Fair Value Measurements

3 Months Ended

Mar. 31, 2016

Fair Value Measurements.

U.S. GAAP requires enhanced disclosures about investments and non-recurring non-financial assets and non-financial liabilities that are measured and reported at fair value and has established a hierarchal disclosure framework that prioritizes and ranks the level of market price observability used in measuring investments or non-financial assets and liabilities at fair value. Market price observability is impacted by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

Investments and non-financial assets and/or liabilities measured and reported at fair value are classified and disclosed in one of the following categories:

Level 1 - Quoted prices are available in active markets for identical investments as of the reporting date. The types of investments included in Level 1 include listed equities and listed derivatives. We do not adjust the quoted price for these investments, even in situations where we hold a large position.

Level 2 - Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies. Investments that are generally included in this category include corporate bonds and loans, less liquid and restricted equity securities and certain over-the-counter derivatives. The inputs and assumptions of our Level 2 investments are derived from market observable sources including reported trades, broker/dealer quotes and other pertinent data.

Level 3 - Pricing inputs are unobservable for the investment and non-financial asset and/or liability and include situations where there is little, if any, market activity for the investment or non-financial asset and/or liability. The inputs into the determination of fair value require significant management judgment or estimation. Fair value is determined using comparable market transactions and other valuation methodologies, adjusted as appropriate for liquidity, credit, market and/or other risk factors.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and consideration of factors specific to the investment. Significant transfers, if any, between the levels within the fair value hierarchy are recognized at the beginning of the reporting period when changes in circumstances require such transfers.

The following table summarizes the valuation of our investments, derivative contracts, securities sold not yet purchased and other liabilities by the above fair value hierarchy levels measured on a recurring and non-recurring basis as of March 31, 2016 and December 31, 2015:



	March 31, 2016								December 31, 2015
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets	(in millions)
Investments (Note 4)	$	9,007	$	430	$	249	$	9,686	$	14,447	$	289	$	292	$	15,028
Derivative contracts, at fair value⁽¹⁾	—		40		—		40		—		259		—		259
	$	9,007	$	470	$	249	$	9,726	$	14,447	$	548	$	292	$	15,287
Liabilities
Securities sold, not yet purchased	$	998	$	54	$	—	$	1,052	$	794	$	—	$	—	$	794
Other liabilities	—		1		—		1		—		3		—		3
Derivative contracts, at fair value⁽²⁾	—		469		—		469		—		36		—		36
	$	998	$	524	$	—	$	1,522	$	794	$	39	$	—	$	833


⁽¹⁾	Amounts are classified within other assets in our condensed consolidated balance sheets.


⁽²⁾	Amounts are classified within accrued expenses and other liabilities in our condensed consolidated balance sheets.

Assets Measured at Fair Value on a Recurring Basis for Which We Use Level 3 Inputs to Determine Fair Value

The changes in investments measured at fair value on a recurring basis for which we use Level 3 inputs to determine fair value are as follows:



	Three Months Ended March 31,
	2016			2015
	(in millions)
Balance at January 1	$	283		$	229
Gross unrealized gains (losses)	16			(14		)
Purchases	50			—
Transfers (out) in	(122		)	1
Balance at March 31	$	227		$	216

During the first quarter of 2016, we transferred out a Level 3 corporate debt investment in the amount of $126 million. See Note 2, "Operating Units - Gaming," for further discussion regarding this transaction.

During 2015, the Holding Company made a certain investment classified as trading securities, which is considered a Level 3 investment due to unobservable market data and is measured at fair value on a recurring basis. We purchased an additional $50 million of this investment during the three months ended March 31, 2016. We determined the fair value of this investment using internally developed models and other valuation techniques. As of March 31, 2016 and December 31, 2015, the fair value of this investment was $207 million and $157 million, respectively.

There were no unrealized gains or losses included in earnings for the three months ended March 31, 2016 related to Level 3 investments still held at March 31, 2016 by our Investment and Gaming segments and the Holding Company.

Assets Measured at Fair Value on a Non-Recurring Basis for Which We Use Level 3 Inputs to Determine Fair Value

We have certain investments in debt securities classified as held-to-maturity within our Gaming segment since we have the ability and intent to hold the bonds to maturity. The debt securities are classified as Level 3 investments measured at fair value on a non-recurring basis and therefore are excluded from the roll forward of Level 3 investments measured on a recurring basis above. As of March 31, 2016 and December 31, 2015, the fair value of these debt securities was $22 million and $9 million, respectively, with the increase resulting from our acquisition of Trump during the first quarter of 2016.

During the three months ended March 31, 2016, our Energy segment recorded a goodwill impairment charge of 574 million, which represented the full amount of the remaining goodwill allocated to this segment. Refer to Note 8, "Goodwill and Intangible Assets, Net," for further discussion. Additionally, during the three months ended March 31, 2016, our Automotive segment recorded $3 million of impairment relating to property, plant and equipment.

- 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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