4. Valuation of debt and equity investments and certain liabilities

Debt and equity investments

We classify our investments as available for sale, trading, equity method or non-marketable equity. Most of our investments are debt securities, which are classified as available for sale.

Available-for-sale and trading securities are stated at fair value, which is generally based on market prices or broker quotes. See Fair-value considerations below. Unrealized gains and losses from available-for-sale debt securities are recorded as an increase or decrease, net of taxes, in AOCI on our Consolidated Balance Sheets. We record other-than-temporary impairments on available-for-sale debt securities in OI&E in our Consolidated Statements of Income.

We classify certain mutual funds as trading securities. These mutual funds hold a variety of debt and equity investments intended to generate returns that offset changes in certain deferred compensation liabilities. We record changes in the fair value of these mutual funds and the related deferred compensation liabilities in SG&A.

Our other investments include equity-method investments and non-marketable equity investments, which are not measured at fair value. These investments consist of interests in venture capital funds and other non-marketable equity securities. Gains and losses from equity-method investments are recognized in OI&E based on our ownership share of the investee’s financial results.

Details of our investments are as follows:

	September 30, 2018						December 31, 2017
	Cash and Cash		Short-Term		Long-Term		Cash and Cash		Short-Term		Long-Term
	Equivalents		Investments		Investments		Equivalents		Investments		Investments
Measured at fair value:
Available-for-sale debt securities:
Money market funds	$	475	$	—	$	—	$	525	$	—	$	—
Corporate obligations		378		1,263		—		172		698		—
U.S. government agency and Treasury securities		499		2,348		—		700		2,115		—
Trading securities:
Mutual funds		—		—		253		—		—		236
Total		1,352		3,611		253		1,397		2,813		236

Other measurement basis:
Equity-method investments		—		—		21		—		—		26
Non-marketable equity investments		—		—		4		—		—		6
Cash on hand		150		—		—		259		—		—
Total	$	1,502	$	3,611	$	278	$	1,656	$	2,813	$	268

As of September 30, 2018, and December 31, 2017, unrealized gains and losses associated with our available-for-sale investments were not material. We did not recognize any credit losses related to available-for-sale investments for the first nine months of 2018 and 2017.

Proceeds from sales, redemptions and maturities of short-term available-for-sale investments were $1.72 billion and $920 million for the third quarters of 2018 and 2017, respectively, and $4.55 billion and $3.31 billion for the first nine months of 2018 and 2017, respectively. Gross realized gains and losses from these sales were not material.

The following table presents the aggregate maturities of our available-for-sale investments as of September 30, 2018:

Due	Fair Value
One year or less	$	4,833
One to two years		130

Other-than-temporary declines and impairments in the values of our available-for-sale investments, which were recognized in OI&E, were not material in the first nine months of 2018 and 2017.

Fair-value considerations

We measure and report certain financial assets and liabilities at fair value 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 (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

The three-level hierarchy discussed below indicates the extent and level of judgment used to estimate fair-value measurements.

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Level 1 – Uses unadjusted quoted prices that are available in active markets for identical assets or liabilities as of the reporting date.

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Level 2 – Uses inputs other than Level 1 that are either directly or indirectly observable as of the reporting date through correlation with market data, including quoted prices for similar assets and liabilities in active markets and quoted prices in markets that are not active. Level 2 also includes assets and liabilities that are valued using models or other pricing methodologies that do not require significant judgment since the input assumptions used in the models, such as interest rates and volatility factors, are corroborated by readily observable data. We utilize a third-party data service to provide Level 2 valuations. We verify these valuations for reasonableness relative to unadjusted quotes obtained from brokers or dealers based on observable prices for similar assets in active markets.

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Level 3 – Uses inputs that are unobservable, supported by little or no market activity and reflect the use of significant management judgment. These values are generally determined using pricing models that utilize management estimates of market participant assumptions. As of September 30, 2018 and December 31, 2017, we had no Level 3 assets or liabilities, other than certain assets held by our postretirement plans.

The following are our assets and liabilities that were accounted for at fair value on a recurring basis. These tables do not include cash on hand, assets held by our postretirement plans, or assets and liabilities that are measured at historical cost or any basis other than fair value.

	September 30, 2018						December 31, 2017
	Level 1		Level 2		Total		Level 1		Level 2		Total
Assets:
Money market funds	$	475	$	—	$	475	$	525	$	—	$	525
Corporate obligations		—		1,641		1,641		—		870		870
U.S. government agency and Treasury securities		2,847		—		2,847		2,765		50		2,815
Mutual funds		253		—		253		236		—		236
Total assets	$	3,575	$	1,641	$	5,216	$	3,526	$	920	$	4,446

Liabilities:
Deferred compensation	$	271	$	—	$	271	$	255	$	—	$	255
Total liabilities	$	271	$	—	$	271	$	255	$	—	$	255