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FAIR VALUE MEASUREMENTS

12 Months Ended

Dec. 31, 2019

Fair value measurements are estimated based on valuation techniques and inputs categorized as follows:


•	Level 1 — Quoted prices in active markets for identical assets or liabilities;


•	Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and


•	Level 3 — Unobservable inputs that are supported by little or no market activity and that are financial instruments whose values are determined using discounted cash flow methodologies, pricing models, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.

If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following fair value hierarchy table presents the components and classification of the Company’s financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2019 and 2018:



	2019								2018
(in millions)	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	2,696	$	2,646	$	50	$	—	$	197	$	166	$	31	$	—
Liabilities:
Acquisition-related contingent consideration	$	316	$	—	$	—	$	316	$	339	$	—	$	—	$	339
Cross-currency swaps	$	13	$	—	$	13	$	—	$	—	$	—	$	—	$	—

There were no transfers between Level 1, Level 2 or Level 3 during 2019 and 2018.

Cross-currency Swaps

During 2019, the Company entered into cross-currency swaps, with aggregate notional amounts of $1,250 million, to mitigate fluctuation in the value of a portion of its euro-denominated net investment in its consolidated financial statements from adverse movements in exchange rates. The euro-denominated net investment being hedged is the Company’s investment in certain euro-denominated subsidiaries. Prior to 2019, the Company had no derivative instruments for any period presented.

The fair value of the Company’s cross-currency swaps liability as of December 31, 2019 was $13 million. Included in Other non-current liabilities is $22 million of cross-currency swaps liability and included in Prepaid expenses and other current assets is $9 million of earned interest within the Consolidated Balance Sheets. The following table presents the effect of hedging instruments on the Consolidated Statements of Operations and Consolidated Statements of Comprehensive Loss for the year 2019:



(in millions)	Loss recognized in Other comprehensive loss		Gain excluded from assessment of hedge effectiveness		Location of gain in income of excluded component
Cross-currency swaps	$	22	$	9	Interest expense

During 2019, there were no payments or receipts in settlement of the Company’s cross-currency swaps as the settlement dates occur in February and August of each year, with the first settlement in February 2020. Future settlements of the Company’s cross-currency swaps will be reported as investing activities in the Consolidated Statement of Cash Flows.

Acquisition-related Contingent Consideration Obligations

The fair value measurement of acquisition-related contingent consideration arising from business combinations is determined via a probability-weighted discounted cash flow analysis or Monte Carlo Simulation (if deemed appropriate), using unobservable (Level 3) inputs. These inputs may include: (i) the estimated amount and timing of projected cash flows, (ii) the probability of the achievement of the factor(s) on which the contingency is based, (iii) the risk-adjusted discount rate used to

present value the probability-weighted cash flows and (iv) volatility of projected performance (Monte Carlo Simulation). Significant increases (decreases) in any of those inputs in isolation could result in a significantly lower (higher) fair value measurement. At December 31, 2019, the fair value measurements of acquisition-related contingent consideration were determined using risk-adjusted discount rates ranging from 5% to 25%.

The following table presents a reconciliation of contingent consideration obligations measured on a recurring basis using significant unobservable inputs (Level 3) for 2019 and 2018:



(in millions)	2019						2018
Beginning balance, January 1,				$	339					$	387
Adjustments to Acquisition-related contingent consideration:
Accretion for the time value of money	$	22					$	24
Fair value adjustments due to changes in estimates of future payments	(10		)				(33		)
Acquisition-related contingent consideration adjustments				12						(9		)
Payments / Settlements				(36		)				(39		)
Foreign currency translation adjustment included in other comprehensive loss				1						—
Ending balance, December 31,				316						339
Current portion				54						41
Non-current portion				$	262					$	298

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

The following table presents the components and classification of the Company’s financial assets and liabilities measured at fair value on a non-recurring basis:



	December 31, 2019								December 31, 2018
(in millions)	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Other non-current assets:
Non-current assets held for sale	$	39	$	—	$	—	$	39	$	—	$	—	$	—	$	—

Non-current assets held for sale of $39 million included in the Consolidated Balance Sheets as of December 31, 2019 were remeasured to estimated fair values less costs to sell. Included in Asset impairments in 2019 is a charge of $8 million associated with these assets held for sale. The estimated fair values of these assets less costs to sell were determined using a discounted cash flow analysis which utilized Level 3 unobservable inputs. See Note 4, "DIVESTITURES" for additional details regarding these assets held for sale.

Fair Value of Long-term Debt

The fair value of long-term debt as of December 31, 2019 and 2018 was $27,520 million and $23,357 million, respectively, and was estimated using the quoted market prices for the same or similar debt issuances (Level 2).

- 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.

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