Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Fair Value Measurement Inputs and Valuation Techniques

The fair values of the Fixed-price Preemptive Rights and Cronos warrant are estimated using Black-Scholes option-pricing models, adjusted for observable inputs (which are classified in Level 1 of the fair value hierarchy), including share price, and unobservable inputs, including probability factors and weighting of expected life, volatility levels and risk-free interest rates (which are classified in Level 3 of the fair value hierarchy) based on the following assumptions at:

	September 30, 2020	December 31, 2019	September 30, 2020	December 31, 2019
	Fixed-price Preemptive Rights		Cronos Warrant
Share price (1)	C$6.69	C$9.97	C$6.69	C$9.97
Expected life (2)	1.18 years	1.67 years	2.43 years	3.18 years
Expected volatility (3)	80.68%	81.61%	80.68%	81.61%
Risk-free interest rate (4)(5)	0.20%	1.71%	0.25%	1.69%
Expected dividend yield (6)	—%	—%	—%	—%

(1) Based on the closing market price for Cronos common stock on the Toronto Stock Exchange on the date indicated.

(2) Based on the weighted-average expected life of the Fixed-price Preemptive Rights (with a range from approximately 0.25 year to 5.25 years at September 30, 2020 and 0.25 year to 6 years at December 31, 2019) and the March 8, 2023 expiration date of the Cronos warrant.

(3) Based on a blend of historical volatility levels of the underlying equity security and peer companies.

(4) Based on the implied yield currently available on Canadian Treasury zero coupon issues (with a range from approximately 0.12% to 0.36% at September 30, 2020 and 1.66% to 1.74% at December 31, 2019) weighted for the remaining expected life of the Fixed-price Preemptive Rights.

(5) Based on the implied yield currently available on Canadian Treasury zero coupon issues and the expected life of the Cronos warrant.

(6) Based on Cronos’s expected dividend payments.

Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation

The following table provides a reconciliation of the beginning and ending balance of the Fixed-price Preemptive Rights and Cronos warrant, which are classified in Level 3 of the fair value hierarchy:

	(in millions)
Balance at December 31, 2019	$	303
Pre-tax earnings (losses) recognized in net earnings	(202)
Balance at September 30, 2020	$	101

Schedule of Derivative Liabilities at Fair Value

The fair values of Altria’s derivative financial instruments on a gross basis included on the condensed consolidated balance sheets were as follows:

	Fair Value of Assets					Fair Value of Liabilities
	Balance Sheet Classification	September 30, 2020		December 31, 2019		Balance Sheet Classification	September 30, 2020		December 31, 2019
Derivatives designated as hedging instruments:	(in millions)
Foreign currency contracts	Other current assets	$	3	$	46	Other accrued liabilities	$	39	$	7
Foreign currency contracts	Other assets	—		—		Other liabilities	16		21
Total		$	3	$	46		$	55	$	28
Derivatives not designated as hedging instruments:
Cronos warrant	Investments in equity securities	$	86	$	234
Fixed-price Preemptive Rights	Investments in equity securities	15		69
Total		$	101	$	303
Total derivatives		$	104	$	349		$	55	$	28

Pre-tax Effects of Net Investment Hedges on Accumulated Other Comprehensive Losses

For the nine and three months ended September 30, 2020 and 2019, Altria recognized pre-tax unrealized gains/(losses), representing the changes in the fair values of the Fixed-price Preemptive Rights and Cronos warrant, as follows:

	For the Nine Months Ended September 30,				For the Three Months Ended September 30,
	2020		2019		2020		2019
	(in millions)
Fixed-price Preemptive Rights	$	(54)	$	(400)	$	(25)	$	(188)
Cronos warrant	(148)		(896)		(80)		(448)
	$	(202)	$	(1,296)	$	(105)	$	(636)

The pre-tax effects of Altria’s net investment hedges on accumulated other comprehensive losses and the condensed consolidated statements of earnings were as follows:

	Gain (Loss) Recognized in Accumulated Other Comprehensive Losses				Gain (Loss) Recognized in Net Earnings (Losses) (1)				Gain (Loss) Recognized in Accumulated Other Comprehensive Losses				Gain (Loss) Recognized in Net Earnings (Losses) (1)
	For the Nine Months Ended September 30,								For the Three Months Ended September 30,
	2020		2019		2020		2019		2020		2019		2020		2019
	(in millions)
Foreign currency contracts	$	(28)	$	70	$	33	$	26	$	(66)	$	57	$	8	$	10
Foreign currency denominated debt	(215)		168		—		—		(206)		200		—		—
Total	$	(243)	$	238	$	33	$	26	$	(272)	$	257	$	8	$	10

(1) Related to amounts excluded from effectiveness testing.