Fair Value Measurements.

U.S. GAAP requires enhanced disclosures about investments and non-recurring non-financial assets and liabilities that are measured and reported at fair value and has established a hierarchal disclosure framework that prioritizes and ranks the level of market price observability used in measuring investments or non-financial assets and liabilities at fair value. Market price observability is impacted by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

Investments and non-financial assets and/or liabilities measured and reported at fair value are classified and disclosed in one of the following categories:

Level 1 - Quoted prices are available in active markets for identical investments and non-financial assets and/or liabilities as of the reporting date.

Level 2 - Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies where all significant inputs are observable.

Level 3 - Pricing inputs are unobservable for the investment and non-financial asset and/or liability and include situations where there is little, if any, market activity for the investment or non-financial asset and/or liability. The inputs into the determination of fair value require significant management judgment or estimation. Fair value is determined using comparable market transactions and other valuation methodologies, adjusted as appropriate for liquidity, credit, market and/or other risk factors.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, investments', non-financial assets' and/or liabilities' level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and consideration of factors specific to the investment. Significant transfers, if any, between the levels within the fair value hierarchy are recognized at the beginning of the reporting period when changes in circumstances require such transfers.

Assets Measured at Fair Value on a Recurring Basis

The following table summarizes the valuation of our assets and liabilities by the above fair value hierarchy levels measured on a recurring basis as of June 30, 2017 and December 31, 2016:



	June 30, 2017								December 31, 2016
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets	(in millions)
Investments (Note 4)	$	8,214	$	523	$	229	$	8,966	$	9,033	$	306	$	212	$	9,551
Derivative contracts, at fair value (Note 6)⁽¹⁾	—		1		—		1		—		23		—		23
	$	8,214	$	524	$	229	$	8,967	$	9,033	$	329	$	212	$	9,574
Liabilities
Securities sold, not yet purchased (Note 4)	$	1,676	$	53	$	—	$	1,729	$	1,087	$	52	$	—	$	1,139
Other liabilities	—		274		—		274		—		187		—		187
Derivative contracts, at fair value (Note 6)⁽²⁾	—		1,366		—		1,366		—		1,139		—		1,139
	$	1,676	$	1,693	$	—	$	3,369	$	1,087	$	1,378	$	—	$	2,465


⁽¹⁾	Amounts are classified within other assets in our condensed consolidated balance sheets.


⁽²⁾	Amounts are classified within accrued expenses and other liabilities in our condensed consolidated balance sheets.

Assets Measured at Fair Value on a Recurring Basis for Which We Use Level 3 Inputs to Determine Fair Value

The changes in investments measured at fair value on a recurring basis for which we use Level 3 inputs to determine fair value are as follows:



	Six Months Ended June 30,
	2017			2016
	(in millions)
Balance at January 1	$	212		$	283
Net realized and unrealized gains⁽¹⁾	17			10
Purchases	5			50
Transfers out	(6		)	(129		)
Transfers in	1			9
Balance at June 30	$	229		$	223

⁽¹⁾Includes net unrealized gains (losses) of $17 million and $(6) million for the six months ended June 30, 2017 and 2016, respectively, relating to investments still held at June 30 of each respective period and which are included in net gain (loss) from investment activities in the condensed consolidated statements of operations.

Transfers out of Level 3 during the six months ended June 30, 2016 primarily relates to our previously held corporate debt investment in TER of $126 million. The investment was transferred out of Level 3 following TER's emergence from bankruptcy on February 26, 2016 and subsequently becoming a wholly owned consolidated subsidiary of ours upon the extinguishment of their debt and its conversion to equity in TER. Purchases during the six months ended June 30, 2016 relates to an increase in a certain investment classified as trading securities which is considered a Level 3 investment due to unobservable market data and is measured at fair value on a recurring basis. We determined the fair value of this investment using the Black-Scholes option pricing model and other valuation techniques. As of June 30, 2017 and December 31, 2016, the fair value of this investment was $224 million and $207 million, respectively.

Assets Measured at Fair Value on a Non-Recurring Basis for Which We Use Level 3 Inputs to Determine Fair Value

Certain assets measured at fair value using level 3 inputs on a nonrecurring basis have been impaired. During the six months ended June 30, 2017 and 2016, we recorded impairment charges of $3 million and $3 million, respectively, relating to property, plant and equipment. We determined the fair value of property, plant and equipment by applying probability weighted, expected present value techniques to the estimated future cash flows using assumptions a market participant would utilize. In addition, during the three and six months ended June 30, 2017, we recorded a loss of $2 million and $7 million, respectively, from marking inventory down to net realizable value at our Automotive segment. Additionally, in connection with our reclassification of certain railcars leased to others from held and used to assets held for sale, we recorded an impairment charge at our Railcar segment of $67 million for each of the three and six months ended June 30, 2017, which represents the difference between the carrying value and fair value less cost to sell of such assets.

Refer to Note 8, "Goodwill and Intangible Assets, Net," for discussion of our goodwill and intangible asset impairments.

Refer to Note 12, "Segment Reporting," for total impairment recorded by each of our segments.