Quarterly report pursuant to Section 13 or 15(d)

FAIR VALUE

v3.10.0.1
FAIR VALUE
6 Months Ended
Jun. 30, 2018
FAIR VALUE  
FAIR VALUE

10. FAIR VALUE

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2018

 

December 31, 2017

 

Carrying

 

Estimated

 

Carrying

 

Estimated

 

Value

    

Fair Value

    

Value

    

Fair Value

Non-qualified employee benefit plan investments

$

25

 

$

25

 

$

33

 

$

33

Interest rate contracts

 

(1)

 

 

(1)

 

 

(1)

 

 

(1)

Long-term debt (including current portion)

 

(2,566)

 

 

(2,705)

 

 

(2,298)

 

 

(2,483)

 

The carrying amounts reported in our condensed consolidated balance sheets 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 values of non-qualified employee benefit plan investments are 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 June 30, 2018 and December 31, 2017. The estimated fair value amounts have not been comprehensively revalued for purposes of these financial statements since June 30, 2018 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

 

 

 

 

 

Quoted prices

 

Significant other

 

Significant

 

 

 

 

 

in active markets

 

observable

 

unobservable 

 

 

June 30, 

 

for identical

 

inputs

 

 inputs

Description

    

2018

    

assets (Level 1)(2)

    

(Level 2)(2)

    

(Level 3)

Assets:

 

 

 

 

 

    

 

 

 

 

 

 

Equity securities:

 

 

 

 

 

 

 

 

 

 

 

 

Non-qualified employee benefit plan investments

 

$

25

 

$

25

 

$

 —

 

$

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives:

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts(1)

 

$

(1)

 

$

 —

 

$

(1)

 

$

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Amounts Using

 

 

 

 

 

Quoted prices

 

Significant other

 

Significant

 

 

 

 

in active markets

 

observable

 

unobservable 

 

 

December 31, 

 

for identical

 

inputs

 

 inputs

Description

    

2017

    

assets (Level 1)(2)

    

(Level 2)(2)

    

(Level 3)

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Equity securities:

 

 

 

 

 

 

 

 

 

 

 

 

Non-qualified employee benefit plan investments

 

$

33

 

$

33

 

$

 —

 

$

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives:

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts(1)

 

$

(1)

 

$

 —

 

$

(1)

 

$

 —


(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 and yield curves at stated intervals. There were no material changes to the valuation method or assumptions used to determine the fair value during the current period.

 

(2)

There were no transfers between Levels 1 and 2 within the fair value hierarchy during the six months ended June 30, 2018 and the year ended December 31, 2017.

The following table shows a reconciliation of beginning and ending balances for the three and six months ended June 30, 2017 for instruments measured at fair value on a recurring basis using significant unobservable inputs (Level 3) (dollars in millions). During the six months ended June 30, 2018, there were no instruments categorized as Level 3 within the fair value hierarchy.

 

 

 

 

 

 

 

 

 

 

Three months

 

Six months

 

 

ended

 

ended

 

 

June 30, 2017

 

June 30, 2017

 

 

Cross-Currency

 

Cross-Currency

 

 

Interest

 

Interest

 

    

Rate Contracts

 

Rate Contracts

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

    

 

 

 

Beginning balance

 

$

29

 

$

29

Transfers into Level 3

 

 

 —

 

 

 —

Transfers out of Level 3

 

 

 —

 

 

 —

Total (losses) gains:

 

 

 

 

 

 

Included in earnings

 

 

 —

 

 

 —

Included in other comprehensive (loss) income

 

 

(13)

 

 

(13)

Purchases, sales, issuances and settlements

 

 

 —

 

 

 —

Ending balance, June 30, 2017

 

$

16

 

$

16

The amount of total gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets still held at June 30, 2017

 

$

 —

 

$

 —

 

There were no gains or losses (realized and unrealized) included in earnings for instruments measured at fair value on a recurring basis using significant unobservable inputs (Level 3).

 

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 each of the three and six months ended June 30, 2018 and 2017, we recorded charges of nil for the impairment of long‑lived assets.