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FAIR VALUE MEASUREMENTS | 3 Months Ended
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Mar. 31, 2020
Fair Value Disclosures [Abstract] |
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS Bunge's various financial instruments include certain components of working capital such as trade accounts receivable and trade accounts payable. Additionally, Bunge uses short and long-term debt to fund operating requirements. Trade accounts receivable, trade accounts payable, and short-term debt are stated at their carrying value, which is a reasonable estimate of fair value. See Note 5 - Trade Structured Finance Program for trade structured finance program, Note 9 - Other Non-Current Assets for long-term receivables from farmers in Brazil, net and other long-term investments, and Note 14 - Debt for long-term debt. Bunge's financial instruments also include derivative instruments and marketable securities, which are stated at fair value. The fair value standard describes three levels within its hierarchy that may be used to measure fair value.
Level | Description | Financial Instrument (Assets / Liabilities)
Level 1 | Quoted prices (unadjusted) in active markets for identical assets or liabilities. | Exchange traded derivative contracts. Marketable securities in active markets.
Level 2 | Observable inputs, including adjusted Level 1 quotes, quoted prices for similar assets or liabilities, quoted prices in markets that are less active than traded exchanges and other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. | Exchange traded derivative contracts (less liquid market). Readily marketable inventories. Over-the-counter (‘‘OTC’’) commodity purchase and sale contracts. OTC derivatives whose value is determined using pricing models with inputs that are generally based on exchange traded prices, adjusted for location specific inputs that are primarily observable in the market or can be derived principally from or corroborated by observable market data. Marketable securities in less active markets.
Level 3 | Unobservable inputs that are supported by little or no market activity and that are a significant component of the fair value of the assets or liabilities. | Assets and liabilities whose value is determined using proprietary pricing models, discounted cash flow methodologies or similar techniques. Assets and liabilities for which the determination of fair value requires significant management judgment or estimation.
In many cases, a valuation technique used to measure fair value includes inputs from multiple levels of the fair value hierarchy. The lowest level of input that is a significant component of the fair value measurement determines the placement of the entire fair value measurement in the hierarchy. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the classification of fair value assets and liabilities within the fair value hierarchy levels. For a further definition of fair value and the associated fair value levels, refer to Note 15 - Fair Value Measurements, included in the Company's 2019 Annual Report on Form 10-K. The following table sets forth, by level, the Company’s assets and liabilities that were accounted for at fair value on a recurring basis.
| Fair Value Measurements at Reporting Date
| March 31, 2020 |  | December 31, 2019
(US$ in millions) | Level 1 |  | Level 2 |  | Level 3 |  | Total |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Readily marketable inventories (Note 7) | $ | — |  |  | $ | 3,660 |  |  | $ | 619 |  |  | $ | 4,279 |  |  | $ | — |  |  | $ | 3,703 |  |  | $ | 231 |  |  | $ | 3,934 |
Trade accounts receivable (1) | — |  |  | 19 |  |  | — |  |  | 19 |  |  | — |  |  | — |  |  | — |  |  | — |
Unrealized gain on derivative contracts (2): |  |  | 1 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate | — |  |  | 103 |  |  | — |  |  | 103 |  |  | — |  |  | 45 |  |  | — |  |  | 45 |
Foreign exchange | — |  |  | 494 |  |  | — |  |  | 494 |  |  | — |  |  | 331 |  |  | — |  |  | 331 |
Commodities | 36 |  |  | 1,019 |  |  | 18 |  |  | 1,073 |  |  | 34 |  |  | 481 |  |  | 9 |  |  | 524 |
Freight | 21 |  |  | — |  |  | 1 |  |  | 22 |  |  | 10 |  |  | — |  |  | — |  |  | 10 |
Energy | 47 |  |  | — |  |  | — |  |  | 47 |  |  | 56 |  |  | — |  |  | — |  |  | 56 |
Other (3) | 51 |  |  | 244 |  |  | — |  |  | 295 |  |  | 47 |  |  | 370 |  |  | — |  |  | 417 |
Total assets | $ | 155 |  |  | $ | 5,539 |  |  | $ | 638 |  |  | $ | 6,332 |  |  | $ | 147 |  |  | $ | 4,930 |  |  | $ | 240 |  |  | $ | 5,317 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Trade accounts payable (4) | $ | — |  |  | $ | 384 |  |  | $ | 261 |  |  | $ | 645 |  |  | $ | — |  |  | $ | 347 |  |  | $ | 31 |  |  | $ | 378 |
Unrealized loss on derivative contracts (5): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate | — |  |  | 17 |  |  | — |  |  | 17 |  |  | — |  |  | 4 |  |  | — |  |  | 4 |
Foreign exchange | — |  |  | 1,162 |  |  | — |  |  | 1,162 |  |  | — |  |  | 257 |  |  | — |  |  | 257 |
Commodities | 57 |  |  | 590 |  |  | 33 |  |  | 680 |  |  | 49 |  |  | 388 |  |  | 31 |  |  | 468 |
Freight | 21 |  |  | — |  |  | 2 |  |  | 23 |  |  | 10 |  |  | — |  |  | — |  |  | 10 |
Energy | 89 |  |  | 1 |  |  | — |  |  | 90 |  |  | 26 |  |  | — |  |  | 2 |  |  | 28 |
Equity | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total liabilities | $ | 167 |  |  | $ | 2,154 |  |  | $ | 296 |  |  | $ | 2,617 |  |  | $ | 85 |  |  | $ | 996 |  |  | $ | 64 |  |  | $ | 1,145 |
(1) | These receivables are financial instruments for which Bunge has elected the fair value option.
(2) | Unrealized gains on derivative contracts are generally included in other current assets. There were $100 million and $39 million included in other non-current assets at March 31, 2020 and December 31, 2019, respectively.
(3) | Other includes the fair values of marketable securities and investments in other current assets and other non-current assets.
(4) | These payables are hybrid financial instruments for which the Company has elected the fair value option.
(5) | Unrealized losses on derivative contracts are generally included in other current liabilities. There are $12 million and $1 million included in other non-current liabilities at March 31, 2020 and December 31, 2019, respectively.
Readily marketable inventories—RMI reported at fair value are valued based on commodity futures exchange quotations, broker or dealer quotations, or market transactions in either listed or OTC markets with appropriate adjustments for differences in local markets where the Company's inventories are located. In such cases, the inventory is classified within Level 2. Certain inventories may utilize significant unobservable data related to local market adjustments to determine fair value. In such cases, the inventory is classified as Level 3. If the Company used different methods or factors to determine fair values, amounts reported as unrealized gains and losses on derivative contracts and RMI at fair value in the consolidated balance sheets and consolidated statements of income could differ. Additionally, if market conditions change subsequent to the reporting date, amounts reported in future periods as unrealized gains and losses on derivative contracts and RMI at fair value in the consolidated balance sheets and consolidated statements of income could differ. Derivatives—The majority of exchange traded futures and options contracts and exchange cleared contracts are valued based on unadjusted quoted prices in active markets and are classified within Level 1. The majority of the Company’s exchange-traded agricultural commodity futures are cash-settled on a daily basis and, therefore, are not included in these tables. The Company's forward commodity purchase and sale contracts are classified as derivatives along with other OTC derivative instruments relating primarily to freight, energy, foreign exchange and interest rates, and are classified within Level 2 or Level 3 as described below. The Company estimates fair values based on exchange quoted prices, adjusted as appropriate for differences in local markets. These differences are generally valued using inputs from broker or dealer quotations, or market transactions in either the listed or OTC markets. In such cases, these derivative contracts are classified within Level 2. OTC derivative contracts include swaps, options and structured transactions that are generally fair valued using quantitative models that require the use of multiple market inputs including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets which are not highly active, other observable inputs relevant to the asset or liability, and market inputs corroborated by correlation or other means. These valuation models include inputs such as interest rates, prices and indices to generate continuous yield or pricing curves and volatility factors. Where observable inputs are available for substantially the full term of the asset or liability, the instrument is categorized in Level 2. Certain OTC derivatives trade in less active markets with less availability of pricing information and certain structured transactions can require internally developed model inputs that might not be observable in or corroborated by the market. Level 3 Measurements The following relates to Level 3 measurements. An instrument may transfer into or out of Level 3 due to inputs becoming either observable or unobservable. Level 3 Readily marketable inventories and other—The significant unobservable inputs resulting in Level 3 classification for RMI, physically settled forward purchase and sale contracts, and trade accounts payable, relate to certain management estimations regarding costs of transportation and other local market or location-related adjustments, primarily freight related adjustments in the interior of Brazil and the lack of market corroborated information in Canada. In both situations, the Company uses proprietary information such as purchase and sale contracts and contracted prices to value freight, premiums and discounts in its contracts. Movements in the price of these unobservable inputs alone would not have a material effect on the Company's financial statements as these contracts do not typically exceed one future crop cycle. Level 3 Derivatives—Level 3 derivative instruments utilize both market observable and unobservable inputs within the fair value measurements. These inputs include commodity prices, price volatility, interest rates, volumes and locations. The tables below present reconciliations for assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended March 31, 2020 and 2019. These instruments were valued using pricing models that management believes reflect the assumptions that would be used by a marketplace participant.
|  | Three Months Ended March 31, 2020
(US$ in millions) |  | Readily Marketable Inventories |  | Derivatives, Net |  | Trade Accounts Payable |  | Total
Balance, January 1, 2020 |  | $ | 231 |  |  | $ | (24 | ) |  | $ | (31 | ) |  | $ | 176 |
Total gains and losses (realized/unrealized) included in cost of goods sold (1) |  | 164 |  |  | 14 |  |  | 4 |  |  | 182 |
Purchases |  | 678 |  |  | 1 |  |  | (236 | ) |  | 443 |
Sales |  | (627 | ) |  | — |  |  | — |  |  | (627 | )
Issuances |  | — |  |  | (2 | ) |  | — |  |  | (2 | )
Settlements |  | — |  |  | (18 | ) |  | 61 |  |  | 43 |
Transfers into Level 3 |  | 271 |  |  | 3 |  |  | (59 | ) |  | 215 |
Transfers out of Level 3 |  | (98 | ) |  | 10 |  |  | — |  |  | (88 | )
Balance, March 31, 2020 |  | $ | 619 |  |  | $ | (16 | ) |  | $ | (261 | ) |  | $ | 342 |
(1) Readily marketable inventories, derivatives, net and trade accounts payable, include gains/(losses) of $73 million, $13 million and $5 million, respectively, that are attributable to the change in unrealized gains/(losses) relating to Level 3 assets and liabilities still held at March 31, 2020.
|  | Three Months Ended March 31, 2019
(US$ in millions) |  | Readily Marketable Inventories |  | Derivatives, Net |  | Trade Accounts Payable |  | Total
Balance, January 1, 2019 |  | $ | 246 |  |  | $ | (6 | ) |  | $ | (47 | ) |  | $ | 193 |
Total gains and losses (realized/unrealized) included in cost of goods sold (1) |  | 37 |  |  | 2 |  |  | 5 |  |  | 44 |
Purchases |  | 699 |  |  | — |  |  | (361 | ) |  | 338 |
Sales |  | (570 | ) |  | — |  |  | — |  |  | (570 | )
Settlements |  | — |  |  | 1 |  |  | (21 | ) |  | (20 | )
Transfers into Level 3 |  | 276 |  |  | 1 |  |  | 27 |  |  | 304 |
Transfers out of Level 3 |  | (55 | ) |  | — |  |  | — |  |  | (55 | )
Balance, March 31, 2019 |  | $ | 633 |  |  | $ | (2 | ) |  | $ | (397 | ) |  | $ | 234 |
(1) Readily marketable inventories, derivatives, net and trade accounts payable, includes gains/(losses) of $37 million, $6 million and $5 million, respectively, that are attributable to the change in unrealized gains/(losses) relating to Level 3 assets and liabilities still held at March 31, 2019.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19207-110258 + Details
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