FAIR VALUE
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between marketplace participants. Various valuation approaches can be used to determine fair value, each requiring different valuation inputs. The following hierarchy classifies the inputs used to determine fair value into three levels:
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• | Level 1 – quoted prices in active markets for identical assets or liabilities; |
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• | Level 2 – inputs, other than quoted prices, observable by a marketplace participant either directly or indirectly; and |
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• | Level 3 – unobservable inputs significant to the fair value measurement. |
We did not have any significant non-financial assets or liabilities measured at fair value on December 31, 2012 or 2013, except for long-lived assets that were impaired in 2012. We estimated the fair value of these assets primarily based on the discounted projected cash flows of the underlying operations, a Level 3 fair value measure.
Our financial instruments include cash and equivalents, marketable securities and other investments; accounts receivable and accounts payable; short- and long-term debt; and derivative financial instruments. The carrying values of cash and equivalents, accounts receivable and payable, and short-term debt on the Consolidated Balance Sheets approximate their fair value. The following tables present the fair values of our other financial assets and liabilities on December 31, 2012 and 2013, and the basis for determining their fair values:
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| | | | | | | | | | | | | | | |
| Carrying Value | | Fair Value | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) (a) |
Financial assets (liabilities) (b) | December 31, 2012 |
Other investments | $ | 150 |
| | $ | 150 |
| | $ | 96 |
| | $ | 54 |
|
Derivatives | 22 |
| | 22 |
| | — |
| | 22 |
|
Long-term debt, including current portion | (3,909 | ) | | (3,966 | ) | | — |
| | (3,966 | ) |
| | | | | | | |
| December 31, 2013 |
Other investments | $ | 183 |
| | $ | 183 |
| | $ | 134 |
| | $ | 49 |
|
Derivatives | 10 |
| | 10 |
| | — |
| | 10 |
|
Long-term debt, including current portion | (3,909 | ) | | (3,758 | ) | | — |
| | (3,758 | ) |
(a)Determined under a market approach using valuation models that incorporate observable inputs such as interest rates, bond yields and quoted prices for similar assets and liabilities.
(b)We had no Level 3 financial instruments on December 31, 2012 or 2013.
