(5)ÌýÌýÌýAssets and Liabilities Measured at Fair Value
For assets and liabilities required to be reported at fair value, GAAP provides a hierarchy that prioritizes inputs to valuation techniques used to measure fair value into three broad levels. LevelÌý1 inputs are quoted market prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. LevelÌý2 inputs are inputs, other than quoted market prices included within LevelÌý1, that are observable for the asset or liability, either directly or indirectly. LevelÌý3 inputs are unobservable inputs for the asset or liability.ÌýÌýÂ鶹×îгöÆ· does not have any assets or liabilities required to be measured at fair value considered to be Level 3.
Â鶹×îгöÆ·'s assets and liabilities measured at fair value are as follows:
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FairÌýValueÌýMeasurementsÌýat
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FairÌýValueÌýMeasurementsÌýat
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September 30, 2016
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December 31, 2015
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ÌýÌýÌýÌý
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Quoted
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ÌýÌýÌýÌý
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ÌýÌýÌýÌý
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Quoted
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ÌýÌý
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prices
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prices
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inÌýactive
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Significant
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inÌýactive
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Significant
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markets
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other
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markets
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other
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forÌýidentical
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observable
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forÌýidentical
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observable
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assets
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inputs
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assets
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inputs
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Description
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Total
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(LevelÌý1)
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(LevelÌý2)
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Total
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(LevelÌý1)
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(LevelÌý2)
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amountsÌýinÌýmillions
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Cash equivalents
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$
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317
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317
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Ìý—
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68
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68
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Short term marketable securities
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$
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15
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15
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Available-for-sale securities
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$
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444
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420
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24
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474
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425
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49
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Financial instrument assets
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$
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233
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Ìý—
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233
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232
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232
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Debt
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$
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1,510
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1,510
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995
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995
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The majority of Â鶹×îгöÆ·'s LevelÌý2 financial assets and debt are primarily investments in debt related instruments and certain derivative instruments. The Company notes that these assets and liabilities are not always traded publicly or not considered to be traded on "active markets," as defined in GAAP.ÌýÌýThe fair values for such instruments are derived from a typical model using observable market data as the significant inputs or a trading price of a similar asset or liability is utilized.ÌýÌýAccordingly, those available-for-sale securities, financial instruments and debt or debt related instruments are reported in the foregoing table as LevelÌý2 fair value. The financial instrument assets classified as Level 2 in the table above are included in the Other assets line item in the condensed consolidated balance sheets. Short term marketable securities are included in the Other current assets line item in the condensed consolidated balance sheets.
Realized and Unrealized Gains (Losses) on Financial Instruments
Realized and unrealized gains (losses) on financial instruments are comprised of changes in the fair value of the following:
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Three months endedÌý
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Nine months ended
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September 30,
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September 30,
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ÌýÌýÌýÌý
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2016
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ÌýÌýÌýÌý
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2015
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ÌýÌýÌýÌý
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2016
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ÌýÌýÌýÌý
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2015
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amountsÌýinÌýmillions
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Fair Value Option Securities
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$
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14
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(117)
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43
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(139)
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Exchangeable senior debentures (note 9)
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(23)
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Ìý—
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(23)
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Cash convertible notes (a)
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Ìý
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(53)
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(19)
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(52)
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30
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Change in fair value of bond hedges (a)
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69
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(9)
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1
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(47)
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Other derivatives (b)
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(55)
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(2)
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(32)
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$
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7
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(200)
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(33)
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(188)
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(a)
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Â鶹×îгöÆ· issued $1 billion of cash convertible notes in October 2013 which are accounted for at fair value (Level 2), as elected by Â鶹×îгöÆ· at the issuance of the notes. Contemporaneously with the issuance of the convertible notes, Â鶹×îгöÆ· entered into privately negotiated cash convertible note hedges, which are expected to offset potential cash payments Â鶹×îгöÆ· would be required to make in excess of the principal amount of the convertible notes, upon conversion of the notes. The bond hedges are marked to market based on the trading price of underlying securities and other observable market data as the significant inputs (Level 2). See note 9 for additional discussion of the convertible notes and the bond hedges.Ìý
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(b)
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Derivatives are marked to market based on the trading price of underlying securities and other observable market data as the significant inputs (Level 2). During September 2014, Â鶹×îгöÆ· entered into a forward contract to acquire up to 15.9 million shares of Live Nation common stock. Prior to the contract’s original expiration during March 2015, the Company extended the contract through October 15, 2015 with the expiration to occur on the sixtieth day following the completion of the counterparty’s initial hedge, which was November 27, 2015 and settlement occurred on December 2, 2015. The counterparty acquired the maximum number of Live Nation shares of common stock at a volume weighted average share price of $24.91 per share during September 2015. Â鶹×îгöÆ· settled the contract for $396 million paid to the counterparty.
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