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, 2017 ($ in millions)

Level 1

Level 2

Level 3

Total
fair value

Assets

 

 

 

 

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

 

 

 

 

Equity securities

165

165

Debt securities – U.S. government obligations

125

125

Debt securities – Other government obligations

2

2

Debt securities – Corporate

215

215

Receivable in “Other non-current assets”:

 

 

 

 

Receivable under securities lending arrangement

79

79

Derivative assets – current in “Other current assets”

244

244

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

101

101

Total

204

727

931

 

 

 

 

 

Liabilities

 

 

 

 

Derivative liabilities – current in “Other current liabilities”

223

223

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

75

75

Total

298

298

December 31, 2016 ($ in millions)

Level 1

Level 2

Level 3

Total
fair value

Assets

 

 

 

 

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

 

 

 

 

Equity securities

541

541

Debt securities – U.S. government obligations

220

220

Debt securities – Other government obligations

2

2

Debt securities – Corporate

95

95

Derivative assets – current in “Other current assets”

278

278

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

126

126

Total

220

1,042

1,262

 

 

 

 

 

Liabilities

 

 

 

 

Derivative liabilities – current in “Other current liabilities”

304

304

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

101

101

Total

405

405

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” and “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. The fair value of the receivable under the securities lending arrangement has been determined based on the fair value of the security lent.
  • Derivatives: The fair values of derivative instruments are determined using quoted prices of identical instruments from an active market, if available (Level 1 inputs). 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 2017 and 2016.

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, 2017 ($ 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

1,963

1,963

1,963

Time deposits

2,563

2,563

2,563

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

 

 

 

 

 

Time deposits

290

290

290

Receivables under reverse repurchase agreements

305

305

305

Other non-current assets:

 

 

 

 

 

Loans granted

32

33

33

Restricted cash and cash deposits

38

38

38

 

 

 

 

 

 

Liabilities

 

 

 

 

 

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

704

400

304

704

Long-term debt (excluding capital lease obligations)

6,569

6,046

775

6,821

December 31, 2016 ($ 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

1,704

1,704

1,704

Time deposits

1,940

1,940

1,940

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

 

 

 

 

 

Time deposits

824

824

824

Receivables under reverse repurchase agreements

268

268

268

Other short-term investments

3

3

3

Other non-current assets:

 

 

 

 

 

Loans granted

30

31

31

Restricted cash and cash deposits

59

59

59

 

 

 

 

 

 

Liabilities

 

 

 

 

 

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

980

856

124

980

Long-term debt (excluding capital lease obligations)

5,709

5,208

784

5,992

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) restricted cash whose fair values approximate the carrying amounts (Level 1 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 bonds are determined using quoted market prices (Level 1 inputs), if available. For bonds without available quoted market prices 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).