Alaska Airlines and Horizon Air 2014 Annual Report Download - page 162

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NOTE 4. FAIR VALUE MEASUREMENTS
Fair Value of Financial Instruments on a Recurring Basis
Fair values of financial instruments on the consolidated balance sheet (in millions):
December 31, 2014 Level 1 Level 2 Total
Assets
Marketable securities
U.S. government and agency securities $ 166 $ – $ 166
Foreign government bonds – 25 25
Asset-backed securities – 130 130
Mortgage-backed securities – 126 126
Corporate notes and bonds – 645 645
Municipal securities – 18 18
Derivative instruments
Fuel hedge contracts
Call options – 7 7
Liabilities
Derivative instruments
Interest rate swap agreements – (19) (19)
December 31, 2013 Level 1 Level 2 Total
Assets
Marketable securities
U.S. government and agency securities $ 294 $ – $ 294
Foreign government bonds – 11 11
Asset-backed securities – 146 146
Mortgage-backed securities – 143 143
Corporate notes and bonds – 630 630
Municipal securities – 26 26
Derivative instruments
Fuel hedge contracts
Call options – 16 16
Liabilities
Derivative instruments
Interest rate swap agreements – (17) (17)
The Company uses the market and income approach to determine the fair value of marketable
securities. U.S. government securities are Level 1 as the fair value is based on quoted prices in active
markets. Foreign government bonds, asset-backed securities, mortgage-backed securities, corporate
notes and bonds, and municipal securities are Level 2 as the fair value is based on standard valuation
models that are calculated based on observable inputs such as quoted interest rates, yield curves,
credit ratings of the security and other observable market information.
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