Financial Instruments

3 Months Ended

Mar. 31, 2014


Note 6.	Financial Instruments

Cash and cash equivalents, accounts and notes receivable, and accounts payable are carried at cost, which approximates fair value. Short-term investments (consisting primarily of time deposits, commercial paper, and Treasury securities), totaling approximately $1.2 billion and $1.1 billion as of the Successor periods ended March 31, 2014 and December 31, 2013, respectively, and $1.8 billion as of the Predecessor period ended December 31, 2012, are recorded at amortized cost, and the respective carrying amounts approximate fair value using quoted prices in active markets. The fair value of marketable equity securities totaling $50 million and $49 million as of the Successor periods ended March 31, 2014 and December 31, 2013, and $45 million as of the Predecessor period ended December 31, 2012, are measured on a recurring basis using quoted prices in active markets.

The estimated fair value of the majority of our current and long-term debt, excluding the Bond and our credit facilities, is determined based on quoted prices in active markets or by using other observable inputs that are derived principally from or corroborated by observable market data. At March 31, 2013 (Predecessor), the outstanding carrying value under our credit facilities, which totaled $945 million (unaudited) and approximated fair value at the time of transfer, was transferred out of estimated fair value using observable inputs and into estimated fair value using unobservable inputs due to the lack of an available pricing source. To estimate the fair value of Bond issued by Sprint Communications, Inc. to Starburst II (see Note 3. Significant Transactions) and its related bond derivative, a convertible bond pricing model was used based on the relevant interest rates, conversion feature and other significant inputs not observable in the market. The significant unobservable inputs used in the fair value measurement of the Bond and its related bond derivative are the credit condition of the companies, probability and timing of conversion, and discount for lack of marketability. Significant increases or decreases in any of those inputs, in isolation, would result or could have resulted in a significantly lower or higher fair value measurement. Immediately preceding the close of the SoftBank Merger on July 10, 2013, the Bond was converted into shares of Sprint Communications. As a result, there is no balance for the Bond or its related bond derivative as of December 31, 2013 or thereafter.

The following table presents carrying amounts and estimated fair values of current and long-term debt, and the available-for-sale bond investment and its related bond derivative:



	Predecessor
	Carrying amount at December 31, 2012		Estimated Fair Value Using Input Type
	Carrying amount at December 31, 2012		Quoted prices in active markets		Observable		Unobservable		Total estimated fair value
	(in millions)
Current and long-term debt	$	23,569	$	17,506	$	6,118	$	3,104	$	26,728



	Successor
	Carrying amount at December 31, 2012		Estimated Fair Value Using Input Type
	Carrying amount at December 31, 2012		Quoted prices in active markets		Observable		Unobservable		Total estimated fair value
	(in millions)
Bond investment	$	2,929	$	—	$	—	$	2,929	$	2,929
Bond derivative	$	175	$	—	$	—	$	175	$	175



	Carrying amount at December 31, 2013		Estimated Fair Value Using Input Type
	Carrying amount at December 31, 2013		Quoted prices in active markets		Observable		Unobservable		Total estimated fair value
	(in millions)
Current and long-term debt	$	32,485	$	27,000	$	5,356	$	1,389	$	33,745



	Carrying amount at March 31, 2014		Estimated Fair Value Using Input Type
	Carrying amount at March 31, 2014		Quoted prices in active markets		Observable		Unobservable		Total estimated fair value
	(in millions)
Current and long-term debt	$	32,277	$	27,516	$	5,421	$	1,262	$	34,199

The following is a reconciliation of recurring unobservable assets:



	Successor
	Balances as of December 31, 2012		Net purchases		Conversion of Convertible Bond			Accretion of bond discount recognized as interest income		Change in value of derivative			Realization of Gain on Bond recognized in other income, net		Transfers In (Out) of Unobservable Inputs		Balances as of December 31, 2013
	(in millions)
Bond investment	$	2,929	$	—	$	(3,100	)	$	12	$	—		$	159	$	—	$	—
Bond derivatives	$	175	$	—	$	—		$	—	$	(175	)	$	—	$	—	$	—

- 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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