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FAIR VALUE MEASUREMENTS
 9 Months Ended
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, 2021December 31, 2020
(in millions)Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
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 funds2,768 — — 2,768 4,361 — — 4,361 
Equity investment in Galapagos881 — — 881 1,648 — — 1,648 
Other publicly traded equity securities(1)
876 — — 876 743 — — 743 
Deferred compensation plan249 — — 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 plan249 — — 249 218 — — 218 
Foreign currency derivative contracts— 8 — 8 — 121 — 121 
Total$249 $8 $328 $585 $218 $121 $— $339 
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(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, 2021December 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 
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(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 $1.0 billion for the three and nine months ended September 30, 2020, respectively, which were included in Other income (expense), net on our Condensed Consolidated Statements of Operations.
Our available-for-sale debt securities are classified as cash equivalents, short-term marketable securities and long-term marketable securities in our Condensed Consolidated Balance Sheets. See Note 4. Available-For-Sale Debt Securities for additional information.
Equity Investment in Galapagos
The following table summarizes the classification of our equity investment in Galapagos in our Condensed Consolidated Balance Sheets:
(in millions)September 30, 2021December 31, 2020
Prepaid and other current assets$— $351 
Other long-term assets881 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.