AbbVie 2014 Annual Report Download - page 85
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13NOV201221352027
The following table summarizes the bases used to measure certain assets and liabilities that are
carried at fair value on a recurring basis in the consolidated balance sheet as of December 31, 2013:
Basis of fair value measurement
Quoted prices
in active Significant
markets for other Significant
Balance at identical observable unobservable
December 31, assets inputs Inputs
(in millions) 2013 (Level 1) (Level 2) (Level 3)
Assets
Cash and equivalents $9,595 $684 $8,911 $ —
Time deposits 300 — 300 —
Equity securities 10 10 — —
Foreign currency contracts 17 — 17 —
Total assets $9,922 $694 $9,228 $ —
Liabilities
Interest rate hedges $ 432 $ — $ 432 $ —
Foreign currency contracts 73 — 73 —
Contingent consideration 165 — — 165
Total liabilities $ 670 $ — $ 505 $165
The fair values for time deposits included in cash and equivalents and short-term investments are
determined based on a discounted cash flow analysis reflecting quoted market rates for the same or similar
instruments. The fair values of time deposits approximate their amortized cost due to the short maturities
of these instruments. Available-for-sale equity securities consists of investments for which the fair value is
determined by using the published market price per unit multiplied by the number of units held, without
consideration of transaction costs. The derivatives entered into by the company are valued using publicized
spot curves for interest rate hedges and publicized forward curves for foreign currency contracts. The
contingent consideration is valued using a discounted cash flow technique that reflects management’s
expectations about probability of payment.
Cumulative net unrealized holding gains on available-for-sale equity securities totaled $3 million and
$2 million at December 31, 2014 and December 31, 2013, respectively.
There have been no transfers of assets or liabilities between the fair value measurement levels. The
following table is a reconciliation of the fair value measurements that use significant unobservable inputs
(Level 3), which consist of contingent payments related to acquisitions and investments:
(in millions)
Fair value as of December 31, 2012 $ 251
Payments (131)
Additions 28
Change in fair value recognized in earnings 17
Fair value as of December 31, 2013 165
Payments (164)
Other —
Change in fair value recognized in earnings (1)
Fair value as of December 31, 2014 $ —
The contingent payments were primarily in connection with the acquisition of Solvay’s U.S. pharmaceuticals
business in 2010. The achievement of a certain sales milestone resulted in a payment of approximately
2014 Form 10-K 79