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Fair Value Measurements
 12 Months Ended
Dec. 31, 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 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 Consolidated Balance Sheets. The remaining financial instruments are reported on our 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:
 December 31, 2021December 31, 2020
(in millions)Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Assets:        
Available-for-sale debt securities:
U.S. treasury securities$407 $— $— $407 $309 $— $— $309 
U.S. government agencies securities— 4 — 4 — — — — 
Non-U.S. government securities— 50 — 50 — 43 — 43 
Certificates of deposit— 249 — 249 — 216 — 216 
Corporate debt securities— 1,363 — 1,363 — 1,142 — 1,142 
Residential mortgage and asset-backed securities— 424 — 424 — 316 — 316 
Equity securities:
Money market funds3,661 — — 3,661 4,361 — — 4,361 
Equity investment in Galapagos(1)
931 — — 931 1,648 — — 1,648 
Equity investment in Arcus(1)
559 — — 559 212 — — 212 
Other publicly traded equity securities331 — — 331 531 — — 531 
Deferred compensation plan261 — — 261 218 — — 218 
Foreign currency derivative contracts— 80 — 80 — 12 — 12 
Total$6,150 $2,170 $— $8,320 $7,279 $1,729 $— $9,008 
Liabilities:        
Liability for MYR GmbH (“MYR”) contingent consideration$— $— $317 $317 $— $— $— $— 
Deferred compensation plan261 — — 261 218 — — 218 
Foreign currency derivative contracts— 5 — 5 — 121 — 121 
Total$261 $5 $317 $583 $218 $121 $— $339 
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(1)     See Note 11. Collaborations and Other Arrangements for additional information.
Equity Securities
The following table summarizes the classification of our equity securities measured at fair value on a recurring basis on our Consolidated Balance Sheets:
(in millions)December 31, 2021December 31, 2020
Cash and cash equivalents$3,661 $4,361 
Prepaid and other current assets885 853 
Other long-term assets1,197 1,756 
Total$5,743 $6,970 
Changes in the fair value of equity securities resulted in net unrealized losses of $610 million and $1.7 billion and net unrealized gains of $1.2 billion for the years ended December 31, 2021, 2020 and 2019 respectively, which were included in Other income (expense), net, on our Consolidated Statements of Income.
Other Equity Securities
Equity method investments and other equity investments without readily determinable fair values were $338 million and $262 million as of December 31, 2021 and 2020, respectively, and were excluded from the above tables. These amounts were included in Other long-term assets on our Consolidated Balance Sheets.
Related Party Transaction
During the second quarter of 2021, we 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 Consolidated Statements of Income for the year ended December 31, 2021.
Level 2 Inputs
We estimate the fair values of Level 2 investments 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 $28.6 billion and $34.6 billion as of December 31, 2021 and 2020, respectively, and the carrying values were $25.6 billion and $30.3 billion as of December 31, 2021 and 2020, respectively.
Level 3 Inputs
In connection with our first quarter 2021 acquisition of MYR, we measured assets acquired and liabilities assumed at fair value on a nonrecurring basis, except for the liability for contingent consideration. The estimated fair value of the liability for contingent consideration was $341 million and $317 million as of the acquisition date and December 31, 2021, respectively. 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.
In connection with our fourth quarter 2020 acquisition of Immunomedics, Inc. (“Immunomedics”), we measured assets acquired and liabilities assumed at fair value on a nonrecurring basis. The liability assumed related to the sale of future royalties is subsequently amortized using the effective interest method over the remaining estimated life. The fair values of the liability related to the sale of future royalties were $1.3 billion and $1.1 billion as of December 31, 2021 and 2020, respectively, and the carrying value was $1.1 billion as of December 31, 2021 and 2020. See Note 6. Acquisitions and Note 12. Debt and Credit Facilities for additional information.
In 2020, in connection with collaborations and other equity arrangements we entered into with Pionyr Immunotherapeutics Inc. (“Pionyr”) and Tizona Therapeutics, Inc. (“Tizona”), we also measured fair values of our exclusive options to acquire the remaining outstanding capital stock of Pionyr and Tizona on a nonrecurring basis. See Note 11. Collaborations and Other Arrangements for additional information.
In 2019, we measured IPR&D intangible assets acquired in connection with the acquisition of Kite Pharma, Inc. (“Kite”) at fair value on a nonrecurring basis, and recognized a pre-tax impairment charge of $800 million. The fair values of the acquired IPR&D assets are estimated based on probability-adjusted discounted cash flow calculations using Level 3 fair value measurements, and inputs include estimated revenues, costs, probability of technical and regulatory success and discount rates. Amounts capitalized as IPR&D are subject to impairment testing until the completion or abandonment of the associated R&D efforts. See Note 9. Goodwill and Intangible Assets for additional information.
Our policy is to recognize transfers into or out of Level 3 classification as of the actual date of the event or change in circumstances that caused the transfer. There were no transfers between Level 1, Level 2 and Level 3 in the periods presented.