Valuation of Debt and Equity Investments and Certain Liabilities

12 Months Ended

Dec. 31, 2023

Valuation of debt and equity investments and certain liabilities

Investments measured at fair value

Money market funds, debt investments and mutual funds are stated at fair value, which is generally based on market prices or broker quotes. We classify all debt investments as available-for-sale. See Fair-value considerations. Unrealized gains and losses are recorded as an increase or decrease, net of taxes, in AOCI on our Consolidated Balance Sheets, and any credit losses are recorded as an allowance for credit losses with an offset recognized in OI&E in our Consolidated Statements of Income.

Our mutual funds hold a variety of debt and equity investments intended to generate returns that offset changes in certain deferred compensation liabilities. We record changes in the fair value of these mutual funds and the related deferred compensation liabilities in SG&A.

Other investments

Our other investments include equity-method investments and nonmarketable investments, which are not measured at fair value. These investments consist of interests in venture capital funds and other nonmarketable securities. Gains and losses from equity-method investments are recognized in OI&E based on our ownership share of the investee’s financial results. Nonmarketable securities are measured at cost with adjustments for observable changes in price or impairments. Gains and losses on nonmarketable investments are recognized in OI&E.

Details of our investments are as follows:


	December 31, 2023						December 31, 2022
	Cash and Cash Equivalents		Short-Term Investments		Long-Term Investments		Cash and Cash Equivalents		Short-Term Investments		Long-Term Investments
Measured at fair value:
Money market funds	$	1,068	$	—	$	—	$	1,238	$	—	$	—
Corporate obligations	349		1,605		—		276		1,535		—
U.S. government and agency securities	696		3,808		—		680		4,234		—
Non-U.S. government and agency securities	50		198		—		149		248		—
Mutual funds	—		—		12		—		—		11
Total	2,163		5,611		12		2,343		6,017		11

Other measurement basis:
Equity-method investments	—		—		17		—		—		18
Nonmarketable investments	—		—		5		—		—		5
Total	—		—		22		—		—		23

Cash on hand	801		—		—		707		—		—
Total	$	2,964	$	5,611	$	34	$	3,050	$	6,017	$	34

As of December 31, 2023 and 2022, unrealized gains and losses associated with our debt investments were not material. We did not recognize any credit losses related to debt investments in 2023, 2022 or 2021.

The following table presents the aggregate maturities of our debt investments as of December 31, 2023:


	Fair Value
One year or less	$	6,362
One to two years	344

In 2023, 2022 and 2021, the proceeds from sales, redemptions and maturities of short-term debt investments were $13.39 billion, $13.66 billion and $8.48 billion, respectively. Gross realized gains and losses from these sales were not material.

Fair-value considerations

We measure and report certain financial assets and liabilities at fair value on a recurring basis. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

The three-level hierarchy described below indicates the extent and level of judgment used to estimate fair-value measurements.

•Level 1 – Uses unadjusted quoted prices that are available in active markets for identical assets or liabilities as of the reporting date.

•Level 2 – Uses inputs other than Level 1 that are either directly or indirectly observable as of the reporting date through correlation with market data, including quoted prices for similar assets and liabilities in active markets and quoted prices in markets that are not active. Level 2 also includes assets and liabilities that are valued using models or other pricing methodologies that do not require significant judgment since the input assumptions used in the models, such as interest rates and volatility factors, are corroborated by readily observable data. We utilize a third-party data service to provide Level 2 valuations. We verify these valuations for reasonableness relative to unadjusted quotes obtained from brokers or dealers based on observable prices for similar assets in active markets.

•Level 3 – Uses inputs that are unobservable, supported by little or no market activity and reflect the use of significant management judgment. These values are generally determined using pricing models that utilize management estimates of market participant assumptions. As of December 31, 2023 and 2022, we had no Level 3 assets or liabilities.

The following are our assets and liabilities that were accounted for at fair value on a recurring basis. These tables do not include cash on hand, assets held by our postretirement plans, or assets and liabilities that are measured at historical cost or any basis other than fair value.


	December 31, 2023						December 31, 2022
	Level 1		Level 2		Total		Level 1		Level 2		Total
Assets:
Money market funds	$	1,068	$	—	$	1,068	$	1,238	$	—	$	1,238
Corporate obligations	—		1,954		1,954		—		1,811		1,811
U.S. government and agency securities	3,618		886		4,504		4,914		—		4,914
Non-U.S. government and agency securities	—		248		248		—		397		397
Mutual funds	12		—		12		11		—		11
Total assets	$	4,698	$	3,088	$	7,786	$	6,163	$	2,208	$	8,371

Liabilities:
Deferred compensation	$	393	$	—	$	393	$	326	$	—	$	326
Total liabilities	$	393	$	—	$	393	$	326	$	—	$	326