FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

Financial assets and liabilities measured at fair value on a recurring basis are summarized below:



	June 30, 2016								December 31, 2015
Dollars in Millions	Level 1		Level 2			Total			Level 1		Level 2			Total
Cash and cash equivalents - Money market and other securities	$	—	$	2,425		$	2,425		$	—	$	1,825		$	1,825
Marketable securities:
Certificates of deposit	—		438			438			—		804			804
Commercial paper	—		100			100			—		—			—
Corporate debt securities	—		4,358			4,358			—		5,638			5,638
Equity funds	—		95			95			—		92			92
Fixed income funds	—		7			7			—		11			11
Derivative assets:
Interest rate swap contracts	—		14			14			—		31			31
Forward starting interest rate swap contracts	—		—			—			—		15			15
Foreign currency forward contracts	—		36			36			—		50			50
Equity investments	34		—			34			60		—			60
Derivative liabilities:
Interest rate swap contracts	—		—			—			—		(1		)	(1		)
Forward starting interest rate swap contracts	—		(98		)	(98		)	—		(7		)	(7		)
Foreign currency forward contracts	—		(59		)	(59		)	—		(10		)	(10		)

As further described in "Note 10. Financial Instruments and Fair Value Measurements" in our 2015 Form 10-K, our fair value estimates use inputs that are either (1) quoted prices for identical assets or liabilities in active markets (Level 1 inputs), (2) observable prices for similar assets or liabilities in active markets or for identical or similar assets or liabilities in markets that are not active (Level 2 inputs) or (3) unobservable inputs (Level 3 inputs). There were no Level 3 financial assets or liabilities as of June 30, 2016 and December 31, 2015.

Available-for-sale Securities

The following table summarizes available-for-sale securities:



Dollars in Millions	Amortized Cost		Gross Unrealized Gain in Accumulated OCI		Gross Unrealized Loss in Accumulated OCI			Fair Value
Dollars in Millions	Amortized Cost		Gross Unrealized Gain in Accumulated OCI		Gross Unrealized Loss in Accumulated OCI			Fair Value
June 30, 2016
Certificates of deposit	$	438	$	—	$	—		$	438
Commercial paper	100		—		—			100
Corporate debt securities	4,310		48		—			4,358
Equity investments	32		4		(2		)	34
Total	$	4,880	$	52	$	(2	)	$	4,930

December 31, 2015
Certificates of deposit	$	804	$	—	$	—		$	804
Corporate debt securities	5,646		15		(23		)	5,638
Equity investments	74		10		(24		)	60
Total	$	6,524	$	25	$	(47	)	$	6,502



Dollars in Millions	June 30, 2016		December 31, 2015
Current marketable securities^(a)	$	1,717	$	1,885
Non-current marketable securities^(b)	3,281		4,660
Other assets	34		60
Available-for-sale securities	$	5,032	$	6,605


(a)	The fair value option for financial assets was elected for investments in equity and fixed income funds. The fair value of these investments were $102 million at June 30, 2016 and $103 million at December 31, 2015 and were included in current marketable securities.


(b)	All non-current marketable securities mature within five years as of June 30, 2016 and December 31, 2015.

Qualifying Hedges and Non-Qualifying Derivatives

The following table summarizes the fair value of outstanding derivatives:



		June 30, 2016					December 31, 2015
Dollars in Millions	Balance Sheet Location	Notional		Fair Value			Notional		Fair Value
Derivatives designated as hedging instruments:
Interest rate swap contracts	Other assets	$	1,250	$	14		$	1,100	$	31
Interest rate swap contracts	Pension and other liabilities	—		—			650		(1		)
Forward starting interest rate swap contracts	Other assets	—		—			500		15
Forward starting interest rate swap contracts	Accrued liabilities	750		(98		)	—		—
Forward starting interest rate swap contracts	Pension and other liabilities	—		—			250		(7		)
Foreign currency forward contracts	Prepaid expenses and other	638		36			1,016		50
Foreign currency forward contracts	Accrued liabilities	782		(55		)	342		(5		)
Foreign currency forward contracts	Pension and other liabilities	31		(1		)	—		—

Derivatives not designated as hedging instruments:
Foreign currency forward contracts	Accrued liabilities	380		(3		)	445		(5		)

Cash Flow Hedges — The notional amount of outstanding foreign currency forward contracts was primarily attributed to the euro ($721 million) and Japanese yen ($441 million) at June 30, 2016.

Net Investment Hedges — Non-U.S. dollar borrowings of €950 million ($1,055 million) are designated to hedge euro currency exposures of the net investment in certain foreign affiliates.

Fair Value Hedges — The notional amount of fixed-to-floating interest rate swap contracts terminated was $500 million in 2016 and $147 million in 2015 generating proceeds of $43 million in 2016 and $28 million in 2015 (including accrued interest).

Debt Obligations

Long-term debt includes:



Dollars in Millions	June 30, 2016			December 31, 2015
Principal Value	$	6,353		$	6,339
Adjustments to Principal Value:
Fair value of interest rate swap contracts	14			30
Unamortized basis adjustment from swap terminations	301			272
Unamortized bond discounts and issuance costs	(87		)	(91		)
Total	$	6,581		$	6,550

The fair value of debt was $7,455 million at June 30, 2016 and $6,909 million at December 31, 2015 valued using Level 2 inputs. Interest payments were $102 million and $124 million for the six months ended June 30, 2016 and 2015, respectively, net of amounts related to interest rate swap contracts.

The following summarizes the issuance and redemption of long-term debt obligations in 2015 (none in 2016) and related termination of interest rate swap contracts:



Amounts in Millions	Euro			U.S. dollars
Principal Value:
1.000% Euro Notes due 2025	€	575		$	643
1.750% Euro Notes due 2035	575			643
Total	€	1,150		$	1,286

Proceeds net of discount and deferred loan issuance costs	€	1,133		$	1,268

Forward starting interest rate swap contracts terminated:
Notional amount	€	500		$	559
Unrealized loss	(16		)	(18		)



	Six Months Ended
Dollars in Millions	June 30, 2015
Principal amount	$	1,624
Carrying value	1,795
Debt redemption price	1,957
Notional amount of interest rate swap contracts terminated	735
Interest rate swap contract termination payments	11
Loss on debt redemption^(a)	180


(a)	Including acceleration of debt issuance costs, loss on interest rate lock contract and other related fees.