Fair Value Measurements

12 Months Ended

Dec. 31, 2016

The Company holds certain fixed income securities, equity securities and derivatives, which are recognized and disclosed at fair value in the financial statements on a recurring basis. 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 as of the measurement date. Fair value is measured using the fair value hierarchy and related valuation methodologies as defined in the authoritative literature. This guidance specifies a hierarchy of valuation techniques based on whether the inputs to each measurement are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's assumptions about current market conditions. The prescribed fair value hierarchy and related valuation methodologies as they pertain to the Company are as follows:

Level 1—Quoted prices for identical instruments in active markets.

Level 2—Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations, in which all significant inputs are observable, in active markets.

Level 3—Valuations derived from valuation techniques, in which one or more significant inputs are unobservable.

Investments and Derivatives

The fair values of the Company’s financial assets and liabilities by level in the fair value hierarchy as of December 31, 2016 and December 31, 2015 were as follows:



December 31, 2016	Level 2		Total
Assets:
Foreign exchange derivative contracts	$	9	$	9
Available-for-sale securities:
Government, agency, and government-sponsored enterprise obligations	51		51
Corporate bonds	5		5
Liabilities:
Foreign exchange derivative contracts	$	32	$	32



December 31, 2015	Level 1		Level 2		Total
Assets:
Foreign exchange derivative contracts	$	—	$	6	$	6
Available-for-sale securities:
Government, agency, and government-sponsored enterprise obligations	—		444		444
Corporate bonds	—		7		7
Common stock and equivalents	6		—		6
Liabilities:
Foreign exchange derivative contracts	$	—	$	2	$	2
Interest rate swap	—		1		1

Pension and Postretirement Health Care Benefits Plan Assets

The fair values of the various pension and postretirement health care benefits plans’ assets by level in the fair value hierarchy as of December 31, 2016 and 2015 were as follows:

U.S. Pension Benefit Plans



December 31, 2016	Level 1		Level 2		Total
Common stock and equivalents	$	95	$	—	$	95
Commingled equity funds	1,096		493		1,589
Government, agency and government-sponsored enterprise obligations	—		125		125
Other government bonds	—		54		54
Corporate bonds	—		823		823
Mortgage-backed bonds	—		2		2
Commingled bond funds	261		58		319
Commingled short-term investment funds	183		—		183
Total investment securities	$	1,635	$	1,555	$	3,190
Cash					5
Fair value plan assets					$	3,195



December 31, 2015	Level 1		Level 2		Total
Common stock and equivalents	$	89	$	—	$	89
Commingled equity funds	—		1,541		1,541
Preferred stock	2		—		2
Government, agency and government-sponsored enterprise obligations	—		120		120
Other government bonds	—		70		70
Corporate bonds	—		862		862
Mortgage-backed bonds	—		2		2
Commingled short-term investment funds	—		435		435
Total investment securities	$	91	$	3,030	$	3,121
Accrued income receivable					9
Fair value plan assets					$	3,130

Non-U.S. Pension Benefit Plans



December 31, 2016	Level 1		Level 2		Total
Common stock and equivalents	$	161	$	—	$	161
Commingled equity funds	172		173		345
Government, agency, and government-sponsored enterprise obligations	—		823		823
Commingled bond funds	107		36		143
Commingled short-term investment funds	—		1		1
Total investment securities	440		1,033		1,473
Cash					45
Accrued income receivable					—
Insurance contracts					47
Fair value plan assets					$	1,565



December 31, 2015	Level 1		Level 2		Total
Common stock and equivalents	$	21	$	—	$	21
Commingled equity funds	—		293		293
Government, agency, and government-sponsored enterprise obligations	—		811		811
Commingled bond funds	—		56		56
Commingled short-term investment funds	—		7		7
Total investment securities	$	21	$	1,167	$	1,188
Cash					457
Accrued income receivable					2
Insurance contracts					49
Fair value plan assets					$	1,696

Postretirement Health Care Benefits Plan



December 31, 2016	Level 1		Level 2		Total
Common stock and equivalents	$	4	$	—	$	4
Commingled equity funds	47		21		68
Government, agency, and government-sponsored enterprise obligations	—		5		5
Other government bonds	—		2		2
Corporate bonds	—		35		35
Commingled bond funds	11		3		14
Commingled short-term investment funds	8		—		8
Invested cash	—		—		—
Fair value plan assets	$	70	$	66	$	136



December 31, 2015	Level 1		Level 2		Total
Common stock and equivalents	$	4	$	—	$	4
Commingled equity funds	—		71		71
Government, agency, and government-sponsored enterprise obligations	—		5		5
Other government bonds	—		3		3
Corporate bonds	—		40		40
Commingled short-term investment funds	—		14		14
Invested cash	—		6		6
Fair value plan assets	$	4	$	139	$	143

At December 31, 2016, the Company had $309 million of investments in money market prime and government funds (Level 1) classified as Cash and cash equivalents in its consolidated balance sheet, compared to $1.3 billion at December 31, 2015. The money market funds had quoted market prices that are approximately at par.

Using quoted market prices and market interest rates, the Company determined that the fair value of long-term debt at December 31, 2016 was $4.5 billion (Level 2), consistent with the face value of $4.5 billion. Since considerable judgment is required in interpreting market information, the fair value of the long-term debt is not necessarily indicative of the amount which could be realized in a current market exchange.

All other financial instruments are carried at cost, which is not materially different from the instruments’ fair values.

- 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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