FAIR VALUE MEASUREMENTS

Accounting guidance on fair value measurements for certain financial assets and liabilities requires that financial assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs reflecting the reporting entity's own assumptions or external inputs from active markets.

When applying fair value principles in the valuation of assets and liabilities, we are required to maximize the use of quoted market prices and minimize the use of unobservable inputs. We calculate the fair value of our Level 1 and Level 2 instruments based on the exchange traded price of similar or identical instruments, where available, or based on other observable inputs. There were no significant transfers into or out of Level 1 or Level 2 that occurred between December 31, 2012 and December 31, 2013. The fair value of our Level 3 assets and liabilities are calculated as the net present value of expected cash flows based on externally provided or obtained inputs. Certain Level 3 assets may also be based on sale prices of similar assets. Our fair value calculations take into consideration our credit risk and that of our counterparties. Should a counterparty default, our maximum exposure to loss is the asset balance of the instrument. We did not change our valuation techniques used in measuring the fair value of any financial assets and liabilities during the year.

Our valuation of our assets and liabilities measured at fair value at December 31, 2013 and 2012:



	Total				(Level 1)				(Level 2)				(Level 3)
	2013		2012		2013		2012		2013		2012		2013		2012
Assets:
Cash and cash equivalents	$	1,339	$	1,395	$	1,339	$	1,395	$	—	$	—	$	—	$	—
Available-for-sale marketable securities
Corporate and asset-backed debt securities	1,177		1,280		—		—		1,177		1,280		—		—
Foreign government debt securities	845		848		—		—		845		848		—		—
United States agency debt securities	211		288		—		—		211		288		—		—
United States treasury debt securities	350		343		—		—		350		343		—		—
Certificates of deposit	53		114		—		—		53		114		—		—
Other	5		17		—		—		5		17		—		—
Total available-for-sale marketable securities	2,641		2,890		—		—		2,641		2,890		—		—
Trading marketable securities	72		57		72		57		—		—		—		—
Foreign currency exchange forward contracts	25		3		—		—		25		3		—		—
	$	4,077	$	4,345	$	1,411	$	1,452	$	2,666	$	2,893	$	—	$	—
Liabilities:
Deferred compensation arrangements	$	72	$	57	$	72	$	57	$	—	$	—	$	—	$	—
Contingent consideration	59		103		—		—		—		—		59		103
Foreign currency exchange forward contracts	2		1		—		—		2		1		—		—
	$	133	$	161	$	72	$	57	$	2	$	1	$	59	$	103

The following is a rollforward of our assets and liabilities measured at fair value using unobservable inputs (Level 3):



	Total						Corporate and Asset-Backed Debt Securities					Contingent Consideration
	Total						Corporate and Asset-Backed Debt Securities					Contingent Consideration
	2013			2012			2013		2012			2013			2012
Balance at the beginning of the period	$	(103	)	$	(114	)	$	—	$	1		$	(103	)	$	(115	)
Transfers into Level 3	—			—			—		—			—			—
Transfers out of Level 3	—			—			—		—			—			—
Gains or (losses) included in earnings	5			6			—		—			5			6
Sales	—			(1		)	—		(1		)	—			—
Settlements	39			39			—		—			39			39
Other	—			(33		)	—		—			—			(33		)
Balance at the end of the period	$	(59	)	$	(103	)	$	—	$	—		$	(59	)	$	(103	)

The estimated fair value of the liability for contingent consideration represents milestone payments for acquisitions. The fair value of the liability was estimated using a discounted cash flow technique. Significant inputs to this technique included our probability assessments of occurrence of triggering events, appropriately discounted considering the uncertainties associated with the obligation. We remeasure this liability each reporting period and record the changes in the fair value in general and administrative expense (for probability of occurrence) and other income (expense) (for changes in time value of money) in earnings.

The following presents quantitative information about the inputs and valuation methodologies we use for material fair value measurements classified in Level 3:



				Probability Range (Weighted Average)
	Fair Value	Valuation Technique	Unobservable Input	Minimum	Maximum	Weighted Average
Contingent consideration	$59	Discounted cash flow	Probability of occurrence	85	100	95

The following is a summary of our marketable securities:



	Amortized Cost				Gross Unrealized Gains				Gross Unrealized Losses						Estimated Fair Value
	2013		2012		2013		2012		2013			2012			2013		2012
Available-for-sale marketable securities:
Corporate and asset-backed debt securities	$	1,177	$	1,277	$	1	$	4	$	(1	)	$	(1	)	$	1,177	$	1,280
Foreign government debt securities	846		846		—		2		(1		)	—			845		848
United States agency debt securities	211		288		—		—		—			—			211		288
United States treasury debt securities	350		343		—		—		—			—			350		343
Certificates of deposit	53		114		—		—		—			—			53		114
Other	5		17		—		—		—			—			5		17
Total available-for-sale marketable securities	$	2,642	$	2,885	$	1	$	6	$	(2	)	$	(1	)	2,641		2,890
Trading marketable securities															72		57
Total marketable securities															$	2,713	$	2,947
Reported as:
Current assets-marketable securities															$	2,641	$	2,890
Noncurrent assets-other															72		57
															$	2,713	$	2,947

The unrealized losses on our available-for-sale marketable securities were primarily caused by increases in yields as a result of changing conditions in the global credit markets. While some of these investments have been downgraded by rating agencies since their initial purchase, less than 1% of our investments in available-for-sale marketable securities had a credit quality rating of less than single A (per Standard & Poors and Fitch) and A2 (per Moody's). Because we do not intend to sell the investments and it is not more likely than not that we will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, we do not consider these investments to be other-than-temporarily impaired at December 31, 2013.

The cost and estimated fair value of available-for-sale marketable securities at December 31, 2013 by contractual maturity are:



	Cost		Estimated Fair Value
Due in one year or less	$	425	$	424
Due after one year through three years	1,989		1,989
Due after three years	228		228
	$	2,642	$	2,641

The gross unrealized losses and fair value of our investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position at December 31, 2013, are as follows:



		Corporate and Asset-Backed Debt Securities						Foreign Government Debt Securities						United States Agency Debt Securities						Other						Total
		Less Than 12 Months		Greater Than 12 Months		Total		Less Than 12 Months		Greater Than 12 Months		Total		Less Than 12 Months		Greater Than 12 Months		Total		Less Than 12 Months		Greater Than 12 Months		Total		Less Than 12 Months		Greater Than 12 Months		Total
Number of investments	2013	256		6		262		102		9		111		40		1		41		163		21		184		561		37		598
	2012	216		—		216		67		—		67		27		—		27		15		—		15		325		—		325
Fair value	2013	$	478	$	22	$	500	$	538	$	77	$	615	$	164	$	9	$	173	$	25	$	2	$	27	$	1,205	$	110	$	1,315
	2012	425		—		425		324		—		324		87		—		87		27		—		27		863		—		863
Unrealized losses	2013	1		—		1		1		—		1		—		—		—		—		—		—		2		—		2
	2012	1		—		1		—		—		—		—		—		—		—		—		—		1		—		1

Interest and marketable securities income totaled $24, $47 and $34 in 2013, 2012, and 2011, respectively, and is included in other income (expense).