FAIR VALUE MEASUREMENTS (Notes)

12 Months Ended

Dec. 31, 2022

Fair Value Measurements on a Recurring Basis

The following table summarizes the bases used to measure certain assets and liabilities at fair value on a recurring basis:


Basis of Fair Value Measurements on a Recurring Basis	Dec 31, 2022								Dec 31, 2021
In millions	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets at fair value:
Cash equivalents:
Held-to-maturity securities 1	$	—	$	872	$	—	$	872	$	—	$	317	$	—	$	317
Money market funds	—		355		—		355		—		489		—		489
Marketable securities 2	—		939		—		939		—		245		—		245
Equity securities 3	10		—		—		10		20		—		—		20
Nonconsolidated affiliates 4	—		—		7		7		—		—		—		—
Debt securities: 3
Government debt 5	—		622		—		622		—		735		—		735
Corporate bonds	35		1,090		—		1,125		44		1,280		—		1,324
Derivatives relating to: 6
Interest rates	—		351		—		351		—		145		—		145
Foreign currency	—		204		—		204		—		165		—		165
Commodities	63		158		—		221		15		307		—		322
Total assets at fair value	$	108	$	4,591	$	7	$	4,706	$	79	$	3,683	$	—	$	3,762
Liabilities at fair value:
Long-term debt including debt due within one year 7	$	—	$	13,875	$	—	$	13,875	$	—	$	17,125	$	—	$	17,125
Guarantee liability 8	—		—		199		199		—		—		220		220
Derivatives relating to: 6
Interest rates	—		246		—		246		—		284		—		284
Foreign currency	—		119		—		119		—		137		—		137
Commodities	103		167		—		270		37		257		—		294
Total liabilities at fair value	$	103	$	14,407	$	199	$	14,709	$	37	$	17,803	$	220	$	18,060

1.The Company's held-to-maturity securities primarily included treasury bills and time deposits.

2.The Company's investments in marketable securities are included in "Other current assets" in the consolidated balance sheets.

3.The Company's investments in debt securities, which are primarily available-for-sale, and equity securities are included in "Other investments" in the consolidated balance sheets.

4.Estimated asset for an investment in a limited liability company included in "Investment in nonconsolidated affiliates" in the consolidated balance sheets.

5.U.S. Treasury obligations, U.S. agency obligations, U.S. agency mortgage-backed securities and other municipalities' obligations.

6.See Note 21 for the classification of derivatives in the consolidated balance sheets.

7.See Note 21 for information on fair value measurements of long-term debt.

8.Estimated liability for TDCC's guarantee of Sadara's debt which is included in "Other noncurrent obligations" in the consolidated balance sheets. See Note 15 for additional information.

For assets and liabilities classified as Level 1 measurements (measured using quoted prices in active markets), total fair value is either the price of the most recent trade at the time of the market close or the official close price, as defined by the exchange on which the asset is most actively traded on the last trading day of the period, multiplied by the number of units held without consideration of transaction costs.

For assets and liabilities classified as Level 2 measurements, where the security is frequently traded in less active markets, fair value is based on the closing price at the end of the period; where the security is less frequently traded, fair value is based on the price a dealer would pay for the security or similar securities, adjusted for any terms specific to that asset or liability, or by using observable market data points of similar, more liquid securities to imply the price. Market inputs are obtained from well-established and recognized vendors of market data and subjected to tolerance and quality checks.

For derivative assets and liabilities, standard industry models are used to calculate the fair value of the various financial instruments based on significant observable market inputs, such as foreign exchange rates, commodity prices, swap rates, interest rates and implied volatilities obtained from various market sources. Market inputs are obtained from well-established and recognized vendors of market data and subjected to tolerance/quality checks.

For all other assets and liabilities for which observable inputs are used, fair value is derived through the use of fair value models, such as a discounted cash flow model or other standard pricing models. See Note 21 for further information on the types of instruments used by the Company for risk management.

There were no transfers between Levels 1 and 2 in the years ended December 31, 2022 and 2021.

For assets classified as Level 3 measurements, fair value is based on significant unobservable inputs including assumptions where there is little, if any, market activity. The level 3 asset value represents the fair value of an investment in a limited liability company, accounted for as an investment in nonconsolidated affiliates. There was no unfunded commitment on the investment at December 31, 2022.

For liabilities classified as Level 3 measurements, the fair value is based on significant unobservable inputs including assumptions where there is little, if any, market activity. The fair value of the Company’s accrued liability related to the guarantee of Sadara's debt is in proportion to the Company's 35 percent ownership interest in Sadara. The estimated fair value of the guarantee was calculated using a "with" and "without" method. The fair value of the debt was calculated "with" the guarantee less the fair value of the debt "without" the guarantee. The "with" and "without" values were calculated using a discounted cash flow method based on contractual cash flows as well as projected prepayments made on the debt by Sadara. See Note 15 for further information on guarantees classified as Level 3 measurements. The following table summarizes the changes in fair value measurements using Level 3 inputs for the years ended December 31, 2022 and 2021:


Fair Value Measurements Using Level 3 Inputs for Accrued Liability of Sadara Guarantee at Dec 31,	2022		2021
In millions
Balance at Jan 1	$	(220)	$	—
Recognition of liability 1	—		(235)
Gain included in earnings 2	21		15
Balance at Dec 31	$	(199)	$	(220)

1.Included in "Other noncurrent obligations" in the consolidated balance sheets.

2.Included in "Equity in earnings (losses) of nonconsolidated affiliates" in the consolidated income statements.

For equity securities calculated at net asset value per share (or its equivalent), the Company had $92 million in private equity and $20 million in real estate at December 31, 2022 ($106 million in private equity and $22 million in real estate at December 31, 2021). There are no redemption restrictions and the unfunded commitments on these investments were $54 million at December 31, 2022 ($59 million at December 31, 2021).

Fair Value Measurements on a Nonrecurring Basis

The following table summarizes the bases used to measure certain assets at fair value on a nonrecurring basis in the consolidated balance sheets:


Basis of Fair Value Measurements on a Nonrecurring Basis at Dec 31	(Level 3)		Total Losses
In millions







2020
Assets at fair value:
Long-lived assets and other assets	$	121	$	(245)

2022 Fair Value Measurements on a Nonrecurring Basis

The Company's fair value measurements on a nonrecurring basis were insignificant in 2022.

2021 Fair Value Measurements on a Nonrecurring Basis

The Company's fair value measurements on a nonrecurring basis were insignificant in 2021.

2020 Fair Value Measurements on a Nonrecurring Basis

As part of the 2020 Restructuring Program, the Company has or will shut down and write off several small manufacturing facilities and miscellaneous assets around the world. The assets associated with this plan were written down to zero. In addition, impairments of leased, non-manufacturing facilities, which were classified as Level 3 measurements, resulted in a write-down of right-of-use assets to a fair value of $110 million using unobservable inputs. The impairment charges related to the 2020 Restructuring Program, totaling $196 million, were included in "Restructuring and asset related charges - net" in the consolidated statements of income and related to Packaging & Specialty Plastics ($11 million), Industrial Intermediates & Infrastructure ($22 million), Performance Materials & Coatings ($116 million) and Corporate ($47 million).

In 2020, the Company recognized impairment charges of $30 million related to the write-down of a non-manufacturing asset and certain corporate leased equipment and the write-off of a capital project. The assets, classified as Level 3 measurements, were valued at $11 million using unobservable inputs. The impairment charges were included in "Restructuring and asset related charges - net" in the consolidated statements of income and related to Performance Materials & Coatings ($15 million) and Corporate ($15 million).

In 2020, the Company recognized an additional pretax impairment charge of $19 million related to capital additions made to a bio-ethanol manufacturing facility in Santa Vitoria, Minas Gerais, Brazil, which was impaired in 2017. The assets were written down to zero in 2020. The impairment charge was included in “Restructuring and asset related charges - net” in the consolidated statements of income and related to Packaging & Specialty Plastics. On September 29, 2020, the Company divested the bio-ethanol manufacturing facility.

See Note 5 for additional information on the Company's restructuring activities.

- 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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