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Fair Value Measurements
 12 Months Ended
Dec. 31, 2017
Fair Value Disclosures [Abstract]  
Fair Value Measurements
Fair Value Measurements
The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value. Level 1 refers to fair values determined based on quoted prices in active markets for identical assets. Level 2 refers to fair values estimated using significant other observable inputs and Level 3 includes fair values estimated using significant unobservable inputs. The following table presents our assets and liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy.
 
December 31, 2017
December 31, 2016
 
Total

Level 1

Level 2

Total

Level 1

Level 2

Assets
 
 
 
 
 
 
Money market funds

$1,582


$1,582

 

$2,858


$2,858

 
Available-for-sale investments:
 
 
 
 
 
 
Commercial paper
70

 
70

162

 
162

Corporate notes
382

 
382

271

 
271

U.S. government agencies
47

 
47

63

 
63

Other
18

18

 
46

46

 
Derivatives
93

 
93

23

 

$23

Total assets

$2,192


$1,600


$592


$3,423


$2,904


$519

 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
Derivatives

($13
)
 

($13
)

($202
)
 

($202
)
Total liabilities

($13
)
 

($13
)

($202
)
 

($202
)

Money market funds, available-for-sale debt investments and equity securities are valued using a market approach based on the quoted market prices or broker/dealer quotes of identical or comparable instruments.
Derivatives include foreign currency, commodity and interest rate contracts. Our foreign currency forward contracts are valued using an income approach based on the present value of the forward rate less the contract rate multiplied by the notional amount. Commodity derivatives are valued using an income approach based on the present value of the commodity index prices less the contract rate multiplied by the notional amount. The fair value of our interest rate swaps is derived from a discounted cash flow analysis based on the terms of the contract and the interest rate curve.
Certain assets have been measured at fair value on a nonrecurring basis using significant unobservable inputs (Level 3). The following table presents the nonrecurring losses recognized for the years ended December 31 due to long-lived asset impairment, and the fair value and asset classification of the related assets as of the impairment date:
 
2017
 
2016
 
Fair Value

 
Total Losses

 
Fair Value

 
Total Losses

Investments

$1

 

($44
)
 


 


Operating lease equipment
90

 
(32
)
 

$84

 

($52
)
Other assets and Acquired intangible assets
14

 
(23
)
 
12

 
(10
)
Property, plant and equipment
8

 
(2
)
 
10

 
(9
)
Total

$113

 

($101
)
 

$106

 

($71
)

Investments, Acquired intangible assets and Property, plant and equipment were primarily valued using an income approach based on the discounted cash flows associated with the underlying assets. The fair value of the impaired operating lease equipment is derived by calculating a median collateral value from a consistent group of third party aircraft value publications. The values provided by the third party aircraft publications are derived from their knowledge of market trades and other market factors. Management reviews the publications quarterly to assess the continued appropriateness and consistency with market trends. Under certain circumstances, we adjust values based on the attributes and condition of the specific aircraft or equipment, usually when the features or use of the aircraft vary significantly from the more generic aircraft attributes covered by third party publications, or on the expected net sales price for the aircraft.
For Level 3 assets that were measured at fair value on a nonrecurring basis during the year ended December 31, 2017, the following table presents the fair value of those assets as of the measurement date, valuation techniques and related unobservable inputs of those assets.
 
Fair
Value
 
Valuation
Technique(s)
 
Unobservable Input
 
Range
Median or Average
Operating lease equipment
$90
 
Market approach
 
Aircraft value publications
 
$140 - $191(1)
Median $167
 
 
Aircraft condition adjustments
 
($77) - $0(2)
Net ($77)
(1) 
The range represents the sum of the highest and lowest values for all aircraft subject to fair value measurement, according to the third party aircraft valuation publications that we use in our valuation process.
(2) 
The negative amount represents the sum, for all aircraft subject to fair value measurement, of all downward adjustments based on consideration of individual aircraft attributes and condition. The positive amount represents the sum of all such upward adjustments.
Fair Value Disclosures
The fair values and related carrying values of financial instruments that are not required to be remeasured at fair value on the Consolidated Statements of Financial Position at December 31 were as follows:
 
December 31, 2017
 
Carrying Amount

 
Total Fair Value

 
Level 1
 
Level 2

 
Level 3

Assets
 
 
 
 
 
 
 
 
 
Notes receivable, net

$677

 

$682

 
 
 

$682

 
 
Liabilities
 
 
 
 
 
 
 
 
 
Debt, excluding capital lease obligations and commercial paper
(10,380
)
 
(11,923
)
 
 
 
(11,823
)
 

($100
)
 
December 31, 2016
 
Carrying Amount

 
Total Fair Value

 
Level 1
 
Level 2

 
Level 3

Assets
 
 
 
 
 
 
 
 
 
Notes receivable, net

$807

 

$803

 
 
 

$803

 
 
Liabilities
 
 
 
 
 
 
 
 
 
Debt, excluding capital lease obligations
(9,815
)
 
(11,209
)
 
 
 
(11,078
)
 

($131
)

The fair values of notes receivable are estimated with discounted cash flow analysis using interest rates currently offered on loans with similar terms to borrowers of similar credit quality. The fair value of our debt that is traded in the secondary market is classified as Level 2 and is based on current market yields. For our debt that is not traded in the secondary market, the fair value is classified as Level 2 and is based on our indicative borrowing cost derived from dealer quotes or discounted cash flows. The fair values of our debt classified as Level 3 are based on discounted cash flow models using the implied yield from similar securities. With regard to other financial instruments with off-balance sheet risk, it is not practicable to estimate the fair value of our indemnifications and financing commitments because the amount and timing of those arrangements are uncertain. Items not included in the above disclosures include cash, restricted cash, time deposits and other deposits, commercial paper, money market funds, Accounts receivable, Accounts payable and long-term payables. The carrying values of those items, as reflected in the Consolidated Statements of Financial Position, approximate their fair value at December 31, 2017 and 2016. The fair value of assets and liabilities whose carrying value approximates fair value is determined using Level 2 inputs, with the exception of cash (Level 1).