Note 7
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, 2018 ($ in millions)

Level 1

Level 2

Level 3

Total
fair value

Assets

 

 

 

 

Securities in “Marketable securities and short-term investments”:

 

 

 

 

Equity securities

203

203

Debt securities – U.S. government obligations

214

214

Debt securities – Corporate

88

88

Derivative assets – current in “Other current assets”

143

143

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

63

63

Total

214

497

711

 

 

 

 

 

Liabilities

 

 

 

 

Derivative liabilities – current in “Other current liabilities”

192

192

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

37

37

Total

229

229

December 31, 2017 ($ in millions)

Level 1

Level 2

Level 3

Total
fair value

Assets

 

 

 

 

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”

211

211

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

93

93

Total

204

686

890

 

 

 

 

 

Liabilities

 

 

 

 

Derivative liabilities – current in “Other current liabilities”

207

207

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

70

70

Total

277

277

During 2018, 2017 and 2016 there have been no reclassifications for any financial assets or liabilities between Level 1 and Level 2.

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:

  • Securities in “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 non-performance 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 2018 and 2017.

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, 2018 ($ in millions)

Carrying value

 

Level 1

Level 2

Level 3

Total
fair value

Assets

 

 

 

 

 

 

Cash and equivalents (excluding securities with original maturities up to 3 months):

 

 

 

 

 

 

Cash

1,983

 

1,983

1,983

Time deposits

1,462

 

1,462

1,462

Marketable securities and short-term investments (excluding securities):

 

 

 

 

 

 

Time deposits

1

 

1

1

Receivables under reverse repurchase agreements

206

 

206

206

Other non-current assets:

 

 

 

 

 

 

Loans granted

30

 

31

31

Restricted cash and cash deposits

39

 

39

39

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

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

2,008

 

1,480

528

2,008

Long-term debt (excluding capital lease obligations)

6,457

 

5,839

707

6,546

December 31, 2017 ($ in millions)

Carrying value

 

Level 1

Level 2

Level 3

Total
fair value

Assets

 

 

 

 

 

 

Cash and equivalents (excluding 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 securities):

 

 

 

 

 

 

Time deposits

271

 

271

271

Receivables under reverse repurchase agreements

305

 

305

305

Other non-current assets:

 

 

 

 

 

 

Loans granted

29

 

30

30

Restricted cash and cash deposits

35

 

35

35

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

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

694

 

400

294

694

Long-term debt (excluding capital lease obligations)

6,567

 

6,046

773

6,819

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

  • Cash and equivalents (excluding securities with original maturities up to 3 months), and Marketable securities and short-term investments (excluding 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).