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Fair Value Measurements | 12 Months Ended
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Dec. 31, 2018
Fair Value Disclosures [Abstract] |
Fair Value Measurements | Fair Value Measurements We use the fair value method to account for (i) certain of our investments, (ii) our derivative instruments and (iii) certain instruments that we classify as debt. The reported fair values of these investments and instruments as of December 31, 2018 are unlikely to represent the value that will be paid or received upon the ultimate settlement or disposition of these assets and liabilities. U.S. GAAP provides for a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. Level 1 inputs are quoted market prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted market prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. We record transfers of assets or liabilities into or out of Levels 1, 2 or 3 at the beginning of the quarter during which the transfer occurred. During 2018, no material transfers were made. All of our Level 2 inputs (interest rate futures, swap rates and certain of the inputs for our weighted average cost of capital calculations) and certain of our Level 3 inputs (forecasted volatilities and credit spreads) are obtained from pricing services. These inputs, or interpolations or extrapolations thereof, are used in our internal models to calculate, among other items, yield curves, forward interest and currency rates and weighted average cost of capital rates. In the normal course of business, we receive market value assessments from the counterparties to our derivative contracts. Although we compare these assessments to our internal valuations and investigate unexpected differences, we do not otherwise rely on counterparty quotes to determine the fair values of our derivative instruments. The midpoints of applicable bid and ask ranges generally are used as inputs for our internal valuations. For our investments in publicly-traded companies, the recurring fair value measurements are based on the quoted closing price of the respective shares at each reporting date. Accordingly, the valuations of these investments fall under Level 1 of the fair value hierarchy. Our other investments that we account for at fair value are privately-held companies, and therefore, quoted market prices are unavailable. The valuation technique we use for such investments is a combination of an income approach (discounted cash flow model based on forecasts) and a market approach (market multiples of similar businesses). With the exception of certain inputs for our weighted average cost of capital calculations that are derived from pricing services, the inputs used to value these investments are based on unobservable inputs derived from our assumptions. Therefore, the valuation of our privately-held investments falls under Level 3 of the fair value hierarchy. Any reasonably foreseeable changes in assumed levels of unobservable inputs for the valuations of our Level 3 investments would not be expected to have a material impact on our financial position or results of operations. The recurring fair value measurement of our equity-related derivative instruments are based on standard option pricing models, which require the input of observable and unobservable variables such as exchange-traded equity prices, risk-free interest rates, dividend forecasts and forecasted volatilities of the underlying equity securities. The valuations of our equity-related derivative instruments are based on a combination of Level 1 inputs (exchange-traded equity prices), Level 2 inputs (interest rate futures and swap rates) and Level 3 inputs (forecasted volatilities). As changes in volatilities could have a significant impact on the overall valuations over the terms of the derivative instruments, we have determined that these valuations fall under Level 3 of the fair value hierarchy. At December 31, 2018, our equity-related derivatives were not significantly impacted by forecasted volatilities. In order to manage our interest rate and foreign currency exchange risk, we have entered into (i) various derivative instruments and (ii) certain instruments that we classify as debt, as further described in notes 8 and 11, respectively. The recurring fair value measurements of these instruments are determined using discounted cash flow models. With the exception of the inputs for certain swaption s, most of the inputs to these discounted cash flow models consist of, or are derived from, observable Level 2 data for substantially the full term of these instruments. This observable data mostly includes currency rates, interest rate futures and swap rates, which are retrieved or derived from available market data. Although we may extrapolate or interpolate this data, we do not otherwise alter this data in performing our valuations. We use a Monte Carlo based approach to incorporate a credit risk valuation adjustment in our fair value measurements to estimate the impact of both our own nonperformance risk and the nonperformance risk of our counterparties. The inputs used for our credit risk valuations, including our and our counterparties’ credit spreads, represent our most significant Level 3 inputs, and these inputs are used to derive the credit risk valuation adjustments with respect to these instruments. As we would not expect these parameters to have a significant impact on the valuations of these instruments, we have determined that these valuations (other than the valuations of the aforementioned swaption s) fall under Level 2 of the fair value hierarchy. Due to the lack of Level 2 inputs for the swaption valuations, we believe these valuations fall under Level 3 of the fair value hierarchy. Our credit risk valuation adjustments with respect to our cross-currency and interest rate swaps are quantified and further explained in note 8. Fair value measurements are also used in connection with nonrecurring valuations performed in connection with acquisition accounting and impairment assessments. The nonrecurring valuations associated with acquisition accounting primarily include the valuation of reporting units, customer relationship and other intangible assets and property and equipment. Unless a reporting unit has a readily determinable fair value, the valuation of reporting units is based at least in part on discounted cash flow analyses. With the exception of certain inputs for our weighted average cost of capital and discount rate calculations that are derived from pricing services, the inputs used in our discounted cash flow analyses, such as forecasts of future cash flows, are based on our assumptions. The valuation of customer relationships is primarily based on an excess earnings methodology, which is a form of a discounted cash flow analysis. The excess earnings methodology requires us to estimate the specific cash flows expected from the customer relationship, considering such factors as estimated customer life, the revenue expected to be generated over the life of the customer relationship, contributory asset charges and other factors. Tangible assets are typically valued using a replacement or reproduction cost approach, considering factors such as current prices of the same or similar equipment, the age of the equipment and economic obsolescence. Most of our nonrecurring valuations use significant unobservable inputs and therefore fall under Level 3 of the fair value hierarchy. We did not perform significant nonrecurring fair value measurements during 2018 or 2017. A summary of our assets and liabilities that are measured at fair value on a recurring basis is as follows:
|  |  |  | Fair value measurements at December 31, 2018 using:
Description |  | December 31, 2018 |  | Quoted prices in active markets for identical assets (Level 1) |  | Significant other observable inputs (Level 2) |  | Significant unobservable inputs (Level 3)
|  | in millions
Assets: |  |  |  |  |  |  |
Derivative instruments: |  |  |  |  |  |  |
Cross-currency and interest rate derivative contracts | $ | 1,742.8 |  |  | $ | — |  |  | $ | 1,742.5 |  |  | $ | 0.3 |
Equity-related derivative instruments | 746.3 |  |  | — |  |  | — |  |  | 746.3 |
Foreign currency forward and option contracts | 7.2 |  |  | — |  |  | 7.2 |  |  | — |
Other | 0.4 |  |  | — |  |  | 0.4 |  |  | — |
Total derivative instruments | 2,496.7 |  |  | — |  |  | 1,750.1 |  |  | 746.6 |
Investments | 1,174.8 |  |  | 755.9 |  |  | — |  |  | 418.9 |
Total assets | $ | 3,671.5 |  |  | $ | 755.9 |  |  | $ | 1,750.1 |  |  | $ | 1,165.5 |
Liabilities: |  |  |  |  |  |  |
Derivative instruments: |  |  |  |  |  |  |
Cross-currency and interest rate derivative contracts | $ | 1,368.7 |  |  | $ | — |  |  | $ | 1,354.3 |  |  | $ | 14.4 |
Equity-related derivative instruments | 1.4 |  |  | — |  |  | — |  |  | 1.4 |
Foreign currency forward and option contracts | 0.5 |  |  | — |  |  | 0.5 |  |  | — |
Other | 0.1 |  |  | — |  |  | 0.1 |  |  | — |
Total derivative liabilities | 1,370.7 |  |  | — |  |  | 1,354.9 |  |  | 15.8 |
Debt | 248.6 |  |  | — |  |  | 248.6 |  |  | — |
Total liabilities | $ | 1,619.3 |  |  | $ | — |  |  | $ | 1,603.5 |  |  | $ | 15.8 |
|  |  |  | Fair value measurements at December 31, 2017 using:
Description |  | December 31, 2017 |  | Quoted prices in active markets for identical assets (Level 1) |  | Significant other observable inputs (Level 2) |  | Significant unobservable inputs (Level 3)
|  | in millions
Assets: |  |  |  |  |  |  |
Derivative instruments: |  |  |  |  |  |  |
Cross-currency and interest rate derivative contracts | $ | 1,548.9 |  |  | $ | — |  |  | $ | 1,548.7 |  |  | $ | 0.2 |
Equity-related derivative instruments | 560.9 |  |  | — |  |  | — |  |  | 560.9 |
Foreign currency forward and option contracts | 17.1 |  |  | — |  |  | 17.1 |  |  | — |
Other | 0.8 |  |  | — |  |  | 0.8 |  |  | — |
Total derivative instruments | 2,127.7 |  |  | — |  |  | 1,566.6 |  |  | 561.1 |
Investments | 2,315.3 |  |  | 1,908.7 |  |  | — |  |  | 406.6 |
Total assets | $ | 4,443.0 |  |  | $ | 1,908.7 |  |  | $ | 1,566.6 |  |  | $ | 967.7 |
Liabilities: |  |  |  |  |  |  |
Derivative instruments: |  |  |  |  |  |  |
Cross-currency and interest rate derivative contracts | $ | 1,767.9 |  |  | $ | — |  |  | $ | 1,764.5 |  |  | $ | 3.4 |
Equity-related derivative instruments | 5.4 |  |  | — |  |  | — |  |  | 5.4 |
Foreign currency forward and option contracts | 7.9 |  |  | — |  |  | 7.9 |  |  | — |
Total derivative liabilities | 1,781.2 |  |  | — |  |  | 1,772.4 |  |  | 8.8 |
Debt | 926.6 |  |  | 621.7 |  |  | 304.9 |  |  | — |
Total liabilities | $ | 2,707.8 |  |  | $ | 621.7 |  |  | $ | 2,077.3 |  |  | $ | 8.8 |
A reconciliation of the beginning and ending balances of our assets and liabilities measured at fair value on a recurring basis using significant unobservable, or Level 3, inputs is as follows:
| Investments |  | Cross-currency and interest rate derivative contracts |  | Equity-related derivative instruments |  | Total
| in millions
Balance of net assets (liabilities) at January 1, 2018 | $ | 406.6 |  |  | $ | (3.2 | ) |  | $ | 555.5 |  |  | $ | 958.9 |
Gains (losses) included in loss from continuing operations (a): |  |  |  |  |  |  |
Realized and unrealized gains (losses) on derivative instruments, net | — |  |  | (11.5 | ) |  | 197.5 |  |  | 186.0 |
Realized and unrealized loss due to changes in fair values of certain investments and debt, net | (39.0 | ) |  | — |  |  | — |  |  | (39.0 | )
Impact of ASU 2016-01 | 31.9 |  |  | — |  |  | — |  |  | 31.9 |
Additions | 55.0 |  |  | 0.2 |  |  | — |  |  | 55.2 |
Dispositions | (17.7 | ) |  | — |  |  | — |  |  | (17.7 | )
Final settlement of Sumitomo Collar (b) | — |  |  | — |  |  | (7.4 | ) |  | (7.4 | )
Transfers out of Level 3 | (2.0 | ) |  | — |  |  | — |  |  | (2.0 | )
Foreign currency translation adjustments, dividends and other, net | (15.9 | ) |  | 0.4 |  |  | (0.7 | ) |  | (16.2 | )
Balance of net assets (liabilities) at December 31, 2018 | $ | 418.9 |  |  | $ | (14.1 | ) |  | $ | 744.9 |  |  | $ | 1,149.7 |
_______________
(a) | Most of these net gains and losses relate to assets and liabilities that we continue to carry on our consolidated balance sheet as of December 31, 2018.
(b) For additional information regarding the settlement of the final tranche of the Sumitomo Collar, see note 8.

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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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