FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

9 Months Ended

Sep. 30, 2024

FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

The carrying value of our financial instruments approximates fair value, except for notes and debentures. At September 30, 2024 and December 31, 2023, the carrying value of our outstanding notes and debentures was $14.62 billion and $14.60 billion, respectively, and the fair value, which is determined based on quoted prices in active markets (Level 1 in the fair value hierarchy), was $13.4 billion and $13.6 billion, respectively.

Investments

Our investments without a readily determinable fair value for which we have no significant influence, principally comprised of our investment in Viacom18, had a carrying value of $612 million at both September 30, 2024 and December 31, 2023. These investments are included in “Other assets” on the Consolidated Balance Sheets. In April 2023, our ownership of Viacom18 was diluted from 49% to 13% following investment by other parties. The difference between the carrying value of our 49% interest and the fair value of our 13% interest, as indicated by the additional investments, resulted in a noncash gain of $168 million during the second quarter of 2023.

In March 2024, we entered into an agreement to sell our 13% interest in Viacom18 to Reliance Industries Limited (“Reliance”), the majority interest holder, for an aggregate purchase price of 42.86 billion Indian rupees. The closing of this transaction is subject to the satisfaction of certain customary conditions, including receipt of applicable regulatory approvals and the completion of a separate transaction between Viacom 18, Reliance and a third party.

Foreign Exchange Contracts

We use derivative financial instruments primarily to manage 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.

In August 2024, in connection with the proposed sale of our interest in Viacom18, we entered into a foreign currency option contract to mitigate the exchange rate risk of the Indian rupee-denominated purchase price. The option contract has a notional amount of 42.86 billion Indian rupees and settlement is contingent upon closing of the transaction. This option is a non-designated hedge, and therefore, changes in the fair value of the hedge are recognized in “Other items, net” on the Consolidated Statements of Operations.

At September 30, 2024 and December 31, 2023, the notional amount of all foreign exchange contracts was $3.43 billion and $2.72 billion, respectively. At September 30, 2024, $2.55 billion related to future production costs and $878 million related to our foreign currency balances and other expected foreign currency cash flows, including from the sale of our interest in Viacom18 discussed above. At December 31, 2023, $2.20 billion related to future production costs and $523 million related to our foreign currency balances and other expected foreign currency cash flows.

Gains (losses) recognized on derivative financial instruments were as follows:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023		Financial Statement Account
Non-designated foreign exchange contracts	$	(17)	$	9	$	(7)	$	3	Other items, net

Fair Value Measurements

The table below presents assets and liabilities measured at fair value on a recurring basis at September 30, 2024 and December 31, 2023. 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 in the table below 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, 2024			December 31, 2023
Assets:

Foreign currency hedges		$	43		$	40
Total Assets		$	43		$	40
Liabilities:
Deferred compensation		$	380		$	366
Foreign currency hedges		35			30
Total Liabilities		$	415		$	396

In addition, our foreign currency option for the sale of our interest in Viacom18 is measured at fair value on a recurring basis using Level 3 inputs based on an option pricing model and the probability of completion of the transaction. At September 30, 2024, the fair value of the option was a liability of $4 million.

The estimated fair values of our assets that were impaired during the periods presented were determined using Level 3 inputs. See Notes 2 and 3.