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Fair Value Measurements

9 Months Ended

Sep. 30, 2021

Fair Value Measurements

The following tables provide the valuation hierarchy classification of assets and liabilities that are carried at fair value and measured on a recurring basis in our Condensed Consolidated Balance Sheet as of September 30, 2021 and December 31, 2020:


	September 30, 2021
(dollars in millions)	Total		Level 1		Level 2		Level 3
Recurring fair value measurements:
Marketable securities held in trusts	$	965	$	890	$	75	$	—
Derivative assets	103		—		103		—
Derivative liabilities	(133)		—		(133)		—


	December 31, 2020
(dollars in millions)	Total		Level 1		Level 2		Level 3
Recurring fair value measurements:
Marketable securities held in trusts	$	881	$	773	$	108	$	—
Derivative assets	241		—		241		—
Derivative liabilities	(98)		—		(98)		—

Valuation Techniques. Our derivative assets and liabilities include foreign exchange contracts that are measured at fair value using internal models based on observable market inputs such as forward rates, interest rates, our own credit risk and our counterparties’ credit risks.

As of September 30, 2021, there has not been any significant impact to the fair value of our derivative liabilities due to our own credit risk. Similarly, there has not been any significant adverse impact to our derivative assets based on our evaluation of our counterparties’ credit risks.

The following table provides carrying amounts and fair values of financial instruments that are not carried at fair value in our Condensed Consolidated Balance Sheet at September 30, 2021 and December 31, 2020:


	September 30, 2021				December 31, 2020
(dollars in millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value

Customer financing notes receivable	$	299	$	326	$	271	$	264
Short-term borrowings	(206)		(206)		(247)		(247)
Long-term debt (excluding finance leases)	(30,942)		(36,200)		(31,512)		(38,615)
Long-term liabilities	(35)		(33)		(27)		(25)

The following table provides the valuation hierarchy classification of assets and liabilities that are not carried at fair value in our Condensed Consolidated Balance Sheet at September 30, 2021 and December 31, 2020:


	September 30, 2021
(dollars in millions)	Total		Level 1		Level 2		Level 3

Customer financing notes receivable	$	326	$	—	$	326	$	—
Short-term borrowings	(206)		—		(160)		(46)
Long-term debt (excluding finance leases)	(36,200)		—		(36,147)		(53)
Long-term liabilities	(33)		—		(33)		—


	December 31, 2020
(dollars in millions)	Total		Level 1		Level 2		Level 3

Customer financing notes receivable	$	264	$	—	$	264	$	—
Short-term borrowings	(247)		—		(160)		(87)
Long-term debt (excluding finance leases)	(38,615)		—		(38,540)		(75)
Long-term liabilities	(25)		—		(25)		—

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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