilities in “Other non-current liabilities”: The fair values of non-current deposit liabilities are determined using a discounted cash flow methodology based on risk-adjusted interest rates (Level 2 inputs).