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58
Fair Value Measurements at
December 31, 2011 Using
As of
December 31,
Quoted
Prices in
Active
Markets for
Identical
Financial
Instruments
Significant
Other
Observable
Inputs
Significant
Unobservable
Inputs
Balance Sheet
2011
(Level 1)
(Level 2)
(Level 3)
Classification
Financial assets:
Money market funds ...................................................
$2,869
$2,869
$—
$—
Cash and cash equivalents
U.S. treasuries with original maturities of three
months or less ........................................................
2
2
—
—
Cash and cash equivalents
U.S. treasuries and government agency
securities ................................................................
344
344
—
—
Short-term investments
ARS held through Morgan Stanley
Smith Barney LLC ................................................
16
—
—
16
Long-term investments
Total financial assets at fair value ..............................
$3,231
$3,215
$—
$16
The following table provides a reconciliation of the beginning and ending balances of our financial assets and financial liabilities
classified as Level 3 by major categories (amounts in millions) at December 31, 2012 and 2011:
Level 3
ARS
(a)
Total
financial
assets at
fair
value
Balance at January 1, 2011 .............................................................................................................................
$23
$23
Total unrealized gains included in other comprehensive income .............................................................
3
3
Settlements ................................................................................................................................
(10)
(10)
Balance at December 31, 2011 .......................................................................................................................
$16
$16
Total unrealized gains included in other comprehensive income .............................................................
2
2
Settlements ................................................................................................................................
(10)
(10)
Balance at December 31, 2012 .......................................................................................................................
$8
$8
(a) Fair value measurements have been estimated using an income-approach model (specifically, discounted cash-flow
analysis). When estimating the fair value, we consider both observable market data and non-observable factors,
including credit quality, duration, insurance wraps, collateral composition, maximum rate formulas, comparable
trading instruments, and the likelihood of redemption. Significant assumptions used in the analysis include estimates
for interest rates, spreads, cash flow timing and amounts, and holding periods of the securities. Assets measured at
fair value using significant unobservable inputs (Level 3) represent less than 1% of our financial assets measured at
fair value on a recurring basis at December 31, 2012.
Foreign Currency Forward Contracts Not Designated as Hedges
We transact business in various currencies other than the U.S. dollar and have significant international sales and expenses
denominated in currencies other than the U.S. dollar, subjecting us to currency exchange rate risks. To mitigate our risk from foreign currency
fluctuations we periodically enter into currency derivative contracts, principally swaps and forward contracts with maturities of twelve months or
less, with Vivendi as our principal counterparty. We do not hold or purchase any foreign currency contracts for trading or speculative purposes
and we do not designate these forward contracts or swaps as hedging instruments. Accordingly, we report the fair value of these contracts in the
consolidated balance sheet within “Other current assets” or “Other current liabilities” and with changes in fair value recorded in the consolidated
statement of operations within “Investment and other income (expense), net” and “General and administrative expense.” The fair value of foreign