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FAIR VALUE MEASUREMENTS | 9 Months Ended
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Sep. 30, 2021
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; 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 debt securities, accounts receivable, foreign currency exchange contracts, equity securities, accounts payable and short-term and long-term debt. Cash and cash equivalents, marketable debt securities, certain equity securities and foreign currency exchange contracts are reported at their respective fair values on our Condensed Consolidated Balance Sheets. Equity securities without readily determinable fair values are recorded using the measurement alternative of cost less impairment, if any, adjusted for observable price changes in orderly transactions for identical or similar investments of the same issuer. Short-term and long-term debt are reported at their amortized costs on our Condensed Consolidated Balance Sheets. The remaining financial instruments are reported on 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:
|  | September 30, 2021 |  | December 31, 2020
(in millions) |  | Level 1 |  | Level 2 |  | Level 3 |  | Total |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Available-for-sale debt securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. treasury securities |  | $ | 360 |  |  | $ | — |  |  | $ | — |  |  | $ | 360 |  |  | $ | 309 |  |  | $ | — |  |  | $ | — |  |  | $ | 309 |
U.S. government agencies securities |  | — |  |  | 5 |  |  | — |  |  | 5 |  |  | — |  |  | — |  |  | — |  |  | — |
Non-U.S. government securities |  | — |  |  | 44 |  |  | — |  |  | 44 |  |  | — |  |  | 43 |  |  | — |  |  | 43 |
Certificates of deposit |  | — |  |  | 361 |  |  | — |  |  | 361 |  |  | — |  |  | 216 |  |  | — |  |  | 216 |
Corporate debt securities |  | — |  |  | 1,272 |  |  | — |  |  | 1,272 |  |  | — |  |  | 1,142 |  |  | — |  |  | 1,142 |
Residential mortgage and asset-backed securities |  | — |  |  | 447 |  |  | — |  |  | 447 |  |  | — |  |  | 316 |  |  | — |  |  | 316 |
Equity securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Money market funds |  | 2,768 |  |  | — |  |  | — |  |  | 2,768 |  |  | 4,361 |  |  | — |  |  | — |  |  | 4,361 |
Equity investment in Galapagos |  | 881 |  |  | — |  |  | — |  |  | 881 |  |  | 1,648 |  |  | — |  |  | — |  |  | 1,648 |
Other publicly traded equity securities(1) |  | 876 |  |  | — |  |  | — |  |  | 876 |  |  | 743 |  |  | — |  |  | — |  |  | 743 |
Deferred compensation plan |  | 249 |  |  | — |  |  | — |  |  | 249 |  |  | 218 |  |  | — |  |  | — |  |  | 218 |
Foreign currency derivative contracts |  | — |  |  | 55 |  |  | — |  |  | 55 |  |  | — |  |  | 12 |  |  | — |  |  | 12 |
Total |  | $ | 5,134 |  |  | $ | 2,184 |  |  | $ | — |  |  | $ | 7,318 |  |  | $ | 7,279 |  |  | $ | 1,729 |  |  | $ | — |  |  | $ | 9,008 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Liability for MYR GmbH (“MYR”) contingent consideration |  | $ | — |  |  | $ | — |  |  | $ | 328 |  |  | $ | 328 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Deferred compensation plan |  | 249 |  |  | — |  |  | — |  |  | 249 |  |  | 218 |  |  | — |  |  | — |  |  | 218 |
Foreign currency derivative contracts |  | — |  |  | 8 |  |  | — |  |  | 8 |  |  | — |  |  | 121 |  |  | — |  |  | 121 |
Total |  | $ | 249 |  |  | $ | 8 |  |  | $ | 328 |  |  | $ | 585 |  |  | $ | 218 |  |  | $ | 121 |  |  | $ | — |  |  | $ | 339 |
________________________________ (1) Includes our equity investment in Arcus Biosciences, Inc. (“Arcus”) of $482 million as of September 30, 2021 recorded in Prepaid and other current assets and $212 million as of December 31, 2020 recorded in Other long-term assets on our Condensed Consolidated Balance Sheets. See Note 9. Collaborations and Other Arrangements for further information. Equity Securities The following table summarizes the classification of our equity securities measured at fair value on a recurring basis on our Condensed Consolidated Balance Sheets:
(in millions) |  | September 30, 2021 |  | December 31, 2020
Cash and cash equivalents |  | $ | 2,768 |  |  | $ | 4,361 |
Prepaid and other current assets(1) |  | 871 |  |  | 853 |
Other long-term assets(1) |  | 1,135 |  |  | 1,756 |
Total |  | $ | 4,774 |  |  | $ | 6,970 |
________________________________ (1) See the table under the Equity Investment in Galapagos NV (“Galapagos”) for more information. Changes in the fair value of equity securities resulted in net unrealized loss of $142 million and $667 million for the three and nine months ended September 30, 2021, respectively, and $964 million and $1.0 billion for the three and nine months ended September 30, 2020, respectively, which were included in Other income (expense), net on our Condensed Consolidated Statements of Operations. Our available-for-sale debt securities are classified as cash equivalents, short-term marketable securities and long-term marketable securities in our Condensed Consolidated Balance Sheets. See Note 4. Available-For-Sale Debt Securities for additional information. Equity Investment in Galapagos The following table summarizes the classification of our equity investment in Galapagos in our Condensed Consolidated Balance Sheets:
(in millions) |  | September 30, 2021 |  | December 31, 2020
Prepaid and other current assets |  | $ | — |  |  | $ | 351 |
Other long-term assets |  | 881 |  |  | 1,297 |
Total |  | $ | 881 |  |  | $ | 1,648 |
We elected and applied the fair value option to account for our equity investment in Galapagos whereby the investment is marked to market through earnings each reporting period based on the market price of Galapagos shares. We believe the fair value option best reflects the underlying economics of the investment. The portion of the investment subject to long-term contractual lock-up provisions is classified within Other long-term assets and the remainder is classified as Prepaid and other current assets on our Condensed Consolidated Balance Sheets. In April 2021, we amended the Galapagos subscription agreement to extend the initial lock-up provision for certain Galapagos shares from August 2021 to August 2024. As of September 30, 2021, all of our equity investment in Galapagos was classified as Other long-term assets on our Condensed Consolidated Balance Sheets. Other Equity Securities Equity investments not measured at fair value and excluded from the above tables were limited partnerships and other equity method investments of $96 million and $58 million at September 30, 2021 and December 31, 2020, respectively, and other equity investments without readily determinable fair values of $211 million and $204 million at September 30, 2021 and December 31, 2020, respectively. These amounts were included in Other long-term assets on our Condensed Consolidated Balance Sheets. Related Party Transaction During the second quarter of 2021, Gilead donated certain equity securities at fair value to the Gilead Foundation, a California nonprofit organization (the “Foundation”). The Foundation is a related party as certain officers of the Company also serve as directors of the Foundation. The donation expense of $212 million was recorded within Selling, general and administrative expenses on our Condensed Consolidated Statements of Operations during the nine months ended September 30, 2021. Level 2 Inputs We estimate the fair values of Level 2 financial 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 the 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. 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. 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 the 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 aggregate short-term and long-term debt, determined using Level 2 inputs based on their quoted market values, were approximately $29.6 billion and $34.6 billion as of September 30, 2021 and December 31, 2020, respectively, and the carrying values were $26.6 billion and $30.3 billion as of September 30, 2021 and December 31, 2020, respectively. Level 3 Inputs We measured assets acquired and liabilities assumed at fair value as of the acquisition on a nonrecurring basis, in connection with our first quarter 2021 acquisition of MYR. The liability for contingent consideration of $341 million as of the acquisition date is remeasured on a recurring basis. The estimated fair value of this contingent liability was $328 million as of September 30, 2021. The change in estimated fair value from the acquisition date was primarily due to the effect of foreign exchange remeasurement. The contingent consideration was estimated using probability-weighted scenarios for U.S. Food and Drug Administration (“FDA”) approval of Hepcludex. See Note 6. Acquisitions for additional information. We measured assets acquired and liabilities assumed at fair value as of the acquisition on a nonrecurring basis, in connection with our fourth quarter 2020 acquisition of Immunomedics, Inc. (“Immunomedics”). The liability related to future royalties assumed is recorded at amortized cost, which approximated fair value as of September 30, 2021 and December 31, 2020. See Note 6. Acquisitions and Note 10. Debt and Credit Facilities for additional information.

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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=123874694&loc=d3e19207-110258 + Details
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