v2.4.0.8
Fair Value Measurements
 12 Months Ended
Dec. 31, 2013
Fair Value Measurements

Note 10: Fair Value Measurements

The accounting guidance related to financial assets and financial liabilities (“financial instruments”) establishes a hierarchy that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques (market approach, income approach and cost approach). The levels of the hierarchy are described below.

  • Level 1: Consists of financial instruments whose values are based on quoted market prices for identical financial instruments in an active market.
  • Level 2: Consists of financial instruments that are valued using models or other valuation methodologies. These models use inputs that are observable either directly or indirectly. Level 2 inputs include (i) quoted prices for similar assets or liabilities in active markets, (ii) quoted prices for identical or similar assets or liabilities in markets that are not active, (iii) pricing models whose inputs are observable for substantially the full term of the financial instrument and (iv) pricing models whose inputs are derived primarily from or corroborated by observable market data through correlation or other means for substantially the full term of the financial instrument.
  • Level 3: Consists of financial instruments whose values are determined using pricing models that use significant inputs that are primarily unobservable, discounted cash flow methodologies or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of financial instruments and their classification within the fair value hierarchy. Financial instruments are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. There have been no changes in the classification of any financial instruments within the fair value hierarchy in the periods presented. Our financial instruments that are accounted for at fair value on a recurring basis are presented in the table below.

Recurring Fair Value Measures
  Fair Value as of December 31, 2013  Fair Value as of December 31, 2012
(in millions)  Level 1 Level 2 Level 3 Total  Level 1 Level 2 Level 3 Total
Assets                 
Trading securities$ 3,956$ -$ -$ 3,956 $ 4,027$ -$ -$ 4,027
Available-for-sale securities  260  118  11  389   367  76  21  464
Interest rate swap agreements  -  110  -  110   -  210  -  210
Other  -  80  1  81   -  36  2  38
Total$ 4,216$ 308$ 12$ 4,536 $ 4,394$ 322$ 23$ 4,739
Liabilities                 
Derivative component of prepaid forward sale agreements and indexed debt instruments$ -$ 2,816$ -$ 2,816 $ -$ 2,305$ -$ 2,305
Contractual obligations    -  747  747   -  -  1,055  1,055
Contingent consideration  -  -  684  684   -  -  587  587
Other  -  16  -  16   -  14  -  14
Total$ -$ 2,832$ 1,431$ 4,263 $ -$ 2,319$ 1,642$ 3,961

Contractual Obligations and Contingent Consideration

The fair values of the contractual obligations and contingent consideration in the table above are primarily based on certain expected future discounted cash flows, the determination of which involves the use of significant unobservable inputs. The most significant unobservable inputs we use are our estimates of the future revenue we expect to generate from certain NBCUniversal entities, which are related to our contractual obligations, and future net tax benefits that will affect payments to GE, which are related to contingent consideration. The discount rates used in the measurements of fair value were between 5% and 13% and are based on the underlying risk associated with our estimate of future revenue, as well as the terms of the respective contracts, and the uncertainty in the timing of our payments to GE. The fair value adjustments to contractual obligations and contingent consideration are sensitive to the assumptions related to future revenue and tax benefits, respectively, as well as to current interest rates, and therefore, the adjustments are recorded to other income (expense), net in our consolidated statement of income.

 

Changes in Contractual Obligations and Contingent Consideration
(in millions) Contractual Obligations Contingent Consideration
Balance, December 31, 2012$ 1,055$ 587
Fair value adjustments  158  106
Payments  (83)  (214)
Redemption Transaction (see Note 4 for additional information)  -  205
Liberty Media transaction (see Note 6 for additional information)  (383)  -
Balance, December 31, 2013$ 747$ 684

Nonrecurring Fair Value Measures

We have assets and liabilities that are required to be recorded at fair value on a nonrecurring basis when certain circumstances occur. In the case of film or stage play production costs, upon the occurrence of an event or change in circumstance that may indicate that the fair value of a production is less than its unamortized costs, we determine the fair value of the production and record an adjustment for the amount by which the unamortized capitalized costs exceed the production's fair value. The estimate of fair value of a production is determined using Level 3 inputs, primarily an analysis of future expected cash flows. Adjustments to capitalized film and stage play production costs of $167 million and $161 million were recorded in 2013 and 2012, respectively.

NBCUniversal Media, LLC [Member]
  
Fair Value Measurements

Note 10: Fair Value Measurements

The accounting guidance related to financial assets and financial liabilities (“financial instruments”) establishes a hierarchy that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques (market approach, income approach and cost approach). Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of financial instruments and their classification within the fair value hierarchy.

Our financial instruments that are accounted for at fair value on a recurring basis were not material for all periods presented, except for liabilities associated with our contractual obligations. The fair values of the contractual obligations in the table below are primarily based on certain expected future discounted cash flows, the determination of which involves the use of significant unobservable inputs. As the inputs used are not quoted market prices or observable inputs, we classify these contractual obligations as Level 3 financial instruments.

The most significant unobservable inputs we use are our estimates of the future revenue we expect to generate from certain of our entities. The discount rates used in the measurements of fair value as of December 31, 2013 were between 12% and 13% and are based on the underlying risk associated with our estimate of future revenue, as well as the terms of the respective contracts. The fair value adjustments to contractual obligations are sensitive to the assumptions related to future revenue, as well as to current interest rates, and therefore, the adjustments are recorded to other income (expense), net in our consolidated statement of income.

In October 2013, Comcast closed its transaction with Liberty Media Corporation (“Liberty Media”), which included, among other things, the delivery of Liberty Media shares held by Comcast in exchange for Liberty Media's interests in one of our contractual obligations. The liability associated with this contractual obligation is now considered a related party transaction and as a result we no longer remeasure this liability to its fair value on a recurring basis.

 

Changes in Contractual Obligations
Successor (in millions)  
Balance, December 31, 2012$ 1,055
Fair value adjustments  158
Payments  (83)
Liberty Media transaction   (383)
Balance, December 31, 2013$ 747

Nonrecurring Fair Value Measures

We have assets and liabilities that are required to be recorded at fair value on a nonrecurring basis when certain circumstances occur. In the case of film or stage play production costs, upon the occurrence of an event or change in circumstance that may indicate that the fair value of a production is less than its unamortized costs, we determine the fair value of the production and record an adjustment for the amount by which the unamortized capitalized costs exceed the production's fair value. The estimate of fair value of a production is determined using Level 3 inputs, primarily an analysis of future expected cash flows. Adjustments to capitalized film and stage play production costs of $167 million and $161 million were recorded in 2013 and 2012, respectively.