Financial Instruments and Fair Value Measurements

9 Months Ended

Sep. 30, 2022

Financial Instruments and Fair Value Measurements

FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

The carrying value of our financial instruments approximates fair value, except for notes and debentures. At September 30, 2022 and December 31, 2021, the carrying value of our notes and debentures was $15.78 billion and $17.66 billion, respectively, and the fair value, which is determined based on quoted prices in active markets (Level 1 in the fair value hierarchy) was $13.7 billion and $21.5 billion, respectively.

Investments

The carrying value of our investments without a readily determinable fair value for which we have no significant influence was $66 million and $59 million at September 30, 2022 and December 31, 2021, respectively. These investments are included in “Other assets” on the Consolidated Balance Sheets.

On September 30, 2022, we sold a 37.5% interest in The CW to Nexstar Media Inc. and received a noncash distribution of $139 million, comprised of certain licensing receivables earned by The CW prior to the sale. This transaction, which reduced our ownership in The CW to 12.5%, resulted in a loss of $4 million, which principally consists of transaction costs. This loss, along with an impairment of an investment of $5 million, is recorded in “Net gains (losses) from investments” on the Consolidated Statements of Operations.

During the three months ended September 30, 2021, we recorded a net loss from investments of $5 million, reflecting changes in the fair value of a marketable security that was sold during the third quarter of 2021, and during the nine months ended September 30, 2021, we recorded a net gain from investments of $47 million, which included a gain of $37 million from the sale of an investment without a readily determinable fair value and a net gain from changes in the fair value of the marketable security discussed above. These amounts were recorded in “Net gains (losses) from investments” on the Consolidated Statements of Operations.

Foreign Exchange Contracts

We use derivative financial instruments primarily to modify our exposure to market risks from fluctuations in foreign currency exchange rates. We do not use derivative instruments unless there is an underlying exposure and therefore we do not hold or enter into derivative financial instruments for speculative trading purposes.

Foreign exchange forward contracts have principally been used to hedge projected cash flows, in currencies such as the British Pound, the Euro, the Canadian Dollar and the Australian Dollar, generally for periods up to 24 months. We designate foreign exchange forward contracts used to hedge committed and forecasted foreign currency transactions as cash flow hedges. Additionally, we enter into non-designated forward contracts to hedge non-U.S. dollar denominated cash flows.

At September 30, 2022 and December 31, 2021, the notional amount of all foreign exchange contracts was $2.66 billion and $1.94 billion, respectively. At September 30, 2022, $2.04 billion related to future production costs and $621 million related to our foreign currency balances and other expected foreign currency cash flows. At December 31, 2021, $1.38 billion related to future production costs and $564 million related to our foreign currency balances and other expected foreign currency cash flows.

Gains recognized on derivative financial instruments were as follows:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021		Financial Statement Account
Non-designated foreign exchange contracts	$	35	$	13	$	75	$	12	Other items, net

The fair value of our derivative instruments was not material to the Consolidated Balance Sheets for any of the periods presented.

Fair Value Measurements

The table below presents our assets and liabilities that are measured at fair value on a recurring basis at September 30, 2022 and December 31, 2021. These assets and liabilities have been categorized according to the three-level fair value hierarchy established by the FASB, which prioritizes the inputs used in measuring fair value. Level 1 is based on publicly quoted prices for the asset or liability in active markets. Level 2 is based on inputs that are observable other than quoted market prices in active markets, such as quoted prices for the asset or liability in inactive markets or quoted prices for similar assets or liabilities. Level 3 is based on unobservable inputs reflecting our own assumptions about the assumptions that market participants would use in pricing the asset or liability. All of our assets and liabilities that are measured at fair value on a recurring basis use level 2 inputs. The fair value of foreign currency hedges is determined based on the present value of future cash flows using observable inputs including foreign currency exchange rates. The fair value of deferred compensation liabilities is determined based on the fair value of the investments elected by employees.


		At			At
	September 30, 2022			December 31, 2021
Assets:

Foreign currency hedges		$	59		$	23
Total Assets		$	59		$	23
Liabilities:
Deferred compensation		$	313		$	435
Foreign currency hedges		137			29
Total Liabilities		$	450		$	464