Quarterly report pursuant to Section 13 or 15(d)

FAIR VALUE

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FAIR VALUE
 9 Months Ended
Sep. 30, 2014
FAIR VALUE  
FAIR VALUE

9. FAIR VALUE

        The fair values of financial instruments were as follows (dollars in millions):

 
   September 30, 2014   December 31, 2013  
 
   Carrying
Value		   Estimated
Fair Value		   Carrying
Value		   Estimated
Fair Value		  

Non-qualified employee benefit plan investments

   $ 21   $ 21   $ 21   $ 21  

Cross-currency interest rate contracts

     30     30     2     2  

Interest rate contracts

     (7 )   (7 )   (10 )   (10 )

Long-term debt (including current portion)

     (4,026 )   (4,069 )   (3,910 )   (4,010 )

        The carrying amounts reported in our condensed consolidated balance sheets (unaudited) of cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of the immediate or short-term maturity of these financial instruments. The fair value of non-qualified employee benefit plan investments is obtained through market observable pricing using prevailing market prices. The estimated fair values of our long-term debt are based on quoted market prices for the identical liability when traded as an asset in an active market (Level 1).

        The fair value estimates presented herein are based on pertinent information available to management as of September 30, 2014 and December 31, 2013. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since September 30, 2014 and current estimates of fair value may differ significantly from the amounts presented herein.

        The following assets and liabilities are measured at fair value on a recurring basis (dollars in millions):

 
    
   Fair Value Amounts Using  
Description
  September 30,
2014		   Quoted prices in
active markets for
identical assets
(Level 1)(3)		   Significant other
observable
inputs
(Level 2)(3)		   Significant
unobservable
inputs
(Level 3)(3)		  

Assets:

                          

Available-for sale equity securities:

                          

Equity mutual funds

   $ 21   $ 21   $ —   $ —  

Derivatives:

                          

Cross-currency interest rate contracts(1)          

     30     —     30     —  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total assets

   $ 51   $ 21   $ 30   $ —  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
                   

Liabilities:

                          

Derivatives:

                          

Interest rate contracts(2)

   $ (7 ) $ —   $ (7 ) $ —  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
                   


 

 
    
   Fair Value Amounts Using  
Description
  December 31,
2013		   Quoted prices in
active markets for
identical assets
(Level 1)(3)		   Significant other
observable
inputs
(Level 2)(3)		   Significant
unobservable
inputs
(Level 3)(3)		  

Assets:

                          

Available-for sale equity securities:

                          

Equity mutual funds

   $ 21   $ 21   $ —   $ —  

Derivatives:

                          

Cross-currency interest rate contracts(1)          

     2     —     2     —  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total assets

   $ 23   $ 21   $ 2   $ —  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
                   

Liabilities:

                          

Derivatives:

                          

Interest rate contracts(2)

   $ (10 ) $ —   $ (10 ) $ —  
                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
                   
(1)
The income approach is used to calculate the fair value of these instruments. Fair value represents the present value of estimated future cash flows, calculated using relevant interest rates, exchange rates, and yield curves at stated intervals. There were no material changes to the valuation methods or assumptions used to determine the fair value during the current period.

(2)
The income approach is used to calculate the fair value of these instruments. Fair value represents the present value of estimated future cash flows, calculated using relevant interest rates and yield curves at stated intervals. There were no material changes to the valuation methods or assumptions used to determine the fair value during the current period.

(3)
There were no transfers between Levels 1 and 2 within the fair value hierarchy for the nine months ended September 30, 2014 and the year ended December 31, 2013. During the nine months ended September 30, 2014 and 2013, there were no instruments categorized as Level 3 within the fair value hierarchy.

        We also have assets that under certain conditions are subject to measurement at fair value on a non-recurring basis. These assets include property, plant and equipment and those associated with acquired businesses, including goodwill and intangible assets. For these assets, measurement at fair value in periods subsequent to their initial recognition is applicable if one or more is determined to be impaired. During the nine months ended September 30, 2014 and 2013, we recorded charges of $26 million and $1 million, respectively, for the impairment of long-lived assets.