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Within the next twelve months, it is reasonably possible we will reduce approximately $16 million of previously
unrecognized tax benefits due to the expiration of statutes of limitation and anticipated closure of income tax examinations.
16. Fair Value Measurements
Fair Value Measurements on a Recurring Basis
FASB literature regarding fair value measurements for financial and non-financial assets and liabilities establishes a
three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize
the use of “observable inputs” and minimize the use of “unobservable inputs.” The three levels of inputs used to measure fair
value are as follows:
• Level 1—Quoted prices in active markets for identical assets or liabilities.
• Level 2—Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar
assets or liabilities in active markets or other inputs that are observable or can be corroborated by observable
market data.
• Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the
fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies
and similar techniques that use significant unobservable inputs.
The table below segregates all assets and liabilities that are measured at fair value on a recurring basis (which means
they are so measured at least annually) into the most appropriate level within the fair value hierarchy based on the inputs used to
determine the fair value at the measurement date (amounts in millions):
Fair Value Measurements at
December 31, 2011 Using
As of
December 31,
Quoted
Prices in
Active
Markets for
Identical
Financial
Instruments
Significant
Other
Observable
Inputs
Significant
Unobservable
Inputs Balance Sheet
2011 (Level 1) (Level 2) (Level 3) Classification
Financial assets:
Money market funds ..................................... $2,869 $2,869 $— $— Cash and cash equivalents
U.S. treasuries with original maturities
of three months or less ............................. 2 2 — — Cash and cash equivalents
U.S. treasuries and government agency
securities ................................................... 344 344 — — Short-term investments
ARS held through Morgan Stanley
Smith Barney LLC ................................... 16 — — 16 Long-term investments
Total financial assets at fair value ................. $3,231 $3,215 $— $16
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