Fair Value

Under U.S. GAAP, 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 market participants at the measurement date. U.S. GAAP provides a framework for measuring fair value and establishes a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability. The three-level hierarchy for disclosure of fair value measurements is as follows:

Level 1 - Quoted market prices in active markets for identical assets or liabilities.

Level 2 - Observable inputs such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

Level 3 - Valuations with one or more unobservable significant inputs that reflect the reporting entity's own assumptions.

RECURRING FAIR VALUE MEASUREMENTS

The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of June 30, 2014 (in millions):



	Fair Value Measurements at June 30, 2014
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Level 1		Level 2		Level 3
Commodity contracts	$	—	$	3	$	—
Interest rate contracts	—		24		—
Foreign exchange forward contracts	—		1		—
Marketable securities - trading	25		—		—
Total assets	$	25	$	28	$	—

Commodity contracts	$	—	$	3	$	—
Interest rate contracts	—		13		—
Total liabilities	$	—	$	16	$	—

The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of December 31, 2013 (in millions):



	Fair Value Measurements at December 31, 2013
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Level 1		Level 2		Level 3
Commodity contracts	$	—	$	1	$	—
Interest rate contracts	—		17		—
Foreign exchange forward contracts	—		3		—
Marketable securities - trading	21		—		—
Total assets	$	21	$	21	$	—

Commodity contracts	$	—	$	13	$	—
Interest rate contracts	—		34		—
Total liabilities	$	—	$	47	$	—

The fair values of marketable securities are determined using quoted market prices from daily exchange traded markets based on the closing price as of the balance sheet date and are classified as Level 1. The fair values of commodity forward and future contracts, interest rate swap contracts and foreign currency forward contracts are determined based on inputs that are readily available in public markets or can be derived from information available in publicly quoted markets. The fair value of commodity forward and future contracts are valued using the market approach based on observable market transactions, primarily underlying commodities futures or physical index prices, at the balance sheet date. Interest rate swap contracts are valued using models based primarily on readily observable market parameters, such as LIBOR forward rates, for all substantial terms of the Company's contracts and credit risk of the counterparties. The fair value of foreign currency forward contracts are valued using quoted forward foreign exchange prices at the reporting date. Therefore, the Company has categorized these contracts as Level 2.

As of June 30, 2014 and December 31, 2013, the Company did not have any assets or liabilities measured on a recurring basis without observable market values that would require a high level of judgment to determine fair value (Level 3).

There were no transfers of financial instruments between the three levels of fair value hierarchy during the three and six months ended June 30, 2014 and 2013.

ESTIMATED FAIR VALUE OF LONG-TERM OBLIGATIONS

The estimated fair values of long-term obligations as of June 30, 2014 and December 31, 2013 are as follows (in millions):



	June 30, 2014				December 31, 2013
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term debt – 2016 Notes	$	500	$	517	$	500	$	519
Long-term debt – 2018 Notes	724		849		724		856
Long-term debt – 2019 Notes⁽¹⁾	249		255		248		252
Long-term debt – 2020 Notes⁽¹⁾	244		246		241		236
Long-term debt – 2021 Notes⁽¹⁾	246		254		241		241
Long-term debt – 2022 Notes⁽¹⁾	257		239		247		226
Long-term debt – 2038 Notes⁽¹⁾	262		352		252		317

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(1)	The carrying amount includes the unamortized discounts on the issuance of debt and adjustments related to the change in the fair value of interest rate swaps designated as fair value hedges on the 2019, 2020, 2021, 2022 and 2038 Notes. Refer to Note 6 for additional information regarding derivatives.

Capital leases have been excluded from the calculation of fair value for both 2014 and 2013.

The fair value amounts of long term debt as of June 30, 2014 and December 31, 2013 were based on current market rates available to the Company (Level 2 inputs). The difference between the fair value and the carrying value represents the theoretical net premium or discount that would be paid or received to retire all debt at such date.

FAIR VALUE OF OTHER FINANCIAL INSTRUMENTS

The fair value amounts for cash and cash equivalents, accounts receivable, net, commercial paper, accounts payable and other current liabilities approximate carrying amounts due to the short maturities of these instruments.