Fair Value Measurements

3 Months Ended

Mar. 31, 2015

Investments



(In millions)	Balance		Level 1		Level 2		Level 3
March 31, 2015
Assets:
Equity securities	$	4	$	4	$	—	$	—
Government bonds	69		—		69		—
Total assets at fair value	$	73	$	4	$	69	$	—

December 31, 2014
Assets:
Equity securities	$	15	$	15	$	—	$	—
Government bonds	70		—		70		—
Total assets at fair value	$	85	$	15	$	70	$	—

Investments consist of equity and debt securities that are traded in active markets, have readily determined market values and have maturity dates of greater than three months from the date of purchase. The majority of these investments are in deferred charges and other assets in our Consolidated Balance Sheets, while a portion is included in prepayments and other current assets. As of March 31, 2015 and December 31, 2014, gross unrealized gains and losses on marketable securities were not material.

Derivative Instruments

Interest Rate Swap Agreements

As of December 31, 2014, CEOC had eight interest rate swap agreements that were not designated as accounting hedges and had notional amounts totaling $5.8 billion and a total fair value liability of $6 million. These interest rate swaps expired and were settled for $17 million by CEC during the first quarter of 2015. We did not renew the swap agreements or enter into any replacement instruments.

Effect of Non-designated Derivative Instruments on Net Loss

(In millions)		Three Months Ended March 31,
Derivatives not designated as hedging instruments	Location of Loss Recognized in Net Loss	2015		2014
Net periodic cash settlements and accrued interest ⁽¹⁾	Interest expense	$	—	$	43
Total expense related to derivatives	Interest expense	7		8

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⁽¹⁾	The derivative settlements under the terms of the interest rate swap agreements are recognized as interest expense and are paid monthly or quarterly.

Items Measured at Fair Value on a Non-recurring Basis

We had contingent earnout liabilities primarily related to the CIE acquisition of Pacific Interactive. During the first quarter of 2015, we paid $64 million of the earnout liability. As of March 31, 2015, the remaining liability was $3 million.

We classify the items measured at fair value on a non-recurring basis within level 3 in the fair value hierarchy.