Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2017

Fair Value of Financial Instruments and Other Non-Financial Assets

The following table includes the estimated fair value and carrying value of those assets and liabilities that are measured at fair value on a recurring and non-recurring basis as well as the estimated fair value of the Company’s financial instruments that are not accounted for at fair value on a recurring basis.



		June 30, 2017				December 31, 2016
	Fair Value Hierarchy Level	Carrying Amount Asset (Liability) $		Fair Value Asset (Liability) $		Carrying Amount Asset (Liability) $		Fair Value Asset (Liability) $
Recurring
Cash and cash equivalents, restricted cash, and marketable securities	Level 1	815,783		815,783		805,567		805,567
Derivative instruments (note 13)
Interest rate swap agreements – assets⁽¹⁾	Level 2	3,300		3,300		7,943		7,943
Interest rate swap agreements – liabilities⁽¹⁾	Level 2	(304,154	)	(304,154	)	(302,935	)	(302,935	)
Cross currency interest swap agreement⁽¹⁾	Level 2	(186,764	)	(186,764	)	(237,165	)	(237,165	)
Foreign currency contracts	Level 2	653		653		(2,993	)	(2,993	)
Stock purchase warrants	Level 3	—		—		575		575
Time-charter swap agreement	Level 3	—		—		208		208
Freight forward agreements	Level 1	10		10		—		—
Non-recurring
Vessels and equipment	Level 2	—		—		11,300		11,300
Vessels held for sale	Level 2	17,000		17,000		61,282		61,282
Equity-accounted investments (note 6c)	Level 1	33,287		33,287		—		—
Long-term investments	Level 2	—		—		6,000		6,000
Other
Loans to equity-accounted investees and joint venture partners – Current	(2)	10,951		(2	)	11,821		(2	)
Loans to equity-accounted investees and joint venture partners – Long-term	(2)	322,061		(2	)	292,209		(2	)
Long-term receivable included in accounts receivable and other assets⁽³⁾	Level 3	7,052		7,021		10,985		10,944
Long-term debt – public (note 7)	Level 1	(1,516,105	)	(1,375,814	)	(1,503,472	)	(1,409,996	)
Long-term debt – non-public (note 7)	Level 2	(5,056,817	)	(4,960,137	)	(5,136,074	)	(5,009,900	)


(1)	The fair value of the Company's interest rate swap and cross currency swap agreements at June 30, 2017 includes $12.7 million (December 31, 2016 - $15.8 million) accrued interest expense which is recorded in accrued liabilities on the unaudited consolidated balance sheets.


(2)	In the unaudited interim consolidated financial statements, the Company’s loans to and equity investments in equity-accounted investees form the aggregate carrying value of the Company’s interests in entities accounted for by the equity method. The fair value of the individual components of such aggregate interests is not determinable.

(3)

As at June 30, 2017, the estimated fair value of the non-interest bearing receivable from Royal Dutch Shell plc (or Shell) is based on the remaining future fixed payments as well as an estimated discount rate. The estimated fair value of this receivable as of June 30, 2017 was $7.0 million (December 31, 2016 – $10.9 million) using a discount rate of 8.0%. As there is no market rate for the equivalent of an unsecured non-interest bearing receivable from Shell, the discount rate is based on unsecured debt instruments of similar maturity held by the Company, adjusted for a liquidity premium. A higher or lower discount rate would result in a lower or higher fair value asset.

Stock Purchase Warrants Changes in Fair Value Measured on Recurring Basis Using Significant Unobservable Inputs (Level 3)

Changes in fair value during the three and six months ended June 30, 2017 for Teekay Tankers' time-charter swap agreement, which is described in Note 13 below and is measured at fair value on the recurring basis using significant unobservable inputs (Level 3), are as follows:



	Three Months Ended June 30, 2017	Six Months Ended June 30, 2017
	$	$
Fair value asset - beginning of the period	(185)	208
Settlements	(360)	(1,106)
Realized and unrealized (loss) gain in earnings	545	898
Fair value asset - at the end of the period	—	—

Changes in fair value during the three and six months ended June 30, 2017 and 2016 for the Company’s derivative instruments, the TIL stock purchase warrants, which are described below and are measured at fair value on the recurring basis using significant unobservable inputs (Level 3), are as follows:



	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
	$		$		$		$
Fair value at the beginning of the period	332		6,107		575		10,328
Unrealized loss included in earnings	(332	)	(4,274	)	(575	)	(8,495	)
Fair value at the end of the period	—		1,833		—		1,833

Changes in Estimated Fair Value of Contingent Consideration Liability Relating to Acquisition of Logitel

Changes in the estimated fair value of Teekay Offshore’s contingent consideration liability relating to the acquisition of Logitel, which is measured at fair value on a recurring basis using significant unobservable inputs (Level 3), during the three and six months ended June 30, 2016 are as follows:



	Three Months Ended June 30,			Six Months Ended June 30,
	2017	2016		2017	2016
	$	$		$	$
Balance at beginning of period	—	(15,221	)	—	(14,830	)
Gain included in Other loss - net	—	15,221		—	14,830
Balance at end of period	—	—		—	—

Summary of Financing Receivables

The following table contains a summary of the Company’s financing receivables by type of borrower and the method by which the Company monitors the credit quality of its financing receivables on a quarterly basis.



Class of Financing Receivable	Credit Quality Indicator	Grade	June 30, 2017	December 31, 2016
Class of Financing Receivable	Credit Quality Indicator	Grade	$	$
Direct financing leases	Payment activity	Performing	653,846	660,594
Other loan receivables
Loans to equity-accounted investees and joint venture partners	Other internal metrics	Performing	333,012	304,030
Long-term receivable included in other assets	Payment activity	Performing	13,663	17,712
			1,000,521	982,336