Fair Value Measurements

ASC 820, "Fair Value Measurement," defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also establishes a three-level fair value hierarchy that prioritizes information used in developing assumptions when pricing an asset or liability as follows:

Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities;

Level 2: Quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and

Level 3: Unobservable inputs where there is little or no market data, which requires the reporting entity to develop its own assumptions.

ASC 820 requires the use of observable market data, when available, in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.

Recurring Fair Value Measurements

The following tables present the Company’s fair value hierarchy for those assets and liabilities measured at fair value as of December 31, 2018 and September 30, 2018 (in millions):



	Fair Value Measurements Using:
	Total as of December 31, 2018		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Other current assets
Foreign currency exchange derivatives	$	16	$	—	$	16	$	—
Assets held for sale
Commodity derivatives	1		—		1		—
Other noncurrent assets
Investments in marketable common stock	1		1		—		—
Deferred compensation plan assets	92		92		—		—
Exchange traded funds (fixed income)¹	145		145		—		—
Exchange traded funds (equity)¹	98		98		—		—
Equity swap	47		—		47		—
Noncurrent assets held for sale
Investments in marketable common stock	2		2		—		—
Total assets	$	402	$	338	$	64	$	—
Other current liabilities
Foreign currency exchange derivatives	$	24	$	—	$	24	$	—
Commodity derivatives	2		—		2		—
Liabilities held for sale
Commodity derivatives	11		—		11		—
Total liabilities	$	37	$	—	$	37	$	—



	Fair Value Measurements Using:
	Total as of September 30, 2018		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Other current assets
Foreign currency exchange derivatives	$	16	$	—	$	16	$	—
Commodity derivatives	1		—		1		—
Exchange traded funds (fixed income)¹	14		14		—		—
Other noncurrent assets
Investments in marketable common stock	1		1		—		—
Deferred compensation plan assets	100		100		—		—
Exchange traded funds (fixed income)¹	148		148		—		—
Exchange traded funds (equity)¹	119		119		—		—
Equity swap	63		—		63		—
Noncurrent assets held for sale
Investments in marketable common stock	3		3		—		—
Total assets	$	465	$	385	$	80	$	—
Other current liabilities
Foreign currency exchange derivatives	$	12	$	—	$	12	$	—
Commodity derivatives	2		—		2		—
Liabilities held for sale
Commodity derivatives	12		—		12		—
Total liabilities	$	26	$	—	$	26	$	—

¹Classified as restricted investments for payment of asbestos liabilities. See Note 20, "Commitments and Contingencies," of the notes to consolidated financial statements for further details.

Valuation Methods

Foreign currency exchange derivatives: The foreign currency exchange derivatives are valued under a market approach using publicized spot and forward prices.

Commodity derivatives: The commodity derivatives are valued under a market approach using publicized prices, where available, or dealer quotes.

Equity swaps: The equity swaps are valued under a market approach as the fair value of the swaps is equal to the Company’s stock price at the reporting period date.

Deferred compensation plan assets: Assets held in the deferred compensation plans will be used to pay benefits under certain of the Company's non-qualified deferred compensation plans. The investments primarily consist of mutual funds which are publicly traded on stock exchanges and are valued using a market approach based on the quoted market prices. During the three months ended December 31, 2018, the Company recognized unrealized losses of $9 million in the consolidated statements of income on these investments that were still held as of December 31, 2018, where they offset unrealized gains on the related deferred compensation plan liability.

Investments in marketable common stock and exchange traded funds: Investments in marketable common stock and exchange traded funds are valued using a market approach based on the quoted market prices, where available, or broker/dealer quotes of identical or comparable instruments. During the three months ended December 31, 2018, the Company recognized unrealized losses of $22 million in the consolidated statements of income on these investments that were still held as of December 31, 2018, of which $21 million related to restricted investments. Refer to Note 20, "Commitments and Contingencies," of the notes to consolidated financial statements for further information.

The fair values of cash and cash equivalents, accounts receivable, short-term debt and accounts payable approximate their carrying values. The fair value of long-term debt was $9.5 billion and $9.6 billion at December 31, 2018 and September 30, 2018, respectively. The fair value of public debt was $8.5 billion and $8.6 billion, at December 31, 2018 and September 30, 2018, respectively, which was determined primarily using market quotes classified as Level 1 inputs within the ASC 820 fair value hierarchy. The fair value of other long-term debt was $1.0 billion at December 31, 2018 and September 30, 2018, which was determined based on quoted market prices for similar instruments classified as Level 2 inputs within the ASC 820 fair value hierarchy.