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:

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December 31, 2013 ($ in millions)

Level 1

Level 2

Level 3

Total fair value

Assets

 

 

 

 

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

 

 

 

 

Debt securities – Corporate

69

69

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

 

 

 

 

Equity securities

159

159

Debt securities – U.S. government obligations

104

104

Debt securities – European government obligations

25

25

Debt securities – Other government obligations

3

3

Debt securities – Corporate

146

146

Derivative assets – current in “Other current assets”

372

372

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

128

128

Total

129

877

1,006

 

 

 

 

 

Liabilities

 

 

 

 

Derivative liabilities – current in “Other current liabilities”

3

199

202

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

52

52

Total

3

251

254

 

 

 

 

 

 

 

 

 

 

December 31, 2012 ($ in millions)

Level 1

Level 2

Level 3

Total fair value

Assets

 

 

 

 

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

 

 

 

 

Debt securities – Corporate

128

128

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

 

 

 

 

Equity securities

3

1,279

1,282

Debt securities – U.S. government obligations

159

159

Debt securities – Other government obligations

3

3

Debt securities – Corporate

117

117

Available-for-sale securities in “Other non-current assets”:

 

 

 

 

Equity securities

2

2

Derivative assets – current in “Other current assets”

296

296

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

144

144

Total

164

1,967

2,131

 

 

 

 

 

Liabilities

 

 

 

 

Derivative liabilities – current in “Other current liabilities”

4

192

196

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

69

69

Total

4

261

265

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 2013. During 2012, impairment charges of $87 million were recorded as an adjustment to the fair value of certain equity-method investments. The non-recurring fair value measures were determined using a discounted cash flow model adjusted for industry and market conditions using Level 3 inputs and the resulting fair value of those assets remeasured during 2012 and still held at December 31, 2012, was not significant. Other non-recurring fair value measurements in 2012 were not significant.

Disclosure about financial instruments carried on a cost basis

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

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December 31, 2013 ($ 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

2,414

2,414

2,414

Time deposits

3,538

3,538

3,538

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

 

 

 

 

 

Time deposits

18

18

18

Other short-term investments

9

9

9

Short-term loans in “Receivables, net”

6

6

6

Other non-current assets:

 

 

 

 

 

Loans granted

54

52

52

Held-to-maturity securities

104

121

121

Restricted cash and cash deposits

276

95

219

314

 

 

 

 

 

 

Liabilities

 

 

 

 

 

Short-term debt and current maturities of long-term debt (excluding finance lease liabilities)

424

107

317

424

Long-term debt (excluding finance lease liabilities)

7,475

7,540

34

7,574

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

279

338

338

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2012 ($ 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

2,784

2,784

2,784

Time deposits

3,963

3,963

3,963

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

 

 

 

 

 

Time deposits

30

30

30

Other short-term investments

15

15

15

Short-term loans in “Receivables, net”

7

7

7

Other non-current assets:

 

 

 

 

 

Loans granted

58

59

59

Held-to-maturity securities

97

124

124

Restricted cash and cash deposits

271

80

242

322

 

 

 

 

 

 

Liabilities

 

 

 

 

 

Short-term debt and current maturities of long-term debt (excluding finance lease liabilities)

2,512

1,328

1,184

2,512

Long-term debt (excluding finance lease liabilities)

7,449

7,870

39

7,909

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

283

359

359

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 debt securities with original maturities up to 3 months), Marketable securities and short-term investments (excluding available-for-sale securities), and Short-term loans in “Receivables, net”: 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 approximates 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 finance lease liabilities: Includes commercial paper, bank borrowings and overdrafts as well as bonds maturing in the next 12 months. The carrying amounts of short-term debt and current maturities of long-term debt, excluding finance lease liabilities, approximate their fair values.
  • Long-term debt excluding finance lease liabilities: Fair values of outstanding bonds are determined using quoted market prices (Level 1 inputs). The fair values of other debt 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).