Time Magazine 2013 Annual Report Download - page 99

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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, 2013 and December 31, 2012, respectively (millions):
December 31, 2013 December 31, 2012
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Assets:
Trading securities:
Diversified equity
securities(a) ......... $ 254$5$—$259$258$ 5$—$263
Available-for-sale
securities:
Equity securities ...... 57——57 18 —— 18
Debt securities ........ — 40 — 40 — 99 — 99
Derivatives:
Foreign exchange
contracts .......... — 10 — 10 — 9 — 9
Other ............... 6 — 8 14 4 — 13 17
Liabilities:
Derivatives:
Foreign exchange
contracts .......... — (17) — (17) — (31) — (31)
Other ............... — — (7) (7) — — (6) (6)
Total ................... $ 317 $ 38$1$356$280$82$7$369
(a) Consists of investments related to deferred compensation.
The Company primarily applies the market approach for valuing recurring fair value measurements. During
the year ended December 31, 2013, approximately $13 million of certain available-for-sale debt securities
classified within Level 2 were transferred into available-for-sale equity securities and classified within Level 1
due to the initial public offering of the investee.
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