Note 19. Fair Value

The following table represents our fair value hierarchy for our financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2013 (in millions):


	Level 1		Level 2		Level 3		Total
Asset Derivatives:
Forward contracts	$	—	$	3	$	—	$	3

Liability Derivatives:
Forward contracts	$	—	$	4	$	—	$	4

The forward contracts are over-the-counter contracts that do not trade on a public exchange. The fair values of the contracts are based on inputs such as foreign currency spot rates and forward points that are readily available on public markets, and as such, are classified as Level 2. We consider both our credit risk, as well as our counterparties’ credit risk, in determining fair value, and we did not make an adjustment as it was deemed insignificant based on the short duration of the contracts and our rate of short-term debt.

We believe the carrying values of our financial instruments related to current assets and current liabilities approximate fair value. The following table presents the carrying amounts and estimated fair values of our long-term financial instruments (in millions):


		September 30, 2013				December 31, 2012
	Hierarchy Level	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Assets:
Restricted cash	1	$	4	$	4	$	6	$	6
VOI notes receivable	3		185		231		92		113
Securitized vacation ownership notes receivable	3		347		439		438		558
Other notes receivable	3		17		17		11		11

Total financial assets		$	553	$	691	$	547	$	688

Liabilities:
Long-term debt	1	$	1,265	$	1,389	$	1,273	$	1,447
Long-term securitized debt	3		291		305		383		402

Total financial liabilities		$	1,556	$	1,694	$	1,656	$	1,849

Off-Balance sheet:
Letters of credit	2	$	—	$	117	$	—	$	117
Surety bonds	2		—		83		—		80

Total off-balance sheet		$	—	$	200	$	—	$	197

The carrying value of our restricted cash approximates its fair value. We estimate the fair value of our VOI notes receivable and securitized VOI notes receivable using assumptions related to current or recent securitization market transactions. The amount is then compared to a discounted expected future cash flow model using a discount rate commensurate with the risk of the underlying notes, primarily determined by the credit worthiness of the borrowers based on their FICO scores. The results of these two methods are then evaluated to determine the estimated fair value. The fair value of other notes receivable is estimated based on the terms of the instrument and current market conditions. These financial instrument assets are recorded in the other assets line item in our consolidated balance sheet.

We estimate the fair value of our publicly traded debt based on the bid prices in the public debt markets. The carrying amount of our floating rate debt is a reasonable basis of fair value due to the variable nature of the interest rates. Our non-public, securitized debt and fixed rate debt fair value is determined based upon discounted cash flows for the debt rates deemed reasonable for the type of debt, prevailing market conditions and the length to maturity for the debt.

The fair values of our letters of credit and surety bonds are estimated to be the same as the contract values based on the nature of the fee arrangements with the issuing financial institutions.