Quest Diagnostics 2015 Annual Report Download - page 97

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QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(in millions unless otherwise indicated)
F- 22
7. FAIR VALUE MEASUREMENTS
The following table provides a summary of the recognized assets and liabilities that are measured at fair value on a
recurring basis:
Basis of Fair Value Measurements
Total Level 1 Level 2 Level 3
December 31, 2015
Assets:
Trading securities $ 49 $ 49 $ — $ —
Cash surrender value of life insurance policies 29 — 29 —
Interest rate swaps 23 — 23 —
Available-for-sale equity securities 6 6 — —
Total $ 107 $ 55 $ 52 $ —
Liabilities:
Deferred compensation liabilities $ 85 $ — $ 85 $ —
Interest rate swaps 6 — 6 —
Contingent consideration 3 — — 3
Total $ 94 $ — $ 91 $ 3
December 31, 2014
Assets:
Trading securities $ 49 $ 49 $ — $ —
Cash surrender value of life insurance policies 30 — 30 —
Interest rate swaps 17 — 17 —
Available-for-sale equity securities 9 9 — —
Put option 1 — — 1
Total $ 106 $ 58 $ 47 $ 1
Liabilities:
Deferred compensation liabilities $ 85 $ — $ 85 $ —
Contingent consideration 17 — — 17
Forward starting interest rate swaps 15 — 15 —
Interest rate swaps 13 — 13 —
Call option 5 — — 5
Total $ 135 $ — $ 113 $ 22
The Company offers certain employees the opportunity to participate in non-qualified supplemental deferred
compensation plans. A participant's deferrals, together with Company matching credits, are invested in a variety of participant-
directed stock and bond mutual funds that are classified as trading securities. Changes in the fair value of these securities are
measured using quoted prices in active markets based on the market price per unit multiplied by the number of units held
exclusive of any transaction costs. A corresponding adjustment for changes in fair value of the trading securities is also
reflected in the changes in fair value of the deferred compensation obligation. The deferred compensation liabilities are
classified within Level 2 because their inputs are derived principally from observable market data by correlation to the trading
securities.
The Company offers certain employees the opportunity to participate in a non-qualified deferred compensation
program. A participant's deferrals, together with Company matching credits, are “invested” at the direction of the employee in a
hypothetical portfolio of investments which are tracked by an administrator. The Company purchases life insurance policies,
with the Company named as beneficiary of the policies, for the purpose of funding the program's liability. Changes in the cash
QUEST DIAGNOSTICS 2015 ANNUAL REPORT ON FORM 10-K