Fair Value Measurements

9 Months Ended

Sep. 30, 2012

Fair Value Disclosures [Abstract]

Fair Value Measurements

FAIR VALUE MEASUREMENTS

Accounting guidance on fair value measurements for certain financial assets and liabilities requires that financial assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:

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

Level 2:    Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3:    Unobservable inputs reflecting the reporting entity's own assumptions or external inputs from active markets. 

When applying fair value principles in the valuation of assets and liabilities, we are required to maximize the use of quoted market prices and minimize the use of unobservable inputs. We calculate the fair value of our Level 1 and Level 2 instruments based on the exchange traded price of similar or identical instruments, where available, or based on other observable inputs. There were no significant transfers into or out of Level 1 or Level 2 that occurred between December 31, 2011 and September 30, 2012. The fair value of our Level 3 assets and liabilities are calculated as the net present value of expected cash flows based on externally provided or obtained inputs. Certain Level 3 assets may also be based on sale prices of similar assets. Our fair value calculations take into consideration our credit risk and that of our counterparties. We have not changed our valuation techniques used in measuring the fair value of any financial assets and liabilities during the year.

Our valuation of our assets and liabilities measured at fair value on a recurring basis by the aforementioned pricing categories is: 

	Total				(Level 1)				(Level 2)				(Level 3)
	September		December		September		December		September		December		September		December
	2012		2011		2012		2011		2012		2011		2012		2011
Assets:
Cash and cash equivalents	$	1,423	$	905	$	1,423	$	905	$	—	$	—	$	—	$	—
Available-for-sale marketable securities
Corporate and asset-backed debt securities	1,060		1,350		—		—		1,060		1,349		—		1
Foreign government debt securities	893		747		—		—		893		747		—		—
U.S. agency debt securities	243		241		—		—		243		241		—		—
Certificates of deposit	99		36		—		—		99		36		—		—
Other	145		140		—		—		145		140		—		—
Total available-for-sale marketable securities	2,440		2,514		—		—		2,440		2,513		—		1
Trading marketable securities	57		50		57		50		—		—		—		—
Foreign currency exchange contracts	1		1		—		—		1		1		—		—
	$	3,921	$	3,470	$	1,480	$	955	$	2,441	$	2,514	$	—	$	1
Liabilities:
Deferred compensation arrangements	$	57	$	50	$	57	$	50	$	—	$	—	$	—	$	—
Contingent consideration	73		112		—		—		—		—		73		112
Foreign currency exchange contracts	2		9		—		—		2		9		—		—
	$	132	$	171	$	57	$	50	$	2	$	9	$	73	$	112

The following is a roll forward of our assets and liabilities measured at fair value on a recurring basis using unobservable inputs (Level 3):

	Total						Corporate and Asset-Backed Debt Securities					Foreign Government Debt Securities					Contingent Consideration
	September			December			September			December		September		December			September			December
	2012			2011			2012			2011		2012		2011			2012			2011
Balance at the beginning of the period	$	(111	)	$	(110	)	$	1		$	1	$	—	$	1		$	(112	)	$	(112	)
Transfers into Level 3	—			—			—			—		—		—			—			—
Transfers out of Level 3	—			(1		)	—			—		—		(1		)	—			—
Gains or (losses) included in earnings	5			—			—			—		—		—			5			—
Sales	(1		)	—			(1		)	—		—		—			—			—
Settlements	34			—			—			—		—		—			34			—
Balance at the end of the period	$	(73	)	$	(111	)	$	—		$	1	$	—	$	—		$	(73	)	$	(112	)

The estimated fair value of the liability for contingent consideration represents milestone payments for acquisitions. The fair value of the liability was estimated using a discounted cash flow technique. Significant inputs to this technique included our probability assessments of occurrence of triggering events, appropriately discounted considering the uncertainties associated with the obligation, calculated in accordance with the terms of the acquisition agreement. We remeasure this liability each reporting period and record the changes in the fair value in general and administrative expense (for probability of occurrence) and other income (expense) (for changes in time value of money) in our consolidated statement of earnings.

The following table presents quantitative information about the inputs and valuation methodologies we use for material fair value measurements classified in Level 3 of the fair value hierarchy at September 30, 2012:

				Range (Weighted Average)
	Fair Value at 09/30/2012	Valuation Technique	Unobservable Input	Minimum	Maximum	Weighted Average
Contingent consideration	$73	Discounted cash flow	Probability of occurrence	60	100	98

The following tables present a summary of our marketable securities at September 30, 2012 and December 31, 2011:

	Amortized Cost				Gross Unrealized Gains				Gross Unrealized (Losses)					Estimated Fair Value
	September		December		September		December		September		December			September		December
	2012		2011		2012		2011		2012		2011			2012		2011
Available-for-sale marketable securities:
Corporate and asset-backed debt securities	$	1,055	$	1,353	$	5	$	2	$	—	$	(5	)	$	1,060	$	1,350
Foreign government debt securities	890		745		3		3		—		(1		)	893		747
U.S. agency debt securities	242		241		1		—		—		—			243		241
Certificates of deposit	99		36		—		—		—		—			99		36
Other	145		140		—		—		—		—			145		140
Total available-for-sale marketable securities	$	2,431	$	2,515	$	9	$	5	$	—	$	(6	)	2,440		2,514
Trading marketable securities														57		50
Total marketable securities														$	2,497	$	2,564
Reported as:
Current assets-marketable securities														$	2,440	$	2,513
Noncurrent assets-Other														57		51
														$	2,497	$	2,564

The unrealized losses on our available-for-sale marketable securities, which were less than $0.5 at September 30, 2012, were primarily caused by increases in yields as a result of continued challenging conditions in the global credit markets. While some of these investments have been downgraded by rating agencies since their initial purchase, less than 1% of our investments in corporate securities had a credit quality rating of less than A2 (Moody's), A (Standard & Poors) and A (Fitch). Because we do not intend to sell the investments and it is not more likely than not that we will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, we do not consider these investments to be other-than-temporarily impaired at September 30, 2012. The cost and estimated fair value of available-for-sale marketable securities at September 30, 2012 by contractual maturity are: 

	Cost		Estimated Fair Value
Due in one year or less	$	412	$	412
Due after one year through three years	1,941		1,949
Due after three years	78		79
	$	2,431	$	2,440

The gross unrealized losses and fair value of our investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position at September 30, 2012, are as follows:

	Corporate and Asset-Backed Debt Securities				Foreign Government Debt Securities				U.S. Agency Debt Securities				Other				Total
	Less Than 12 Months		Total		Less Than 12 Months		Total		Less Than 12 Months		Total		Less Than 12 Months		Total		Less Than 12 Months		Total
Number of Investments	86		86		45		45		10		10		23		23		164		164
Fair Value	$	202	$	202	$	144	$	144	$	27	$	27	$	52	$	52	$	425	$	425
Unrealized Losses	$	—	$	—	—		—		—		—		—		—		$	—	$	—

Upon the sale of a security classified as available for sale, the security’s specific unrealized gain (loss) is reclassified out of “Accumulated Other Comprehensive Income (Loss)” into earnings based on the specific identification method. Interest and marketable securities income totaled $37 and $24 for the nine months ended September 30, 2012 and 2011, respectively, and $12 and $9 for the three months ended September 30, 2012 and 2011, respectively, and is included in other income (expense).