| Assets and Liabilities Measured at Fair Value |
(6) 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. The Company does not have any recurring assets or liabilities measured at fair value that would be considered Level 3.
Liberty’s assets and liabilities measured at fair value are as follows:
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December 31, 2023 |
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December 31, 2022 |
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Quoted prices |
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Significant other |
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Quoted prices |
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Significant other |
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in active markets |
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observable |
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in active markets |
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observable |
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for identical assets |
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inputs |
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for identical assets |
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inputs |
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Description |
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Total |
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(Level 1) |
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(Level 2) |
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Total |
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(Level 1) |
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(Level 2) |
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amounts in millions |
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Cash equivalents |
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$ |
1,142 |
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1,142 |
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— |
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2,026 |
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2,026 |
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— |
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Debt and equity securities |
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$ |
113 |
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113 |
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— |
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80 |
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80 |
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— |
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Financial instrument assets |
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$ |
141 |
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117 |
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24 |
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393 |
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86 |
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307 |
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Debt |
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$ |
3,059 |
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— |
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3,059 |
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3,331 |
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— |
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3,331 |
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Financial instrument liabilities |
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$ |
13 |
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— |
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13 |
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— |
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— |
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— |
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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. The fair value of debt related instruments are based on quoted market prices but not considered to be traded on “active markets,” as defined by GAAP. Accordingly, those debt and equity securities, financial instruments and debt or debt related instruments are reported in the foregoing table as Level 2 fair value. Debt and equity securities included in the table above are included in the Other assets line item in the consolidated balance sheets. As of December 31, 2023, financial instrument assets included in the table above are included in the Other assets line item in the consolidated balance sheets. As of December 31, 2022, $219 million and $174 million of financial instrument assets included in the table above are included in the Other current assets and Other assets line items, respectively, in the consolidated balance sheet. As of December 31, 2023, $8 million and $5 million of financial instrument liabilities included in the table above are included in the Other current liabilities and Other liabilities line items, respectively, in the consolidated balance sheet.
Realized and Unrealized Gains (Losses) on Financial Instruments, net
Realized and unrealized gains (losses) on financial instruments, net are comprised of changes in the fair value of the following (amounts in millions):
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Years ended December 31, |
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2023 |
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2022 |
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2021 |
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Debt and equity securities |
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$ |
12 |
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(7) |
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204 |
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Debt measured at fair value (a) |
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(259) |
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717 |
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(886) |
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Change in fair value of bond hedges (b) |
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(114) |
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(236) |
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193 |
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Other |
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38 |
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125 |
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38 |
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$ |
(323) |
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599 |
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(451) |
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| (a) |
The Company elected to account for its exchangeable senior debentures and convertible notes using the fair value option. Changes in the fair value of the exchangeable senior debentures and convertible notes recognized in the 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 gain of $18 million, loss of $4 million and loss of $107 million for the years ended December 31, 2023, 2022 and 2021, respectively. During the year ended December 31, 2023, the Company recognized $18 million of previously unrecognized gains related to the retirement of the 1% Convertible Notes (defined below), the 2.125% Exchangeable Senior Debentures due 2048, the Convertible Notes and the 0.5% Exchangeable Senior Debentures due 2050, which was recognized through other, net in the consolidated statements of operations. The cumulative change since issuance was a gain of $64 million as of December 31, 2023, net of the recognition of previously unrecognized gains and losses.
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| (b) |
Contemporaneously with the issuance of the Convertible Notes, Liberty entered into privately negotiated cash convertible note hedges, which were 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 were marked to market based on the trading price of underlying securities and other observable market data as the significant inputs (Level 2). See note 9 for additional discussion of the Convertible Notes and the bond hedges.
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