Financial Instruments

12 Months Ended

Mar. 31, 2017

The Company carries certain assets and liabilities at fair value. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The three-tier hierarchy for inputs used in measuring fair value, which prioritizes the inputs based on the observability as of the measurement date, is as follows: quoted prices in active markets for identical assets or liabilities; observable inputs other than the quoted prices in active markets for identical assets and liabilities; and unobservable inputs for which there is little or no market data, which require the Company to develop assumptions of what market participants would use in pricing the asset or liability.

The carrying amount of cash equivalents, accounts and notes receivable, and accounts payable approximates fair value. Short-term investments are recorded at amortized cost and the respective carrying amounts approximate fair value primarily using quoted prices in active markets. As of March 31, 2017, short-term investments totaled $5.4 billion and consisted of approximately $3.0 billion of time deposits and $2.4 billion of commercial paper. Sprint did not hold any short-term investments as of March 31, 2016. The fair value of marketable equity securities totaling $46 million for both periods ended March 31, 2017 and 2016, respectively, are measured on a recurring basis using quoted prices in active markets.

Except for our financing transaction with MLS, current and long-term debt and our other financings are carried at amortized cost. The Company elected to measure the financing obligation with MLS at fair value as a means to better reflect the economic substance of the arrangement. The Tranche 2 financing obligation, which amounted to $385 million at March 31, 2017 and is reported in "Current portion of long-term debt, financing and capital lease obligations" in our consolidated balance sheets, is the only eligible financial instrument for which we have elected the fair value option.

The fair value of the financing obligation, which was determined at the outset of the arrangement using a discounted cash flow model, was derived by unobservable inputs such as customer churn rates, customer upgrade probabilities, and the likelihood that Sprint will elect the Exchange Option versus the termination option upon a customer upgrade. Any gains or losses resulting from changes in the fair value of the financing obligation are included in “Other (expense) income, net” on the consolidated statements of operations. For the year ended March 31, 2017, the change in fair value of the financing obligation resulted in a loss of approximately $24 million. For the year ended March 31, 2017, the payments made to MLS totaled $654 million. In addition to the Tranche 2 financing obligation, the remaining debt for which estimated fair value is determined based on unobservable inputs primarily represents borrowings under our Network Equipment Sale-Leaseback and sales of receivables under our Receivables Facility. The carrying amounts associated with these borrowings approximates fair value.

The estimated fair value of the majority of our current and long-term debt, excluding our credit facilities, sold wireless service, installment billing and future receivables, and borrowings under our Network Equipment Sale-Leaseback and Tranche 2 transactions, is determined based on quoted prices in active markets or by using other observable inputs that are derived principally from, or corroborated by, observable market data.

The following table presents carrying amounts and estimated fair values of current and long-term debt:



	Carrying amount at March 31, 2017		Estimated Fair Value Using Input Type
	Carrying amount at March 31, 2017		Quoted prices in active markets		Observable		Unobservable		Total estimated fair value
	(in millions)
Current and long-term debt	$	40,581	$	33,196	$	4,352	$	5,468	$	43,016



	Carrying amount at March 31, 2016		Estimated Fair Value Using Input Type
	Carrying amount at March 31, 2016		Quoted prices in active markets		Observable		Unobservable		Total estimated fair value
	(in millions)
Current and long-term debt	$	33,645	$	21,757	$	4,474	$	2,130	$	28,361

- 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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