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Fair Value Measurements | 6 Months Ended
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Jun. 30, 2018
Fair Value Disclosures [Abstract] |
Fair Value Measurements | FAIR VALUE MEASUREMENTS We determine the fair value of financial and non-financial assets and liabilities using the fair value hierarchy, which establishes three levels of inputs that may be used to measure fair value, as follows:
• | Level 1 inputs include quoted prices in active markets for identical assets or liabilities;
• | Level 2 inputs include observable inputs other than Level 1 inputs, such as quoted prices for similar assets or liabilities; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability. For our marketable securities, we review trading activity and pricing as of the measurement date. When sufficient quoted pricing for identical securities is not available, we use market pricing and other observable market inputs for similar securities obtained from various third-party data providers. These inputs either represent quoted prices for similar assets in active markets or have been derived from observable market data; and
• | Level 3 inputs include unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the underlying asset or liability. Our Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques and significant management judgment or estimation.
Our financial instruments consist primarily of cash and cash equivalents, marketable securities, accounts receivable, foreign currency exchange contracts, equity securities, accounts payable and short-term and long-term debt. Cash and cash equivalents, marketable debt and equity securities, and foreign currency exchange contracts are reported at their respective fair values on our Condensed Consolidated Balance Sheets. Short-term and long-term debt are reported at their amortized costs on our Condensed Consolidated Balance Sheets. The remaining financial instruments are reported in our Condensed Consolidated Balance Sheets at amounts that approximate current fair values. There were no transfers between Level 1, Level 2 and Level 3 in the periods presented. The following table summarizes the types of assets and liabilities measured at fair value on a recurring basis by level within the fair value hierarchy (in millions):
| June 30, 2018 |  | December 31, 2017
| Level 1 |  | Level 2 |  | Level 3 |  | Total |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Available-for-sale debt securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Corporate debt securities | $ | — |  |  | $ | 12,092 |  |  | $ | — |  |  | $ | 12,092 |  |  | $ | — |  |  | $ | 14,747 |  |  | $ | — |  |  | $ | 14,747 |
U.S. treasury securities | 3,391 |  |  | — |  |  | — |  |  | 3,391 |  |  | 4,061 |  |  | — |  |  | — |  |  | 4,061 |
Residential mortgage and asset-backed securities | — |  |  | 2,657 |  |  | — |  |  | 2,657 |  |  | — |  |  | 4,058 |  |  | — |  |  | 4,058 |
U.S. government agencies securities | — |  |  | 872 |  |  | — |  |  | 872 |  |  | — |  |  | 926 |  |  | — |  |  | 926 |
Certificates of deposit | — |  |  | 3,145 |  |  | — |  |  | 3,145 |  |  | — |  |  | 5,131 |  |  | — |  |  | 5,131 |
Non-U.S. government securities | — |  |  | 404 |  |  | — |  |  | 404 |  |  | — |  |  | 664 |  |  | — |  |  | 664 |
Marketable equity securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Money market funds | 7,060 |  |  | — |  |  | — |  |  | 7,060 |  |  | 4,714 |  |  | — |  |  | — |  |  | 4,714 |
Equity securities | 663 |  |  | — |  |  | — |  |  | 663 |  |  | 635 |  |  | — |  |  | — |  |  | 635 |
Deferred compensation plan | 131 |  |  | — |  |  | — |  |  | 131 |  |  | 116 |  |  | — |  |  | — |  |  | 116 |
Foreign currency derivative contracts | — |  |  | 53 |  |  | — |  |  | 53 |  |  | — |  |  | 13 |  |  | — |  |  | 13 |
Total | $ | 11,245 |  |  | $ | 19,223 |  |  | $ | — |  |  | $ | 30,468 |  |  | $ | 9,526 |  |  | $ | 25,539 |  |  | $ | — |  |  | $ | 35,065 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deferred compensation plan | $ | 131 |  |  | $ | — |  |  | $ | — |  |  | $ | 131 |  |  | $ | 116 |  |  | $ | — |  |  | $ | — |  |  | $ | 116 |
Foreign currency derivative contracts | — |  |  | 11 |  |  | — |  |  | 11 |  |  | — |  |  | 93 |  |  | — |  |  | 93 |
Total | $ | 131 |  |  | $ | 11 |  |  | $ | — |  |  | $ | 142 |  |  | $ | 116 |  |  | $ | 93 |  |  | $ | — |  |  | $ | 209 |
Our available-for-sale debt securities are classified as cash equivalents, short-term marketable securities and long-term marketable securities. See Note 4, Available-for-Sale Debt Securities for additional information. The following table summarizes the classification of our marketable equity securities in our Condensed Consolidated Balance Sheets (in millions):
| June 30, 2018 |  | December 31, 2017
Cash and cash equivalents | $ | 7,060 |  |  | $ | 4,714 |
Prepaid and other current assets | 666 |  |  | 637 |
Other long-term assets | 128 |  |  | 114 |
Total | $ | 7,854 |  |  | $ | 5,465 |
For the three and six months ended June 30, 2018, changes in the estimated fair values of marketable equity securities resulted in unrealized losses of $64 million and $19 million, respectively, which were included in Other income (expense), net, on our Condensed Consolidated Statements of Income. Cash and cash equivalents in the table above excludes cash of $2.0 billion and $2.4 billion, respectively, and cash equivalents of $4.1 billion and $481 million as of June 30, 2018 and December 31, 2017, respectively. Level 2 Inputs We estimate the fair values of Level 2 instruments by taking into consideration valuations obtained from third-party pricing services. The pricing services utilize industry standard valuation models, including both income-based and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker/dealer quotes on the same or similar securities, issuer credit spreads, benchmark securities, prepayment/default projections based on historical data and other observable inputs. Substantially all of our foreign currency derivative contracts have maturities within an 18-month time horizon and all are with counterparties that have a minimum credit rating of A- or equivalent by S&P Global Ratings, Moody’s Investors Service, Inc. or Fitch Ratings, Inc. We estimate the fair values of these contracts by taking into consideration valuations obtained from a third-party valuation service that utilizes an income-based industry standard valuation model for which all significant inputs are observable, either directly or indirectly. These inputs include foreign currency exchange rates, London Interbank Offered Rates (LIBOR) and swap rates. These inputs, where applicable, are observable at commonly quoted intervals. The total estimated fair values of our short-term and long-term debt, determined using Level 2 inputs based on their quoted market values, were approximately $29.3 billion and $35.5 billion at June 30, 2018 and December 31, 2017, respectively, and the carrying values were $29.1 billion and $33.5 billion at June 30, 2018 and December 31, 2017, respectively.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -URI http://asc.fasb.org/topic&trid=2155941 + Details
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