Time Magazine 2011 Annual Report Download - page 94

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TIME WARNER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
5. FAIR VALUE MEASUREMENTS
A fair value measurement is determined based on the assumptions that a market participant would use in
pricing an asset or liability. A three-tiered hierarchy draws distinctions between market participant assumptions
based on (i) observable inputs such as quoted prices in active markets (Level 1), (ii) inputs other than quoted
prices in active markets that are observable either directly or indirectly (Level 2) and (iii) unobservable inputs
that require the Company to use present value and other valuation techniques in the determination of fair value
(Level 3). The following table presents information about assets and liabilities required to be carried at fair value
on a recurring basis as of December 31, 2011 and December 31, 2010, respectively (millions):
Fair Value Measurements
December 31, 2011 December 31, 2010
Description Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Assets:
Trading securities:
Diversified equity
securities(a) .......... $ 265 $ 5 $— $ 270 $ 261 $ 4 $ — $ 265
Available-for-sale securities:
Equity securities ........ 14 — — 14 12 — — 12
Debt securities ......... — 72 — 72 — 41 — 41
Derivatives:
Foreign exchange
contracts ............ — 28 — 28 — 17 — 17
Other ................ 4 — 20 24 4 — 19 23
Liabilities:
Derivatives:
Foreign exchange
contracts ............ — — — — — (20) — (20)
Other ................ — — (17) (17) — — (28) (28)
Total ..................... $ 283 $ 105 $ 3 $ 391 $ 277 $ 42 $ (9) $ 310
(a) Consists of deferred compensation related investments.
The Company primarily applies the market approach for valuing recurring fair value measurements. Assets
and liabilities valued using significant unobservable inputs (Level 3) primarily consist of an asset related to
equity instruments held by employees of a former subsidiary of the Company and liabilities for contingent
consideration and options to redeem securities.
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