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Annual report pursuant to Section 13 and 15(d)

Assets and Liabilities Measured at Fair Value

v3.22.4
Assets and Liabilities Measured at Fair Value
12 Months Ended
Dec. 31, 2022
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. Level1 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. Level2 inputs are inputs, other than quoted market prices included within Level1, that are observable for the asset or liability, either directly or indirectly. Level3 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 Level3.

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

ٱ𳦱𳾲31,2022

ٱ𳦱𳾲31,2021

Quotedprices

Significantother

Quotedprices

Significantother

inactivemarkets

observable

inactivemarkets

observable

foridenticalassets

inputs

foridenticalassets

inputs

Description

Total

(Level1)

(Level2)

Total

(Level1)

(Level2)

amountsinmillions

Cash equivalents

$

2,026

2,026

2,436

2,436

Short-term marketable securities

$

70

70

Investment in trust account

$

575

575

Debt and equity securities

$

80

80

217

217

Financial instrument assets

$

393

86

307

640

99

541

Debt

$

3,331

3,331

5,222

5,222

Financial instrument liabilities

$

59

20

39

The majority of Liberty’s Level2 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 Level2 fair value. Short-term marketable securities in the table above are included in the Other current assets line item in the consolidated balance sheets. Investments in the trust account and debt and equity securities and 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, 2021, $527 million and $113 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.

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):

YearsendedDecember31,

2022

2021

2020

Debt and equity securities

$

(7)

204

(74)

Debt measured at fair value (a)

717

(886)

(114)

Change in fair value of bond hedges (b)

(236)

193

(127)

Other

125

38

(87)

$

599

(451)

(402)

(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 loss of $4 million, loss of $107 million and gain of $148 million for the years ended December 31, 2022, 2021 and 2020, respectively, and the cumulative change was a gain of $64 million as of December 31, 2022.
(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 SeriesA Liberty SiriusXM, Liberty Braves and Liberty Formula One securities and other observable market data as the significant inputs (Level2). See note9 for additional discussion of the Convertible Notes and the bond hedges.