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MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
64
Debt
The Company estimates the fair value of its long-term debt using the market pricing approach which applies market assumptions
for relevant though not directly comparable undertakings. Long-term debt is classified as Level 2 of the Valuation Hierarchy. At
December 31, 2015 the carrying value and fair value of long-term debt was $3.3 billion. At December 31, 2014, the carrying
value and fair value of long-term debt was $1.5 billion.
Settlement and Other Guarantee Liabilities
The Company estimates the fair value of its settlement and other guarantees using the market pricing approach which applies
market assumptions for relevant though not directly comparable undertakings, as the latter are not observable in the market
given the proprietary nature of such guarantees. At December 31, 2015 and 2014, the carrying value and fair value of settlement
and other guarantee liabilities were not material. Settlement and other guarantee liabilities are classified as Level 3 of the
Valuation hierarchy as their valuation requires substantial judgment and estimation of factors that are not currently observable
in the market. For additional information regarding the Company’s settlement and other guarantee liabilities, see Note 19
(Settlement and Other Risk Management).
Non-Financial Instruments
Certain assets are measured at fair value on a nonrecurring basis for purposes of initial recognition and impairment testing. The
Company’s non-financial assets measured at fair value on a nonrecurring basis include property, plant and equipment, goodwill
and other intangible assets. These assets are subject to fair value adjustments in certain circumstances, such as when there is
evidence of impairment.
Amortized Costs and Fair Values – Available-for-Sale Investment Securities
The major classes of the Company’s available-for-sale investment securities, for which unrealized gains and losses are recorded
as a separate component of other comprehensive income on the consolidated statement of comprehensive income, and their
respective amortized cost basis and fair values as of December 31, 2015 and 2014 were as follows:
December 31, 2015
Amortized
Cost
Gross
Unrealized
Gain
Gross
Unrealized
Loss
Fair
Value
(in millions)
Municipal securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 62 $ — $ — $ 62
U.S. government and agency securities . . . . . . . . . . . . . . . . 72 — — 72
Corporate securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 631 — (1) 630
Asset-backed securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 — — 57
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 1 — 40
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 861 $ 1 $ (1) $ 861
December 31, 2014
Amortized
Cost
Gross
Unrealized
Gain
Gross
Unrealized
Loss
Fair
Value
(in millions)
Municipal securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 135 $ — $ — $ 135
U.S. government and agency securities . . . . . . . . . . . . . . . . 199 — — 199
Corporate securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 619 — (1) 618
Asset-backed securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178 — — 178
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 1 (4) 38
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,172 $ 1 $ (5) $ 1,168
The municipal securities are primarily comprised of tax-exempt bonds and are diversified across states and sectors. The U.S.
government and agency securities are primarily invested in U.S. government bonds and U.S. government sponsored agency