Fair Value Disclosure

9 Months Ended

Sep. 30, 2011

Fair Value Disclosure

Fair Value Disclosure

(7) Fair Value Disclosure

Our financial instruments consist of cash and cash equivalents, accounts receivable, accounts receivable—affiliates, short-term affiliate loans, accounts payable, accounts payable—affiliates and long-term debt excluding capital lease obligations. The carrying amounts of our cash and cash equivalents, accounts receivable, accounts receivable—affiliates, short-term affiliate loans, accounts payable and accounts payable—affiliates approximate their fair values.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between independent and knowledgeable parties who are willing and able to transact for an asset or liability at the measurement date. We use valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs when determining fair value and then we rank the estimated values based on the reliability of the inputs used following the fair value hierarchy set forth by the FASB.

The three input levels in the hierarchy of fair value measurements are defined by the FASB generally as follows:

Input Level	Description of Input
Level 1	Observable inputs such as quoted market prices in active markets.
Level 2	Inputs other than quoted prices in active markets that are either directly or indirectly observable.
Level 3	Unobservable inputs in which little or no market data exists.

During the second quarter of 2011, the rights to our auction rate securities were assigned to CenturyLink. Upon assignment, the fair market value of those securities was $79 million.

The following table presents the carrying amounts and estimated fair values of our investment securities, which are reported in noncurrent other assets, and long-term debt, excluding capital lease obligations, as well as the input levels used to determine the fair values:

	Input Level		Successor September 30, 2011				Predecessor December 31, 2010
			Carrying Amount		Fair Value		Carrying Amount		Fair Value
			(Dollars in millions)
Assets—Investment securities		3	$	—		—		92		92
Liabilities—Long-term debt excluding, capital lease obligations		2	$	12,570		12,087		11,583		12,480

The table below presents a rollforward of our auction rate securities valued using Level 3 inputs for the predecessor three months ended March 31, 2011 and the successor six months ended September 30, 2011:

	Auction Rate Securities
	(Dollars in millions)
Balance at December 31, 2010 (Predecessor)	$	92
Dispositions and settlements		—
Included in other income (expense)		—
Balance at March 31, 2011 (Predecessor)	$	92
Fair value adjustment		(13	)
Balance at April 1, 2011 (Successor)		79
Assignments to CenturyLink		(79	)
Balance at September 30, 2011 (Successor)	$	—