AT&T Wireless 2014 Annual Report Download - page 61

AT&T INC. | 59
Following is the fair value leveling for available-for-sale securities and derivatives as of December 31, 2014, and
December 31, 2013:
December 31, 2014
Level 1 Level 2 Level 3 Total
Available-for-Sale Securities
Domestic equities $1,160 $ — $ — $ 1,160
International equities 553 — — 553
Fixed income bonds — 836 — 836
Asset Derivatives1
Interest rate swaps — 157 — 157
Cross-currency swaps — 1,243 — 1,243
Interest rate locks — 5 — 5
Liability Derivatives1
Cross-currency swaps — (1,506) — (1,506)
Interest rate locks — (133) — (133)
December 31, 2013
Level 1 Level 2 Level 3 Total
Available-for-Sale Securities
Domestic equities $ 1,049 $ — $ — $ 1,049
International equities 563 — — 563
Fixed income bonds — 759 — 759
Asset Derivatives1
Interest rate swaps — 191 — 191
Cross-currency swaps — 1,951 — 1,951
Liability Derivatives1
Interest rate swaps — (7) — (7)
Cross-currency swaps — (519) — (519)
1 Derivatives designated as hedging instruments are reflected as “Other assets,” “Other noncurrent liabilities” and, for a portion of interest rate swaps, “Other current assets” in
our consolidated balance sheets.
investments of $1,890 are recorded in “Other current
assets” and our investment securities are recorded in
“Other Assets” on the consolidated balance sheets.
Derivative Financial Instruments
We employ derivatives to manage certain market risks,
primarily interest rate risk and foreign currency exchange
risk. This includes the use of interest rate swaps, interest
rate locks, foreign exchange forward contracts and
combined interest rate foreign exchange contracts (cross-
currency swaps). We do not use derivatives for trading or
speculative purposes. We record derivatives on our
consolidated balance sheets at fair value that is derived
from observable market data, including yield curves and
foreign exchange rates (all of our derivatives are Level 2).
Cash flows associated with derivative instruments are
presented in the same category on the consolidated
statements of cash flows as the item being hedged.
The majority of our derivatives are designated either as a
hedge of the fair value of a recognized asset or liability or
of an unrecognized firm commitment (fair value hedge), or
as a hedge of a forecasted transaction or of the variability
of cash flows to be received or paid related to a recognized
asset or liability (cash flow hedge).
Investment Securities
Our investment securities include equities, fixed income
bonds and other securities. A substantial portion of the fair
values of our available-for-sale securities was estimated
based on quoted market prices. Investments in securities
not traded on a national securities exchange are valued
using pricing models, quoted prices of securities with
similar characteristics or discounted cash flows. Realized
gains and losses on securities are included in “Other
income (expense) – net” in the consolidated statements
of income using the specific identification method.
Unrealized gains and losses, net of tax, on available-for-sale
securities are recorded in accumulated OCI. Unrealized
losses that are considered other than temporary are
recorded in “Other income (expense) – net” with the
corresponding reduction to the carrying basis of the
investment. Fixed income investments of $102 have
maturities of less than one year, $417 within one to
three years, $75 within three to five years, and $242
for five or more years.
Our cash equivalents (money market securities), short-term
investments (certificate and time deposits) and customer
deposits are recorded at amortized cost, and the respective
carrying amounts approximate fair values. Our short-term