Fair Value Measurements

3 Months Ended

Mar. 31, 2016

FAIR VALUE MEASUREMENTS

Financial assets and liabilities carried at fair value are 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 our assumptions or external inputs from active markets.

When applying the 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 identical or similar instruments, where available, or based on other observable inputs taking into account our credit risk and that of our counterparties. Foreign currency exchange contracts and interest rate hedges are included in Level 2 as we use inputs other than quoted prices that are observable for the asset or liability. The Level 2 derivative instruments are primarily valued using standard calculations and models that use readily observable market data as their basis.

Our Level 3 liabilities represent milestone payments for acquisitions. The fair value of the liabilities was estimated using a discounted cash flow technique. Significant unobservable inputs to this technique included our probability assessments of occurrence of triggering events, appropriately discounted considering the uncertainties associated with the obligation. We remeasure our assets and liabilities each reporting period and record the changes in fair value within selling, general and administrative expense and the changes in the time value of money within other income (expense), net.

There were no significant transfers into or out of any level between December 31, 2015 and March 31, 2016.

Valuation of Assets and Liabilities Measured at Fair Value



	March			December
	2016			2015
Cash and cash equivalents	$	6,976		$	3,379
Trading marketable securities	85			82
Level 1 - Assets	$	7,061		$	3,461
Available-for-sale marketable securities:
Corporate and asset-backed debt securities	$	184		$	214
Foreign government debt securities	93			96
United States agency debt securities	77			120
United States treasury debt securities	139			264
Certificates of deposit	17			8
Total available-for-sale marketable securities	$	510		$	702
Foreign currency exchange forward contracts	12			69
Interest rate swap asset	35			15
Level 2 - Assets	$	557		$	786
Total assets measured at fair value	$	7,618		$	4,247

Deferred compensation arrangements	$	85		$	82
Level 1 - Liabilities	$	85		$	82
Foreign currency exchange forward contracts	$	29		$	10
Interest rate swap liability	—			4
Level 2 - Liabilities	$	29		$	14
Contingent consideration:
Beginning balance	$	56		$	48
Additions	6			11
Losses included in earnings	(3		)	—
Settlements	(5		)	(3		)
Balance at the end of the period	$	54		$	56
Level 3 - Liabilities	$	54		$	56
Total liabilities measured at fair value	$	168		$	152

Fair Value of Available for Sale Securities by Contractual Maturity

On March 31, 2016 the aggregate difference between the cost and fair value of available-for-sale marketable securities is nominal. Interest receivable of $3 related to our marketable securities portfolio was recorded in prepaid expenses and other current assets.The total of interest and marketable securities income was $5 and $6 in the three months 2016 and 2015. The amounts are included in other income (expense), net.

Less than 1% of our investments in available-for-sale marketable securities have a credit quality rating of less than A2 (Moody's), A (Standard & Poor's) and A (Fitch). 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 on March 31, 2016.

Securities in a Continuous Unrealized Loss Position



	Number of Investments	Fair Value
Corporate and asset-backed	34	$	37
Foreign government	2	10
United States agency	3	8
United States debt	3	5
Certificate of deposit	2	2
Total	44	$	62

On March 31, 2016 substantially all our investments with unrealized losses that are not deemed to be other-than-temporarily impaired have been in a continuous unrealized loss position for less than twelve months, and the losses are nominal.

- 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.

+ References + Details

Due in one year or less

Due after one year through three years