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Annual report pursuant to Section 13 and 15(d)

Assets And Liabilities Measured At Fair Value

v3.8.0.1
Assets And Liabilities Measured At Fair Value
 12 Months Ended
Dec. 31, 2017
Assets and Liabilities Measured at Fair Value
Assets and Liabilities Measured at Fair Value

(6)Assets 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. Level1 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. Level2 inputs are inputs, other than quoted market prices included within Level1, that are observable for the asset or liability, either directly or indirectly. Level3 inputs are unobservable inputs for the asset or liability. The Company does not have any recurring assets or liabilities measured at fair value that would be considered Level3.

Liberty’s assets and liabilities measured at fair value are as follows:

December31,2017

December31,2016

Quotedprices

Significantother

Quotedprices

Significantother

inactivemarkets

observable

inactivemarkets

observable

foridenticalassets

inputs

foridenticalassets

inputs

Description

Total

(Level1)

(Level2)

Total

(Level1)

(Level2)

amountsinmillions

Cash equivalents

$

804

804

—

289

289

—

Available-for-sale securities

$

1,047

467

580

489

489

—

Financial instrument assets

$

369

19

350

286

16

270

Debt

$

2,115

—

2,115

1,546

—

1,546

The majority of Liberty’s Level2 financial instruments are debt related instruments and derivative instruments. In addition, SIRIUSXM’s investment in Pandora Media, Inc. (“Pandora”) is classified as Level2. See note7 for information related to the investment in Pandora. The Company notes that these assets are not always traded publicly or not considered to be traded on “active markets,” as defined in GAAP. The 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. The fair value of debt related instruments are based on quoted market prices but not considered to be traded on “active markets,” as defined by GAAP. Accordingly, those available-for-sale securities, financial instruments and debt or debt related instruments are reported in the foregoing table as Level2 fair value. The financial instrument assets included in the table above are included in the Other assets line item in the 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 (amounts in millions):

YearsendedDecember31,

2017

2016

2015

Fair Value Option Securities (a)

$

(36)

112

(151)

Debt measured at fair value (b)

(126)

(113)

(5)

Change in fair value of bond hedges (c)

72

37

23

Other derivatives

2

1

(7)

$

(88)

37

(140)

(a)

Changes in unrealized gains (losses) on fair value option securities include SIRIUSXM’s investment in Pandora’s SeriesA Convertible Preferred Stock. See note7 for information related to the investment in Pandora.

(b)

Changes in unrealized gains (losses) on debt measured at fair value are due to market factors primarily driven by changes in the fair value of the underlying shares into which the debt is exchangeable.

(c)

Contemporaneously with the issuance of the 1.375% Cash Convertible Notes due 2023, Liberty entered into privately negotiated cash convertible note hedges, which are expected to offset potential cash payments Liberty 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 SeriesA Liberty SiriusXM, Liberty Braves and Liberty Formula One securities and other observable market data as the significant inputs (Level2). See note10 for additional discussion of the convertible notes and the bond hedges.