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Fair Value Of Financial Instruments | 9 Months Ended
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Sep. 30, 2018
Fair Value Disclosures [Abstract] |
Fair Value of Financial Instruments | FAIR VALUE OF FINANCIAL INSTRUMENTS Fair Value Measurements on a Recurring Basis Derivative instruments—All derivative instruments are required to be reported on the balance sheet at fair value unless the transactions qualify and are designated as normal purchases or sales. Changes in fair value are reported currently through earnings unless they meet hedge accounting criteria. Aptiv’s derivative exposures are with counterparties with long-term investment grade credit ratings. Aptiv estimates the fair value of its derivative contracts using an income approach based on valuation techniques to convert future amounts to a single, discounted amount. Estimates of the fair value of foreign currency and commodity derivative instruments are determined using exchange traded prices and rates. Aptiv also considers the risk of non-performance in the estimation of fair value, and includes an adjustment for non-performance risk in the measure of fair value of derivative instruments. The non-performance risk adjustment reflects the credit default spread (“CDS”) applied to the net commodity by counterparty and foreign currency exposures by counterparty. When Aptiv is in a net derivative asset position, the counterparty CDS rates are applied to the net derivative asset position. When Aptiv is in a net derivative liability position, estimates of peer companies’ CDS rates are applied to the net derivative liability position. In certain instances where market data is not available, Aptiv uses management judgment to develop assumptions that are used to determine fair value. This could include situations of market illiquidity for a particular currency or commodity or where observable market data may be limited. In those situations, Aptiv generally surveys investment banks and/or brokers and utilizes the surveyed prices and rates in estimating fair value. As of September 30, 2018 and December 31, 2017, Aptiv was in a net derivative asset position of $9 million and $12 million, respectively, and no significant adjustments were recorded for nonperformance risk based on the application of peer companies’ CDS rates, evaluation of our own nonperformance risk and because Aptiv’s exposures were to counterparties with investment grade credit ratings. Refer to Note 14. Derivatives and Hedging Activities for further information regarding derivatives. Contingent consideration—As described in Note 17. Acquisitions and Divestitures, as of September 30, 2018, additional contingent consideration may be earned as a result of Aptiv’s acquisition agreements for nuTonomy, Inc. (“nuTonomy”), Movimento Group (“Movimento”) and Control-Tec LLC (“Control-Tec”). The liability for contingent consideration is estimated as of the date of the acquisition and is recorded as part of the purchase price, and is subsequently re-measured to fair value at each reporting date, based on a probability-weighted discounted cash flow analysis using a rate that reflects the uncertainty surrounding the expected outcomes, which the Company believes is appropriate and representative of market participant assumptions. The measurement of the liability for contingent consideration is based on significant inputs that are not observable in the market, and is therefore classified as a Level 3 measurement in accordance with ASU Topic 820-10-35. Examples of utilized unobservable inputs are estimated future earnings of the acquired businesses and applicable discount rates. The estimate of the liability may fluctuate if there are changes in the forecast of the acquired businesses’ future earnings, as a result of actual earnings levels achieved or in the discount rates used to determine the present value of contingent future cash flows. As of September 30, 2018, the range of periods in which the earn-out provisions may be achieved is from 2018 to 2020. The Company regularly reviews these assumptions and makes adjustments to the fair value measurements as required by facts and circumstances. As of September 30, 2018 and December 31, 2017, the liability for contingent consideration was $26 million (of which $7 million was classified within other current liabilities and $19 million was classified within other long-term liabilities) and $33 million (of which $7 million was classified within other current liabilities and $26 million was classified within other long-term liabilities), respectively. Adjustments to this liability for interest accretion are recognized in interest expense, and any other changes in the fair value of this liability are recognized within other income (expense), net in the consolidated statement of operations. The changes in the contingent consideration liability classified as a Level 3 measurement for the nine months ended September 30, 2018 were as follows:
| Contingent Consideration Liability
| (in millions)
Fair value at beginning of period | $ | 33 |
Additions | — |
Payments | (7 | )
Interest accretion | — |
Fair value at end of period | $ | 26 |
During the nine months ended September 30, 2018 and 2017, the Company paid $7 million and $22 million, respectively, of contingent consideration based on the actual level of earnings of the acquired businesses during the contractual earn-out period. As of September 30, 2018 and December 31, 2017, Aptiv had the following assets measured at fair value on a recurring basis:
| Total |  | Quoted Prices in Active Markets Level 1 |  | Significant Other Observable Inputs Level 2 |  | Significant Unobservable Inputs Level 3
| (in millions)
As of September 30, 2018: |
Commodity derivatives | $ | 1 |  |  | $ | — |  |  | $ | 1 |  |  | $ | — |
Foreign currency derivatives | 23 |  |  | — |  |  | 23 |  |  | — |
Total | $ | 24 |  |  | $ | — |  |  | $ | 24 |  |  | $ | — |
As of December 31, 2017: |  |  |  |  |  |  |
Commodity derivatives | $ | 35 |  |  | $ | — |  |  | $ | 35 |  |  | $ | — |
Foreign currency derivatives | 3 |  |  | — |  |  | 3 |  |  | — |
Total | $ | 38 |  |  | $ | — |  |  | $ | 38 |  |  | $ | — |
As of September 30, 2018 and December 31, 2017, Aptiv had the following liabilities measured at fair value on a recurring basis:
| Total |  | Quoted Prices in Active Markets Level 1 |  | Significant Other Observable Inputs Level 2 |  | Significant Unobservable Inputs Level 3
| (in millions)
As of September 30, 2018: |
Commodity derivatives | $ | 13 |  |  | $ | — |  |  | $ | 13 |  |  | $ | — |
Foreign currency derivatives | 2 |  |  | — |  |  | 2 |  |  | — |
Contingent consideration | 26 |  |  | — |  |  | — |  |  | 26 |
Total | $ | 41 |  |  | $ | — |  |  | $ | 15 |  |  | $ | 26 |
As of December 31, 2017: |  |  |  |  |  |  |
Foreign currency derivatives | $ | 26 |  |  | $ | — |  |  | $ | 26 |  |  | $ | — |
Contingent consideration | 33 |  |  | — |  |  | — |  |  | 33 |
Total | $ | 59 |  |  | $ | — |  |  | $ | 26 |  |  | $ | 33 |
Non-derivative financial instruments—Aptiv’s non-derivative financial instruments include cash and cash equivalents, accounts and notes receivable, accounts payable, as well as debt, which consists of its accounts receivable factoring arrangement, capital leases and other debt issued by Aptiv’s non-U.S. subsidiaries, the Revolving Credit Facility, the Tranche A Term Loan and all series of outstanding senior notes. The fair value of debt is based on quoted market prices for instruments with public market data or significant other observable inputs for instruments without a quoted public market price (Level 2). As of September 30, 2018 and December 31, 2017, total debt was recorded at $4,108 million and $4,149 million, respectively, and had estimated fair values of $4,042 million and $4,289 million, respectively. For all other financial instruments recorded at September 30, 2018 and December 31, 2017, fair value approximates book value. Fair Value Measurements on a Nonrecurring Basis In addition to items that are measured at fair value on a recurring basis, Aptiv also has items in its balance sheet that are measured at fair value on a nonrecurring basis. As these items are not measured at fair value on a recurring basis, they are not included in the tables above. Nonfinancial assets and liabilities that are measured at fair value on a nonrecurring basis include certain long-lived assets, equity investments, intangible assets, asset retirement obligations, share-based compensation and liabilities for exit or disposal activities measured at fair value upon initial recognition. During the three and nine months ended September 30, 2018, Aptiv recorded non-cash asset impairment charges totaling $1 million and $2 million, respectively, within cost of sales related to declines in the fair values of certain fixed assets. During the three and nine months ended September 30, 2017, Aptiv recorded non-cash asset impairment charges totaling $1 million and $2 million, respectively, within cost of sales related to declines in the fair values of certain fixed assets. Fair value of long-lived assets is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved and a review of appraisals. As such, Aptiv has determined that the fair value measurements of long-lived assets fall in Level 3 of the fair value hierarchy.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -URI http://asc.fasb.org/topic&trid=2155941 + Details
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