FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

Fair Value of Financial Instruments

We use an independent pricing source to determine the fair value of our available-for-sale securities included as Level 1 and Level 2. For purposes of valuing our securities, the independent pricing source utilizes the following market approach by investment class:


•	Money market mutual funds are valued on a spread or discount rate basis,


•	Asset-backed securities are valued using historical and projected prepayments speed and loss scenarios and spreads obtained from the new issue market, dealer quotes and trade prices,


•	U.S. treasuries, corporate bonds, and other debt securities are priced based on dealer quotes from multiple sources, and


•	US government agencies and government sponsored agencies are priced using LIBOR/swap curves, credit spreads and interest rate volatilities.

We have not adjusted the prices obtained from the independent pricing service and we believe the prices received from the independent pricing service are representative of the prices that would be received to sell the assets at the measurement date (exit price).

On a recurring basis, we did not have any Level 3 financial instruments as of December 31, 2018 and December 31, 2017. There were transfers between levels as of December 31, 2018 and December 31, 2017.

Fair Value Measurements on a Recurring Basis

The following tables summarize our financial instruments by significant categories and fair value measurement on a recurring basis as of December 31, 2018 and 2017:



(in millions)	Level 1		Level 2		Total
December 31, 2018
Cash equivalents:
Money market mutual funds	$	4	$	—	$	4
U.S. treasuries	—		1		1
Total cash equivalents	4		1		5
Investments:
Asset-backed securities	—		33		33
Corporate bonds	—		99		99
U.S. government agencies and government-sponsored agencies	—		7		7
U.S. treasuries	—		41		41
Other debt securities	—		9		9
Total investments	—		189		189
Restricted cash equivalents:
Money market mutual funds	48		—		48
Commercial paper	20		—		20
Total restricted cash equivalents	68		—		68
Restricted investments:
U.S. treasuries	—		5		5
Exchange traded fund	1		—		1
Certificate of deposit	—		2		2
Total restricted investments	1		7		8
Total investments and restricted cash equivalents and investments	$	73	$	197	$	270



(in millions)	Level 1		Level 2		Total
December 31, 2017
Restricted cash equivalents:
Money market mutual funds	$	199	$	—	$	199
Commercial paper	21		—		21
Total restricted cash equivalents	220		—		220
Restricted investments:
U.S. treasuries	37		—		37
Exchange traded fund	1		—		1
Certificate of deposit	—		2		2
Total restricted investments	38		2		40
Total restricted cash equivalents and investments	$	258	$	2	$	260

Restricted Cash Equivalents

The Company's restricted cash equivalents include money market mutual funds and commercial paper. The carrying value of cash equivalents approximate their fair values due to the short-term maturities and are classified as Level 1 in the fair value hierarchy because we use quoted market prices that are readily available in an active market to determine the fair value.

Restricted Investments

The Company's restricted investments include U.S. treasuries, an exchange traded fund and a certificate of deposit. The exchange traded fund is classified as Level 1 in the fair value hierarchy as we use active quoted market prices that are readily available in an active market to determine fair value. The U.S. treasuries are classified as Level 2 in the fair value hierarchy as their prices are based on dealer quotes from multiple sources. The certificate of deposit is classified as Level 2 in the fair value hierarchy as we use a market approach that compares the fair values on certificates with similar maturities.

Fair Value of Financial Instruments Disclosure

Long-Term Debt

The carrying value of our long-term debt at December 31, 2018 and 2017 was $414 million and $425 million, respectively. The estimated fair values of our debt payable at December 31, 2018 and 2017 were $414 million and $428 million, respectively. On September 30, 2018 we changed our methodology of estimating the fair values of our debt payable to a discounted cash flow, which incorporates credit spreads and market interest rates to estimate the fair value and is considered Level 3 in the hierarchy for fair value measurement. The valuation at December 31, 2017 is considered Level 2 in the hierarchy for fair value measurement.