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NOTE 7. MARKETABLE SECURITIES A summary of marketable securities, all of which are classified as current, was as follows:
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July 1, 2018 |
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December 31, 2017 |
In millions |
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Cost |
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Gross unrealized
gains/(losses) (1)
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Estimated
fair value |
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Cost |
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Gross unrealized
gains/(losses) (1)
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Estimated
fair value |
Equity securities |
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Debt mutual funds |
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$ |
163 |
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$ |
— |
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$ |
163 |
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$ |
170 |
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$ |
— |
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$ |
170 |
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Certificates of deposit |
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34 |
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— |
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34 |
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12 |
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— |
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12 |
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Equity mutual funds |
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14 |
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2 |
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16 |
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12 |
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3 |
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15 |
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Available-for-sale debt securities |
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1 |
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— |
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1 |
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1 |
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— |
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1 |
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Total marketable securities |
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$ |
212 |
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$ |
2 |
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$ |
214 |
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$ |
195 |
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$ |
3 |
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$ |
198 |
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(1) Unrealized gains and losses for available-for-sale debt securities are recorded in other comprehensive income (See NOTE 13, "ACCUMULATED OTHER COMPREHENSIVE LOSS," to our Condensed Consolidated Financial Statements for more information). Effective January 1, 2018, with the adoption of the FASB standard, all unrealized gains and losses for equity securities are recorded in other income, net in the Condensed Consolidated Statements of Income. See NOTE 15, "RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS," for detailed information about the adoption of this standard.
All marketable securities are classified as Level 2 securities. The fair value of Level 2 securities is estimated using actively quoted prices for similar instruments from brokers and observable inputs where available, including market transactions and third-party pricing services, or net asset values provided to investors. We do not currently have any Level 3 securities and there were no transfers between Level 2 or 3 during the first half of 2018 and for the year ended December 31, 2017.
A description of the valuation techniques and inputs used for our Level 2 fair value measures is as follows:
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Debt mutual funds— The fair value measure for the vast majority of these investments is the daily net asset value published on a regulated governmental website. Daily quoted prices are available from the issuing brokerage and are used on a test basis to corroborate this Level 2 input.
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Certificates of deposit— These investments provide us with a contractual rate of return and generally range in maturity from three months to five years. The counterparties to these investments are reputable financial institutions with investment grade credit ratings. Since these instruments are not tradable and must be settled directly by us with the respective financial institution, our fair value measure is the financial institution's month-end statement.
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Equity mutual funds— The fair value measure for these investments is the net asset value published by the issuing brokerage. Daily quoted prices are available from reputable third party pricing services and are used on a test basis to corroborate this Level 2 input measure.
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Available-for-sale debt securities— The fair value measure for these securities is broker quotes received from reputable firms. These securities are infrequently traded on a national stock exchange and these values are used on a test basis to corroborate our Level 2 input measure.
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The proceeds from sales and maturities of marketable securities were as follows:
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Three months ended |
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Six months ended |
In millions |
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July 1,
2018 |
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July 2,
2017 |
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July 1,
2018 |
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July 2,
2017 |
Proceeds from sales of marketable securities |
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$ |
12 |
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$ |
12 |
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$ |
81 |
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$ |
44 |
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Proceeds from maturities of marketable securities |
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22 |
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3 |
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35 |
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118 |
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Investments in marketable securities - liquidations |
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$ |
34 |
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$ |
15 |
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$ |
116 |
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$ |
162 |
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