Quarterly report pursuant to Section 13 or 15(d)

Assets And Liabilities Measured At Fair Value

v3.21.2
Assets And Liabilities Measured At Fair Value
6 Months Ended
Jun. 30, 2021
Assets and Liabilities Measured at Fair Value

(5)   Assets and Liabilities Measured at Fair Value

For assets and liabilities required to be reported at fair value, GAAP provides a hierarchy that prioritizes inputs to valuation techniques used to measure fair value into three broad levels. Level 1 inputs are quoted market prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs, other than quoted market prices included within Level 1, that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability.  Liberty does not have any assets or liabilities required to be measured at fair value considered to be Level 3.

Liberty's assets and liabilities measured at fair value are as follows:

Fair Value Measurements at

Fair Value Measurements at

June 30, 2021

December 31, 2020

    

    

Quoted

    

    

    

Quoted

    

  

prices

prices

in active

Significant

in active

Significant

markets

other

markets

other

for identical

observable

for identical

observable

assets

inputs

assets

inputs

Description

Total

(Level 1)

(Level 2)

Total

(Level 1)

(Level 2)

amounts in millions

Cash equivalents

$

2,526

 

2,526

 

 

2,586

    

2,586

    

Debt and equity securities

$

413

 

383

 

30

 

266

    

181

    

85

Financial instrument assets

$

493

 

94

 

399

 

424

    

84

    

340

Debt

$

4,611

 

 

4,611

 

4,545

    

    

4,545

Financial instrument liabilities

$

99

25

74

106

    

    

106

The majority of Liberty's Level 2 financial instruments are debt related instruments and derivative instruments. These assets and liabilities are not always traded publicly or not considered to be traded on "active markets," as defined in GAAP. The fair values for such instruments are derived from a typical model using observable market data as the significant inputs or a trading price of a similar asset or liability is utilized.  Accordingly, those debt securities, financial instruments and debt or debt related instruments are reported in the foregoing table as Level 2 fair value. Debt and equity securities and financial instrument assets classified as Level 1 and Level 2 in the table above are included in the Other assets line item in the condensed consolidated balance sheets.

Realized and Unrealized Gains (Losses) on Financial Instruments, net

Realized and unrealized gains (losses) on financial instruments, net are comprised of changes in the fair value of the following:

Three months ended

Six months ended

June 30,

June 30,

    

2021

    

2020

    

2021

    

2020

 

amounts in millions

Debt and equity securities

$

167

 

22

 

216

 

(113)

Debt measured at fair value (a)

(71)

(262)

(184)

282

Change in fair value of bond hedges (b)

46

73

59

(250)

Other derivatives

 

13

 

(13)

 

15

 

(98)

$

155

 

(180)

 

106

 

(179)

(a) The Company elected to account for its exchangeable senior debentures and cash convertible notes using the fair value option. Changes in the fair value of the exchangeable senior debentures and cash convertible notes recognized in the condensed consolidated statements of operations are primarily due to market factors primarily driven by changes in the fair value of the underlying shares into which the debt is exchangeable. The Company isolates the portion of the unrealized gain (loss) attributable to changes in the instrument specific credit risk and recognizes such amount in other comprehensive earnings (loss). The change in the fair value of the exchangeable senior debentures and cash convertible notes attributable to changes in the instrument specific credit risk was a loss of $8 million and a gain of $27 million for the three months ended June 30, 2021 and 2020, respectively, and a loss of $68 million and a gain of $302 million for the six months ended June 30, 2021 and 2020, respectively, and the cumulative change since issuance was a gain of $107 million as of June 30, 2021.
(b) Contemporaneously with the issuance of the Convertible Notes, Liberty entered into privately negotiated cash convertible note hedges, which are expected to offset potential cash payments Liberty would be required to make in excess of the principal amount of the Convertible Notes, upon conversion of the notes. The bond hedges are marked to market based on the trading price of underlying Series A Liberty SiriusXM, Liberty Braves and Liberty Formula One securities and other observable market data as the significant inputs (Level 2). See note 8 for additional discussion of the bond hedges.