Motorola 2014 Annual Report Download - page 79

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77
Company's assumptions about current market conditions. The prescribed fair value hierarchy and related valuation
methodologies as they pertain to the Company are as follows:
Level 1 - Quoted market prices in active markets are available for investments in common and preferred stock and
common stock equivalents.
Level 2 - The securities classified as Level 2 are comprised primarily of corporate, government, agency, and government
sponsored enterprise fixed income securities. Our pension plan assets also include commingled equities classified as Level 2.
These securities are priced using pricing services, bid/offer, and last trade. Prices may also be obtained from brokers,
counterparties, fund administrators, online securities data services, or investment managers. Fixed income securities and
commingled equities, including short-term instruments, may be priced using pricing models comprised of observable inputs
which include, but are not limited to, market quotations, yields, maturities, call features, and the security's terms and conditions.
In determining the fair value of the Company's foreign currency derivatives, the Company uses forward contract and option
valuation models employing market observable inputs, such as spot currency rates, time value and option volatilities. Since the
Company primarily uses observable inputs in its valuation of its derivative assets and liabilities, they are classified as Level 2
assets.
Level 3 - The securities classified as Level 3 primarily consist of corporate bonds held in one of our non-U.S. pension
plans. These corporate bonds are valued using pricing models which contain unobservable inputs and have limited liquidity.
Determining the fair value of these securities requires the use of unobservable inputs, such as indicative quotes from dealers,
extrapolated data, proprietary models and qualitative input from investment advisors.
Investments and Derivatives
The fair values of the Company’s financial assets and liabilities by level in the fair value hierarchy as of December 31, 2014
and 2013 were as follows:
December 31, 2014 Level 1 Level 2 Total
Assets:
Foreign exchange derivative contracts $ — $ 1 $ 1
Available-for-sale securities:
Government, agency, and government-sponsored enterprise obligations — 14 14
Corporate bonds — 16 16
Mutual funds — 2 2
Common stock and equivalents 71 — 71
Liabilities:
Foreign exchange derivative contracts $ — $ 5 $ 5
Interest agreement derivative contracts — 2 2
December 31, 2013 Level 1 Level 2 Total
Assets:
Foreign exchange derivative contracts — 4 4
Available-for-sale securities:
Government, agency, and government-sponsored enterprise obligations — 15 15
Corporate bonds — 7 7
Mutual funds — 11 11
Common stock and equivalents 2 — 2
Liabilities:
Foreign exchange derivative contracts $ — $ 2 $ 2
Interest agreement derivative contracts — 3 3
There were no significant transfers between Level 1 and Level 2 during 2014 or 2013.