Fair Value Measurements

12 Months Ended

Dec. 31, 2020

Fair Value Disclosures [Abstract]

Fair Value Measurements

5. Fair Value Measurements

U.S. GAAP requires enhanced disclosures about investments and non-recurring non-financial assets and liabilities that are measured and reported at fair value and has established a hierarchal disclosure framework that prioritizes and ranks the level of market price observability used in measuring investments or non-financial assets and liabilities at fair value. Market price observability is impacted by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

Investments and non-financial assets and/or liabilities measured and reported at fair value are classified and disclosed in one of the following categories:

Level 1 - Quoted prices are available in active markets for identical investments and non-financial assets and/or liabilities as of the reporting date.

Level 2 - Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies where all significant inputs are observable. The inputs and assumptions of our Level 2 investments are derived from market observable sources including reported trades, broker/dealer quotes and other pertinent data.

Level 3 - Pricing inputs are unobservable for the investment and non-financial asset and/or liability and include situations where there is little, if any, market activity for the investment or non-financial asset and/or liability. The inputs into the determination of fair value require significant management judgment or estimation. Fair value is determined using comparable market transactions and other valuation methodologies, adjusted as appropriate for liquidity, credit, market and/or other risk factors.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the investments’, non-financial assets’ and/or liabilities’ level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and consideration of factors specific to the investment. Significant transfers, if any, between the levels within the fair value hierarchy are recognized at the beginning of the reporting period when changes in circumstances require such transfers.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table summarizes the valuation of our assets and liabilities by the above fair value hierarchy levels measured on a recurring basis:

	December 31, 2020								December 31, 2019
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(in millions)
Assets
Investments (Note 4)	$	8,546	$	174	$	41	$	8,761	$	9,448	$	281	$	3	$	9,732
Derivative contracts, at fair value (Note 6)		—		785		—		785		—		182		—		182
	$	8,546	$	959	$	41	$	9,546	$	9,448	$	463	$	3	$	9,914
Liabilities
Securities sold, not yet purchased (Note 4)	$	2,521	$	—	$	—	$	2,521	$	1,190	$	—	$	—	$	1,190
Derivative contracts, at fair value (Note 6)		11		628		—		639		—		1,224		—		1,224
Other liabilities		—		214		—		214		—		7		6		13
	$	2,532	$	842	$	—	$	3,374	$	1,190	$	1,231	$	6	$	2,427

Refer to Note 19, “Pension and Other Post-Retirement Benefit Plans,” for our Food Packaging segment’s defined benefit plan assets measured at fair value on a recurring basis as of December 31, 2020 and 2019.

Assets Measured at Fair Value on a Recurring Basis for Which We Use Level 3 Inputs to Determine Fair Value

The changes in investments measured at fair value on a recurring basis for which we use Level 3 inputs to determine fair value are as follows:

	Year Ended December 31,
	2020		2019
	(in millions)
Balance at January 1	$	3	$	372
Transfer in from Level 2		136		—
Net gains recognized in income		48		89
Purchases		101		—
Transfer out of Level 3		(246)		—
Sales		—		(458)
Other		(1)		—
Balance at December 31	$	41	$	3

During 2020, we transferred our debt investment in Vivus from Level 2 to Level 3 due to the reduction in market observable sources occurring during the period. The fair value of this investment was derived from the enterprise value of Vivus at emergence from bankruptcy, which was valued using a discounted cash flow method. We recognized a gain of $48 million as a result of adjusting the fair value of this investment just prior to emergence. In the fourth quarter of 2020, this debt investment, consisting of convertible debt securities, along with a separate debt investment in Vivus, consisting of a term loan, was transferred out of Level 3 upon Vivus’ emergence from bankruptcy, at which point, we acquired all of the equity interests in Vivus, resulting in Vivus becoming a consolidated subsidiary of ours.

As of the beginning of 2019, we had a certain equity investment which was considered a Level 3 investment due to unobservable market data and was measured at fair value on a recurring basis. We determined the fair value of this investment based on recent market transactions. During 2019, we sold this equity investment in its entirety.

During 2020, our Real Estate segment recorded an impairment of certain development property, included in other assets in the consolidated balance sheets, of $5 million, and property, plant and equipment, net of $2 million.

Refer to Note 9, “Goodwill and Intangible Assets, Net,” for discussion of our goodwill and intangible asset impairments.

Refer to Note 13, “Segment and Geographic Reporting,” for total impairment recorded by each of our segments.