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Financial Instruments (Tables) | 9 Months Ended
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Sep. 30, 2021
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Pre-tax Effects of Net Investment Hedges on Accumulated Other Comprehensive Losses | The following table provides (i) the aggregate notional amounts of foreign currency contracts and (ii) the aggregate carrying value and fair value of foreign currency denominated debt:
(in millions) | September 30, 2021 |  | December 31, 2020
Foreign currency contracts (notional amounts) | $ | — |  |  | $ | 1,066 |
Foreign currency denominated debt |  |  |
Carrying value | 4,905 |  |  | 5,171 |
Fair value | 5,288 |  |  | 5,687 |
For the nine and three months ended September 30, 2021 and 2020, Altria recorded non-cash, pre-tax unrealized gains (losses), representing the changes in the fair values of the Fixed-price Preemptive Rights and Cronos warrant, as follows:
| For the Nine Months Ended September 30, |  | For the Three Months Ended September 30,
(in millions) | 2021 |  | 2020 |  | 2021 |  | 2020
Fixed-price Preemptive Rights | $ | (21) |  |  | $ | (54) |  |  | $ | (17) |  |  | $ | (25) |
Cronos warrant | (107) |  |  | (148) |  |  | (118) |  |  | (80) |
Total | $ | (128) |  |  | $ | (202) |  |  | $ | (135) |  |  | $ | (105) |
The pre-tax effects of Altria’s net investment hedges on accumulated other comprehensive losses and the condensed consolidated statements of earnings (losses) were as follows:
|  | Gain (Loss) Recognized in Accumulated Other Comprehensive Losses |  | Gain (Loss) Recognized in Net Earnings (Losses) |  | Gain (Loss) Recognized in Accumulated Other Comprehensive Losses |  | Gain (Loss) Recognized in Net Earnings (Losses)
|  | For the Nine Months Ended September 30, |  | For the Three Months Ended September 30,
(in millions) |  | 2021 |  | 2020 |  | 2021 |  | 2020 |  | 2021 |  | 2020 |  | 2021 |  | 2020
Foreign currency contracts |  | $ | 16 |  |  | $ | (28) |  |  | $ | 7 |  |  | $ | 33 |  |  | $ | — |  |  | $ | (66) |  |  | $ | — |  |  | $ | 8 |
Foreign currency denominated debt |  | 270 |  |  | (215) |  |  | — |  |  | — |  |  | 118 |  |  | (206) |  |  | — |  |  | — |
Total |  | $ | 286 |  |  | $ | (243) |  |  | $ | 7 |  |  | $ | 33 |  |  | $ | 118 |  |  | $ | (272) |  |  | $ | — |  |  | $ | 8 |
Schedule of Debt | The following table provides the aggregate carrying value and fair value of Altria’s total long-term debt:
(in millions) | September 30, 2021 |  | December 31, 2020
Carrying value | $ | 28,127 |  |  | $ | 29,471 |
Fair value | 31,037 |  |  | 34,682 |
Fair Value Measurement Inputs and Valuation Techniques | The fair values of the Fixed-price Preemptive Rights and Cronos warrant are estimated using Black-Scholes option-pricing models, adjusted for observable inputs (which are classified in Level 1 of the fair value hierarchy), including share price, and unobservable inputs, including probability factors and weighting of expected life, volatility levels and risk-free interest rates (which are classified in Level 3 of the fair value hierarchy) based on the following assumptions at:
|  | Fixed-price Preemptive Rights |  | Cronos Warrant |  |  |  |
|  | September 30, 2021 |  | December 31, 2020 |  | September 30, 2021 |  | December 31, 2020 |  |  |  |
Share price (1) |  | C$7.15 |  | C$8.84 |  | C$7.15 |  | C$8.84 |  |  |  |
Expected life (2) |  | 0.81 year |  | 1.05 years |  | 1.43 years |  | 2.18 years |  |  |  |
Expected volatility (3) |  | 67.32% |  | 80.68% |  | 67.32% |  | 80.68% |  |  |  |
Risk-free interest rate (4)(5) |  | 0.24% |  | 0.13% |  | 0.39% |  | 0.21% |  |  |  |
Expected dividend yield (6) |  | —% |  | —% |  | —% |  | —% |  |  |  |
(1) Based on the closing market price for Cronos common stock on the Toronto Stock Exchange on the date indicated. (2) Based on the weighted-average expected life of the Fixed-price Preemptive Rights (with a range from approximately 0.25 year to 4.00 years at September 30, 2021 and 0.25 year to 5 years at December 31, 2020) and the March 8, 2023 expiration date of the Cronos warrant. (3) Based on a blend of historical volatility of the underlying equity security and implied volatility from traded options on the underlying equity security at September 30, 2021. Based on a blend of historical volatility levels of the underlying equity security and peer companies at December 31, 2020. (4) Based on the implied yield currently available on Canadian Treasury zero coupon issues (with a range from approximately 0.12% to 0.89% at September 30, 2021 and 0.06% to 0.39% at December 31, 2020) weighted for the remaining expected life of the Fixed-price Preemptive Rights. (5) Based on the implied yield currently available on Canadian Treasury zero coupon issues and the expected life of the Cronos warrant. (6) Based on Cronos’s expected dividend payments.
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation | The following table provides a reconciliation of the beginning and ending balance of the Fixed-price Preemptive Rights and Cronos warrant, which are classified in Level 3 of the fair value hierarchy:
(in millions) |  |  |
Balance at December 31, 2019 | $ | 303 |  |  |
Pre-tax earnings (losses) recognized in net earnings (losses) | (140) |  |  |
Balance at December 31, 2020 | 163 |  |  |
Pre-tax earnings (losses) recognized in net earnings (losses) | (128) |  |  |
Balance at September 30, 2021 | $ | 35 |  |  |
Schedule of Derivative Liabilities at Fair Value | The fair values of Altria’s derivative financial instruments on a gross basis included on the condensed consolidated balance sheets were as follows:
| Fair Value of Assets |  | Fair Value of Liabilities
(in millions) | Balance Sheet Classification |  | September 30, 2021 |  | December 31, 2020 |  | Balance Sheet Classification | September 30, 2021 |  | December 31, 2020
Derivatives designated as hedging instruments: |
Foreign currency contracts | Other current assets |  | $ | — |  |  | $ | — |  |  | Other accrued liabilities | $ | — |  |  | $ | 87 |
Foreign currency contracts | Other assets |  | — |  |  | — |  |  | Other liabilities | — |  |  | — |
Total |  | $ | — |  |  | $ | — |  |  |  | $ | — |  |  | $ | 87 |
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |  |  |
Cronos warrant | Investments in equity securities |  | $ | 32 |  |  | $ | 139 |  |  |  |  |  |
Fixed-price Preemptive Rights | Investments in equity securities |  | 3 |  |  | 24 |  |  |  |  |  |
Total |  |  | $ | 35 |  |  | $ | 163 |  |  |  |  |  |
Total derivatives |  |  | $ | 35 |  |  | $ | 163 |  |  |  | $ | — |  |  | $ | 87 |

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