Fair Value Measurements

12 Months Ended

Dec. 31, 2021

FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets and liabilities carried at fair value are classified in their entirety based on the lowest level of input 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.

Use of observable market data, when available, is required in making fair value measurements. When inputs used fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement. We

determine fair value for Level 1 instruments using exchange-traded prices for identical instruments. We determine fair value of Level 2 instruments using exchange-traded prices of similar instruments, where available, or utilizing other observable inputs that take into account our credit risk and that of our counterparties. Foreign currency exchange contracts and interest rate hedges are included in Level 2 and 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 are comprised of contingent consideration arising from recently completed acquisitions. We determine fair value of these Level 3 liabilities using a discounted cash flow technique. Significant unobservable inputs were used in our assessment of fair value, including assumptions regarding future business results, discount rates, discount periods and probability assessments based on the likelihood of reaching various targets. We remeasure the fair value of our assets and liabilities each reporting period. We 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.


Assets Measured at Fair Value
	2021		2020
Cash and cash equivalents	$	2,944	$	2,943
Trading marketable securities	193		171
Level 1 - Assets	$	3,137	$	3,114
Available-for-sale marketable securities:
Corporate and asset-backed debt securities	$	48	$	38
Foreign government debt securities	2		—
United States agency debt securities	5		5
United States treasury debt securities	19		36
Certificates of deposit	1		2
Total available-for-sale marketable securities	$	75	$	81
Foreign currency exchange forward contracts	212		20

Level 2 - Assets	$	287	$	101
Total assets measured at fair value	$	3,424	$	3,215


Liabilities Measured at Fair Value
	2021		2020
Deferred compensation arrangements	$	193	$	171
Level 1 - Liabilities	$	193	$	171
Foreign currency exchange forward contracts	$	17	$	160
Interest rate swap liability	—		53
Level 2 - Liabilities	$	17	$	213
Contingent consideration:
Beginning	$	393	$	306
Additions	62		108
Change in estimate	(1)		9
Settlements	(148)		(30)
Ending	$	306	$	393
Level 3 - Liabilities	$	306	$	393
Total liabilities measured at fair value	$	516	$	777


Fair Value of Available for Sale Securities by Maturity
	2021		2020
Due in one year or less	$	36	$	42
Due after one year through three years	$	39	$	39

On December 31, 2021 the aggregate difference between the cost and fair value of available-for-sale marketable securities was nominal. Interest and marketable securities income was $68, $102 and $155 in 2021, 2020 and 2019, which was recorded in other income (expense), net.

Our investments in available-for-sale marketable securities had a minimum credit quality rating of A2 (Moody's), A (Standard & Poor's) and A (Fitch). We do not plan 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.

- 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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