Note 10 — Fair Value Measurements

The Company has categorized its assets and liabilities that are measured at fair value on a recurring and non-recurring basis into a three-level fair value hierarchy, based on the reliability of the inputs used to determine fair value as follows:

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Level 1: refers to fair values determined based on quoted market prices in active markets for identical assets;

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Level 2: refers to fair values estimated using observable market based inputs or unobservable inputs that are corroborated by market data; and

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Level 3: includes fair values estimated using unobservable inputs that are not corroborated by market data.

The following methods and assumptions were used by the Company in estimating its fair value disclosure for financial instruments:

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Available-for-sale securities are classified as Level 1 because we use quoted market prices in determining the fair value of these securities.

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Market values for our derivative instruments have been used to determine the fair value of interest rate swaps and forward foreign exchange contracts based on estimated amounts the Company would receive or have to pay to terminate the agreements, taking into account observable information about the current interest rate environment or current foreign currency forward rates. Such financial instruments are classified as Level 2 in the fair value hierarchy.

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Contingent consideration payable is classified as Level 3, and we estimate fair value based on the likelihood and timing of achieving the relevant milestones of each arrangement, applying a probability assessment to each of the potential outcomes, and discounting the probability-weighted payout. Typically, milestones are based on revenue or Earnings Before Interest, Tax, Depreciation and Amortization (‘EBITDA’) growth for the acquired business.

The following table presents our assets and liabilities measured at fair value on a recurring basis at September 30, 2018 and December 31, 2017:

		Fair Value Measurements on a Recurring Basis at September 30, 2018
	Balance Sheet Location	Level 1		Level 2		Level 3		Total
Assets:
Available-for-sale securities:
Mutual funds / exchange traded funds	Prepaid and other current assets and other non-current assets	$	19	$	—	$	—	$	19
Derivatives:
Derivative financial instruments ⁽ⁱ⁾	Prepaid and other current assets and other non-current assets	$	—	$	3	$	—	$	3
Liabilities:
Contingent consideration:
Contingent consideration ⁽ⁱⁱ⁾	Other current liabilities and other non-current liabilities	$	—	$	—	$	49	$	49
Derivatives:
Derivative financial instruments ⁽ⁱ⁾	Other current liabilities and other non-current liabilities	$	—	$	15	$	—	$	15

		Fair Value Measurements on a Recurring Basis at December 31, 2017
	Balance Sheet Location	Level 1		Level 2		Level 3		Total
Assets:
Available-for-sale securities:
Mutual funds / exchange traded funds	Prepaid and other current assets and other non-current assets	$	40	$	—	$	—	$	40
Derivatives:
Derivative financial instruments ⁽ⁱ⁾	Prepaid and other current assets and other non-current assets	$	—	$	18	$	—	$	18
Liabilities:
Contingent consideration:
Contingent consideration ⁽ⁱⁱ⁾	Other current liabilities and other non-current liabilities	$	—	$	—	$	51	$	51
Derivatives:
Derivative financial instruments ⁽ⁱ⁾	Other current liabilities and other non-current liabilities	$	—	$	37	$	—	$	37

(i)	See Note 8 — Derivative Financial Instruments for further information on our derivative investments.

(ii)

Probability weightings are based on our knowledge of the past and planned performance of the acquired entity to which the contingent consideration applies. The weighted average discount rate used on our material contingent consideration calculations was 9.88% and 9.64% at September 30, 2018 and December 31, 2017, respectively. Using different probability weightings and discount rates could result in an increase or decrease of the contingent consideration payable.

The following table summarizes the change in fair value of the Level 3 liabilities:

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)	September 30, 2018
Balance at December 31, 2017	$	51
Obligations assumed		1
Payments		(3	)
Realized and unrealized gains		2
Foreign exchange		(2	)
Balance at September 30, 2018	$	49

There were no significant transfers between Levels 1, 2 or 3 in the nine months ended September 30, 2018 and 2017, respectively.

The following tables present our liabilities not measured at fair value on a recurring basis at September 30, 2018 and December 31, 2017:

	September 30, 2018				December 31, 2017
	Carrying Value		Fair Value		Carrying Value		Fair Value
Liabilities:
Short-term debt and current portion of long-term debt	$	186	$	193	$	85	$	85
Long-term debt	$	4,498	$	4,583	$	4,450	$	4,706

The carrying values of our revolving lines of credit and term loans approximate their fair values. The fair values above are not necessarily indicative of the amounts that the Company would realize upon disposition nor do they indicate the Company’s intent or ability to dispose of the financial instrument. The fair value of our respective senior notes are considered level 2 financial instruments as they are corroborated by observable market data.