FAIR VALUE MEASUREMENTS

Fair Value Measurements on a Recurring Basis

The following table summarizes the bases used to measure certain assets and liabilities at fair value on a recurring basis:



Basis of Fair Value Measurements on a Recurring Basis	Dec 31, 2017								Dec 31, 2016
In millions	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets at fair value:
Cash equivalents ¹	$	—	$	2,280	$	—	$	2,280	$	—	$	4,173	$	—	$	4,173
Marketable securities	—		4		—		4		—		—		—		—
Interests in trade accounts receivable conduits ²	—		—		677		677		—		—		1,237		1,237
Equity securities ³	88		52		—		140		619		87		—		706
Debt securities: ³
Government debt ⁴	—		639		—		639		—		608		—		608
Corporate bonds	—		733		—		733		—		645		—		645
Derivatives relating to: ⁵
Commodities	47		100		—		147		48		29		—		77
Foreign currency	—		126		—		126		—		193		—		193
Total assets at fair value	$	135	$	3,934	$	677	$	4,746	$	667	$	5,735	$	1,237	$	7,639
Liabilities at fair value:
Long-term debt ⁶	$	—	$	22,615	$	—	$	22,615	$	—	$	22,807	$	—	$	22,807
Derivatives relating to: ⁵
Interest rates	—		4		—		4		—		5		—		5
Commodities	31		261		—		292		20		214		—		234
Foreign currency	—		216		—		216		—		139		—		139
Total liabilities at fair value	$	31	$	23,096	$	—	$	23,127	$	20	$	23,165	$	—	$	23,185


1.	Treasury bills, time deposits, and money market funds included in "Cash and cash equivalents" in the consolidated balance sheets and held at amortized cost, which approximates fair value.

2. Included in "Accounts and notes receivable – Other" in the consolidated balance sheets. See Note 14 for additional information on transfers of financial assets.

3. The Company’s investments in equity and debt securities are primarily classified as available-for-sale and are included in “Other investments” in the consolidated balance sheets.

4. U.S. Treasury obligations, U.S. agency obligations, agency mortgage-backed securities and other municipalities’ obligations.

5. See Note 21 for the classification of derivatives in the consolidated balance sheets.

6. See Note 21 for information on fair value measurements of long-term debt.

For assets and liabilities classified as Level 1 measurements (measured using quoted prices in active markets), total fair value is either the price of the most recent trade at the time of the market close or the official close price, as defined by the exchange on which the asset is most actively traded on the last trading day of the period, multiplied by the number of units held without consideration of transaction costs.

For assets and liabilities classified as Level 2 measurements, where the security is frequently traded in less active markets, fair value is based on the closing price at the end of the period; where the security is less frequently traded, fair value is based on the price a dealer would pay for the security or similar securities, adjusted for any terms specific to that asset or liability, or by using observable market data points of similar, more liquid securities to imply the price. Market inputs are obtained from well-established and recognized vendors of market data and subjected to tolerance and quality checks.

For derivative assets and liabilities, standard industry models are used to calculate the fair value of the various financial instruments based on significant observable market inputs, such as foreign exchange rates, commodity prices, swap rates, interest rates and implied volatilities obtained from various market sources. Market inputs are obtained from well-established and recognized vendors of market data and subjected to tolerance/quality checks.

For all other assets and liabilities for which observable inputs are used, fair value is derived through the use of fair value models, such as a discounted cash flow model or other standard pricing models. See Note 21 for further information on the types of instruments used by the Company for risk management.

There were no transfers between Levels 1 and 2 in the years ended December 31, 2017 and 2016.

For assets classified as Level 3 measurements, the fair value is based on significant unobservable inputs including assumptions where there is little, if any, market activity. The fair value of the Company’s interests held in trade receivable conduits is determined by calculating the expected amount of cash to be received using the key input of anticipated credit losses in the portfolio of receivables sold that have not yet been collected. Given the short-term nature of the underlying receivables, discount rate and prepayments are not factors in determining the fair value of the interests. See Note 14 for further information on assets classified as Level 3 measurements.

The following table summarizes the changes in fair value measurements using Level 3 inputs for the years ended December 31, 2017 and 2016:



Fair Value Measurements Using Level 3 Inputs for Interests Held in Trade Receivable Conduits ¹	2017			2016
In millions	2017			2016
Balance at Jan 1	$	1,237		$	943
Loss included in earnings ²	(8		)	(1		)
Purchases	1,717			1,552
Settlements	(2,269		)	(1,257		)
Balance at Dec 31	$	677		$	1,237


1.	Included in "Accounts and notes receivable – Other" in the consolidated balance sheets.


2.	Included in "Selling, general and administrative expenses" in the consolidated statements of income.

Fair Value Measurements on a Nonrecurring Basis

The following table summarizes the bases used to measure certain assets at fair value on a nonrecurring basis in the consolidated balance sheets in 2017, 2016 and 2015:



Basis of Fair Value Measurements on a Nonrecurring Basis at Dec 31	Quoted Prices in Active Markets for Identical Items (Level 1)		Significant Other Unobservable Inputs (Level 3)		Total Losses
In millions			Significant Other Unobservable Inputs (Level 3)		Total Losses
2017
Assets at fair value:
Long-lived assets, intangible assets, other assets and equity method investments	$	—	$	61	$	(1,226	)
Goodwill	$	—	$	—	$	(1,491	)
2016
Assets at fair value:
Long-lived assets, other assets and equity method investments	$	46	$	—	$	(296	)
2015
Assets at fair value:
Long-lived assets, equity method investments, investments and other assets	$	—	$	24	$	(313	)

2017 Fair Value Measurements on a Nonrecurring Basis

As part of the Synergy Program, the Company has or will shut down a number of manufacturing, R&D and corporate facilities around the world. The manufacturing facilities and related assets (including intangible assets), corporate facilities and data centers associated with this plan were written down to zero in the fourth quarter of 2017. The impairment charges related to the Synergy Program, totaling $287 million, were included in "Restructuring, goodwill impairment and asset related charges - net" in the consolidated statements of income. See Note 6 for additional information on the Company's restructuring activities.

In the fourth quarter of 2017, the Company recognized a $622 million pretax impairment charge related to a biopolymers manufacturing facility in Santa Vitoria, Minas Gerais, Brazil. The Company determined it will not pursue an expansion of the facility’s ethanol mill into downstream derivative products, primarily as a result of cheaper ethane-based production as well as the Company’s new assets coming online in the U.S. Gulf Coast which can be used to meet growing market demands in Brazil. As a result of this decision, cash flow analysis indicated the carrying amount of the impacted assets was not recoverable and the assets were written down to zero in the fourth quarter of 2017. The impairment charge was included in “Restructuring, goodwill impairment and asset related charges - net” in the consolidated statements of income. See Notes 6 and 23 for additional information.

The Company also recognized other pretax impairment charges of $317 million in the fourth quarter of 2017, including charges related to manufacturing assets of $230 million, an equity method investment of $81 million and other assets of $6 million. The assets, classified as Level 3 measurements, were valued at $61 million using unobservable inputs, including assumptions a market participant would use to measure the fair value of the group of assets, which included projected cash flows. The impairment charges were included in "Restructuring, goodwill impairment and asset related charges - net" in the consolidated statements of income. See Notes 6 and 23 for additional information.

In the fourth quarter of 2017, the Company performed its annual goodwill impairment testing utilizing a discounted cash flow methodology as its valuation technique. As a result, the Company determined the fair value of the Coatings & Performance Monomers reporting unit was lower than its carrying amount and recorded an impairment charge of $1,491 million, included in “Restructuring, goodwill impairment and asset related charges - net” in the consolidated statements of income. See Note 13 for additional information on the impairment charge.

2016 Fair Value Measurements on a Nonrecurring Basis

As part of the 2016 restructuring plan, the Company has or will shut down a number of manufacturing and corporate facilities. The manufacturing facilities and related assets, corporate facilities and data centers associated with this plan were written down to zero in the second quarter of 2016. The Company also rationalized its aircraft fleet in the second quarter of 2016. Certain aircraft, classified as a Level 3 measurement, were considered held for sale and written down to fair value, using unobservable inputs, including assumptions a market participant would use to measure the fair value of the aircraft. The aircraft were subsequently sold in the second half of 2016. The impairment charges related to the 2016 restructuring plan, totaling $153 million, were included in "Restructuring, goodwill impairment and asset related charges - net" in the consolidated statements of income. See Note 6 for additional information on the Company's restructuring activities.

The Company recognized an impairment charge of $143 million in the fourth quarter of 2016, related to its equity interest in AFSI. This investment, classified as a Level 1 measurement, was written down to $46 million using quoted prices in an active market. The impairment charge was included in “Restructuring, goodwill impairment and asset related charges - net" in the consolidated statements of income. See Notes 5, 6 and 12 for additional information.

2015 Fair Value Measurements on a Nonrecurring Basis

As part of the 2015 restructuring plan that was approved on April 29, 2015, the Company shut down a number of manufacturing facilities. The manufacturing assets and facilities associated with this plan, classified as Level 3 measurements, were written down to $7 million using unobservable inputs, including assumptions a market participant would use to measure the fair value of the group of assets. In addition, a change in the Company's strategy to monetize and exit certain Venture Capital portfolio investments resulted in the write-down of certain investments. These investments, also classified as Level 3 measurements, were valued at $17 million using unobservable inputs, including assumptions a market participant would use to measure the fair value of the investment. These impairment charges, totaling $169 million, were included in "Restructuring, goodwill impairment and asset related charges - net" in the consolidated statements of income.

As a result of the Company’s continued actions to optimize its footprint, the Company recognized an impairment charge of $144 million in the fourth quarter of 2015, related to manufacturing assets and facilities and an equity method investment. These assets, classified as Level 3 measurements, were written down to zero. The impairment charge was included in "Restructuring, goodwill impairment and asset related charges - net" in the consolidated statements of income.