Fair Value Measurements

9 Months Ended

Sep. 30, 2015

The Company's financial assets and liabilities are measured at fair value on a recurring basis as follows:

Marketable Securities. Where possible, the Company utilizes quoted prices in active markets to measure available-for-sale equity securities, including mutual funds. Such items are classified as Level 1 in the fair value measurement hierarchy. Mutual funds are valued at the net asset value per share or unit multiplied by the number of shares or units held as of the measurement date.

Derivatives. Derivative financial instruments, including interest rate swaps, cross-currency swaps and foreign currency forwards and swaps, are valued in the market using discounted cash flow techniques. These techniques incorporate Level 1 and Level 2 fair value measurement inputs such as interest rates and foreign currency exchange rates. These market inputs are utilized in the discounted cash flow calculation considering the instrument's term, notional amount, discount rate and credit risk. Significant inputs to the derivative valuation for interest rate swaps, cross-currency swaps and foreign currency forwards and swaps are observable in the active markets and are classified as Level 2 in the fair value measurement hierarchy.



	Fair Value Measurement
	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)		Total		Balance Sheet Classification
	(In $ millions)
As of September 30, 2015
Mutual funds	30	—		30		Marketable securities, at fair value
Derivatives Not Designated as Hedges
Foreign currency forwards and swaps	—	2		2		Current Other assets
Total assets	30	2		32
Designated as Net Investment Hedges
3.250% Notes⁽¹⁾	—	—		—		Long-term Debt
Term C-2 and Term C-3 loans⁽¹⁾	—	—		—		Long-term Debt
Derivatives Not Designated as Hedges
Interest rate swaps	—	(1	)	(1	)	Current Other liabilities
Foreign currency forwards and swaps	—	(5	)	(5	)	Current Other liabilities
Total liabilities	—	(6	)	(6	)
As of December 31, 2014
Mutual funds	32	—		32		Marketable securities, at fair value
Derivatives Designated as Cash Flow Hedges
Cross-currency swaps	—	9		9		Current Other assets
Cross-currency swaps	—	43		43		Noncurrent Other assets
Derivatives Not Designated as Hedges
Foreign currency forwards and swaps	—	3		3		Current Other assets
Total assets	32	55		87
Derivatives Designated as Cash Flow Hedges
Cross-currency swaps	—	(2	)	(2	)	Current Other liabilities
Cross-currency swaps	—	(10	)	(10	)	Noncurrent Other liabilities
Designated as a Net Investment Hedge
3.250% Notes⁽¹⁾	—	—		—		Long-term Debt
Derivatives Not Designated as Hedges
Interest rate swaps	—	(4	)	(4	)	Current Other liabilities
Foreign currency forwards and swaps	—	(7	)	(7	)	Current Other liabilities
Total liabilities	—	(23	)	(23	)

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⁽¹⁾	Included in the unaudited consolidated balance sheets at carrying amount.

Carrying values and fair values of financial instruments that are not carried at fair value are as follows:



		Fair Value Measurement
	Carrying Amount	Significant Other Observable Inputs (Level 2)	Unobservable Inputs (Level 3)	Total
	(In $ millions)
As of September 30, 2015
Cost investments	147	—	—	—
Insurance contracts in nonqualified trusts	48	48	—	48
Long-term debt, including current installments of long-term debt	2,567	2,301	247	2,548
As of December 31, 2014
Cost investments	145	—	—	—
Insurance contracts in nonqualified trusts	56	56	—	56
Long-term debt, including current installments of long-term debt	2,633	2,398	260	2,658

In general, the cost investments included in the table above are not publicly traded and their fair values are not readily determinable; however, the Company believes the carrying values approximate or are less than the fair values. Insurance contracts in nonqualified trusts consist of long-term fixed income securities, which are valued using independent vendor pricing models with observable inputs in the active market and therefore represent a Level 2 fair value measurement. The fair value of long-term debt is based on valuations from third-party banks and market quotations and is classified as Level 2 in the fair value measurement hierarchy. The fair value of obligations under capital leases, which are included in long-term debt, is based on lease payments and discount rates, which are not observable in the market and therefore represents a Level 3 fair value measurement.

As of September 30, 2015 and December 31, 2014, the fair values of cash and cash equivalents, receivables, trade payables, short-term borrowings and the current installments of long-term debt approximate carrying values due to the short-term nature of these instruments. These items have been excluded from the table with the exception of the current installments of long-term debt.

- 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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