Annual report pursuant to Section 13 and 15(d)

FAIR VALUE MEASUREMENTS

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FAIR VALUE MEASUREMENTS
 12 Months Ended
Dec. 31, 2020
Fair Value Measurements Disclosure [Abstract]  
FAIR VALUE MEASUREMENTS FAIR VALUE MEASUREMENTS
U.S. GAAP defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Additionally, the inputs used to measure fair value are prioritized based on a three-level hierarchy. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
•Level 1 — Quoted prices in active markets for identical assets or liabilities.
•Level 2 — Observable inputs other than quoted prices included in Level 1. We value assets and liabilities included in this level using dealer and broker quotations, certain pricing models, bid prices, quoted prices for similar assets and liabilities in active markets, or other inputs that are observable or can be corroborated by observable market data.
•Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
Recurring Fair Value Measurements
In accordance with U.S. GAAP, certain assets and liabilities are required to be recorded at fair value on a recurring basis. For our Company, the only assets and liabilities that are adjusted to fair value on a recurring basis are investments in equity securities with readily determinable fair values, debt securities classified as trading or available-for-sale and derivative financial instruments. Additionally, the Company adjusts the carrying value of certain long-term debt as a result of the Company's fair value hedging strategy.
Investments in Debt and Equity Securities
The fair values of our investments in debt and equity securities using quoted market prices from daily exchange traded markets are based on the closing price as of the balance sheet date and are classified as Level 1. The fair values of our investments in debt and equity securities classified as Level 2 are priced using quoted market prices for similar instruments or nonbinding market prices that are corroborated by observable market data. Inputs into these valuation techniques include actual trade data, benchmark yields, broker/dealer quotes and other similar data. These inputs are obtained from quoted market prices, independent pricing vendors or other sources.
Derivative Financial Instruments
The fair values of our futures contracts are primarily determined using quoted contract prices on futures exchange markets. The fair values of these instruments are based on the closing contract price as of the balance sheet date and are classified as Level 1.
The fair values of our derivative instruments other than futures are determined using standard valuation models. The significant inputs used in these models are readily available in public markets, or can be derived from observable market transactions, and therefore have been classified as Level 2. Inputs used in these standard valuation models for derivative instruments other than futures include the applicable exchange rates, forward rates, interest rates, discount rates and commodity prices. The standard valuation model for options also uses implied volatility as an additional input. The discount rates are based on the historical U.S. Deposit or U.S. Treasury rates, and the implied volatility specific to options is based on quoted rates from financial institutions.
Included in the fair values of derivative instruments is an adjustment for nonperformance risk. The adjustment is based on current credit default swap ("CDS") rates applied to each contract, by counterparty. We use our counterparty's CDS rate when we are in an asset position and our own CDS rate when we are in a liability position. The adjustment for nonperformance risk did not have a significant impact on the estimated fair values of our derivative instruments.
The following tables summarize those assets and liabilities measured at fair value on a recurring basis (in millions):
December 31, 2020
Level 1 Level 2 Level 3
Other3
Netting
Adjustment
4
 Fair Value
Measurements
Assets:          
Equity securities with readily determinable values1
$ 2,049  $ 210  $ 12  $ 103  $ —  $ 2,374 
Debt securities1
4  2,267  32  —  —  2,303 
     Derivatives2
63  835  —  —  (669)
6
 229 
8
Total assets $ 2,116  $ 3,312  $ 44  $ 103  $ (669) $ 4,906 
Liabilities:          
    Contingent consideration liability $ —  $ —  $ 321 
5
 $ —  $ —  $ 321 
    Derivatives2
—  91  —  —  (81)
7
 10 
8
Total liabilities $ —  $ 91  $ 321  $ —  $ (81) $ 331 
1Refer to Note 4 for additional information related to the composition of our equity securities with readily determinable values and debt securities.
2Refer to Note 5 for additional information related to the composition of our derivative portfolio.
3 Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy but are included to reconcile to the amounts presented in Note 4.
4 Amounts represent the impact of legally enforceable master netting agreements that allow the Company to settle net positive and negative positions and also cash collateral held or placed with the same counterparties. There are no amounts subject to legally enforceable master netting agreements that management has chosen not to offset or that do not meet the offsetting requirements. Refer to Note 5.
5 Refer to Note 2 for additional information related to the contingent consideration liability resulting from the fairlife acquisition.
6 The Company is obligated to return $546 million in cash collateral it has netted against its derivative position.
7 The Company does not have the right to reclaim any cash collateral it has netted against its derivative position.
8 The Company's derivative financial instruments are recorded at fair value in our consolidated balance sheet as follows: $229 million in the line item other assets, $9 million in the line item accounts payable and accrued expenses and $1 million in the line item other liabilities. Refer to Note 5 for additional information related to the composition of our derivative portfolio.
December 31, 2019
Level 1 Level 2 Level 3
Other3
Netting
Adjustment
4
 Fair Value
Measurements
Assets:          
Equity securities with readily determinable values1
$ 1,877  $ 219  $ 14  $ 109  $ —  $ 2,219 
Debt securities1
—  3,291  37  —  —  3,328 
     Derivatives2
9  579  —  —  (392)
5
 196 
7
Total assets $ 1,886  $ 4,089  $ 51  $ 109  $ (392) $ 5,743 
Liabilities:          
    Derivatives2
$ —  $ 162  $ —  $ —  $ (130)
6
 $ 32 
7
Total liabilities $ —  $ 162  $ —  $ —  $ (130) $ 32 
1 Refer to Note 4 for additional information related to the composition of our equity securities with readily determinable values and debt securities.
2 Refer to Note 5 for additional information related to the composition of our derivative portfolio.
3 Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy but are included to reconcile to the amounts presented in Note 4.
4 Amounts represent the impact of legally enforceable master netting agreements that allow the Company to settle net positive and negative positions and also cash collateral held or placed with the same counterparties. There are no amounts subject to legally enforceable master netting agreements that management has chosen not to offset or that do not meet the offsetting requirements. Refer to Note 5.
5 The Company is obligated to return $261 million in cash collateral it has netted against its derivative position.
6 The Company does not have the right to reclaim any cash collateral it has netted against its derivative position.
7 The Company's derivative financial instruments are recorded at fair value in our consolidated balance sheet as follows: $196 million in the line item other assets and $32 million in the line item other liabilities. Refer to Note 5 for additional information related to the composition of our derivative portfolio.
Gross realized and unrealized gains and losses on Level 3 assets and liabilities were not significant for the years ended December 31, 2020 and 2019.
The Company recognizes transfers between levels within the hierarchy as of the beginning of the reporting period. Gross transfers between levels within the hierarchy were not significant for the years ended December 31, 2020 and 2019.
Nonrecurring Fair Value Measurements
In addition to assets and liabilities that are recorded at fair value on a recurring basis, the Company records assets and liabilities at fair value on a nonrecurring basis as required by U.S. GAAP. Generally, assets are recorded at fair value on a nonrecurring basis as a result of impairment charges or as a result of observable changes in equity securities using the measurement alternative.
The gains and losses on assets measured at fair value on a nonrecurring basis are summarized in the following table (in millions):
Gains (Losses)    
Year Ended December 31, 2020   2019  
Other-than-temporary impairment charges $ (290)
1
 $ (767)
1
Impairment of intangible assets (215)
2
 (42)
4
Impairment of equity investment without a readily determinable fair value (26)
3
 — 
CCBA asset adjustments —  (160)
5
Total $ (531)   $ (969)
1During the years ended December 31, 2020 and 2019, the Company recorded other-than-temporary impairment charges of $252 million and $406 million, respectively, related to CCBJHI, an equity method investee. Based on the length of time and the extent to which the market value of our investment in CCBJHI was less than our carrying value and the financial condition and near-term prospects of the issuer, management determined that the decline in fair value was other than temporary in nature. These impairment charges were determined using the quoted market prices (a Level 1 measurement) of CCBJHI. The Company also recorded other-than-temporary impairment charges of $38 million and $49 million, respectively, related to certain equity method investees in Latin America. These impairment charges were derived using Level 3 inputs and were primarily driven by revised projections of future operating results. During the year ended December 31, 2019, the Company recognized other-than-temporary impairment charges of $255 million related to certain equity method investees in the Middle East. These impairment charges were derived using Level 3 inputs and were primarily driven by revised projections of future operating results largely related to instability in the region and changes in local excise taxes. The Company also recognized an other-than-temporary impairment charge of $57 million related to one of our equity method investees in North America. This impairment charge was derived using Level 3 inputs and was primarily driven by revised projections of future operating results.
2The Company recorded impairment charges of $160 million related to its Odwalla trademark in North America, as the Company decided in June 2020 to discontinue its Odwalla juice business. The Company also recorded an impairment charge of $55 million related to a trademark in North America, which was primarily driven by the impact of the COVID-19 pandemic, revised projections of future operating results and a change in brand focus in the Company's portfolio. The fair value of this trademark was derived using discounted cash flow analyses based on Level 3 inputs.
3The Company recorded an impairment charge of $26 million related to an investment in an equity security without a readily determinable fair value. This impairment charge was derived using Level 3 inputs and was primarily driven by revised projections of future operating results.
4The Company recorded an impairment charge of $42 million related to a trademark in Asia Pacific, which was primarily driven by revised projections of future operating results for the trademark. The fair value of this trademark was derived using discounted cash flow analyses based on Level 3 inputs.
5 As a result of CCBA no longer being classified as held for sale, the Company was required to measure CCBA's property, plant and equipment and definite-lived intangible assets at the lower of their current fair values or their carrying amounts before they were classified as held for sale, adjusted for depreciation and amortization expense that would have been recognized had the business been classified as held and used during the period that CCBA was classified as held for sale. As a result, we reduced the carrying value of CCBA's property, plant and equipment and definite-lived intangible assets by $34 million and $126 million, respectively, based on Level 3 inputs. Refer to Note 2.
Fair Value Measurements for Pension and Other Postretirement Benefit Plan Assets
The fair value hierarchy discussed above is not only applicable to assets and liabilities that are included in our consolidated balance sheets but is also applied to certain other assets that indirectly impact our consolidated financial statements. For example, our Company sponsors and/or contributes to a number of pension and other postretirement benefit plans. Assets contributed by the Company become the property of the individual plans. Even though the Company no longer has control over these assets, we are indirectly impacted by subsequent fair value adjustments to these assets. The actual return on these assets impacts the Company's future net periodic benefit cost as well as amounts recognized in our consolidated balance sheets. Refer to Note 13. The Company uses the fair value hierarchy to measure the fair value of assets held by our various pension and other postretirement benefit plans.
Pension Plan Assets
The following table summarizes the levels within the fair value hierarchy for our pension plan assets (in millions):
December 31, 2020 December 31, 2019
Level 1 Level 2 Level 3 Other
1
 Total Level 1 Level 2 Level 3 Other
1
 Total
Cash and cash equivalents $ 558  $ 120  $ —  $ —  $ 678  $ 597  $ 144  $ —  $ —  $ 741 
Equity securities:    
U.S.-based companies 2,123  12  4  —  2,139  1,876  7  21  —  1,904 
International-based companies 1,694  32  —  —  1,726  1,354  33  —  —  1,387 
Fixed-income securities:
Government bonds —  637  —  —  637  —  536  —  —  536 
Corporate bonds and debt
securities		 —  1,011  31  —  1,042  —  924  40  —  964 
Mutual, pooled and commingled
funds		 44  268  —  502 
4
 814  40  258  —  600 
4
 898 
Hedge funds/limited partnerships —  —  —  622 
5
 622  —  —  —  689 
5
 689 
Real estate —  —  —  332 
6
 332  —  —  —  342 
6
 342 
Derivative financial instruments —  (15)
2
 —  —  (15) —  —  —  —  — 
Other —  —  302 
3
 362 
7
 664  —  —  273 
3
 346 
7
 619 
Total $ 4,419  $ 2,065  $ 337  $ 1,818  $ 8,639  $ 3,867  $ 1,902  $ 334  $ 1,977  $ 8,080 
1Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy but are included to reconcile to the amounts presented in Note 13.
2This class of assets includes investments in credit contracts.
3Includes purchased annuity insurance contracts.
4This class of assets includes actively managed emerging markets equity funds and a collective trust fund for qualified plans, invested primarily in equity securities of companies in developing and emerging markets. There are no liquidity restrictions on these investments.
5This class of assets includes hedge funds that can be subject to redemption restrictions, ranging from monthly to semiannually, with a redemption notice period of up to one year and/or initial lock-up periods of up to three years, and private equity funds that are primarily closed-end funds in which the Company's investments are generally not eligible for redemption. Distributions from these private equity funds will be received as the underlying assets are liquidated or distributed.
6This class of assets includes funds invested in real estate, including a privately held real estate investment trust, a real estate commingled pension trust fund, infrastructure limited partnerships and commingled investment funds. These funds seek current income and capital appreciation through the investments and can be subject to redemption restrictions, ranging from quarterly to semiannually, with a redemption notice period of up to 90 days.
7This class of assets includes segregated portfolios of private investment funds that are invested in a portfolio of insurance-linked securities. These assets can be subject to a semiannual redemption, with a redemption notice period of 90 days, subject to certain gate restrictions.
The following table provides a reconciliation of the beginning and ending balance of Level 3 assets for our U.S. and non-U.S. pension plans (in millions):
Equity
Securities		 Fixed-Income Securities Other Total
2019        
Balance at beginning of year $ 17  $ 16  $ 270  $ 303 
Actual return on plan assets 1  —  10  11 
Purchases, sales, and settlements — net 1  21  1  23 
Transfers into Level 3 — net 2  3  —  5 
Net foreign currency translation adjustments —  —  (8) (8)
Balance at end of year $ 21  $ 40  $ 273 
1
 $ 334 
2020      
Balance at beginning of year $ 21  $ 40  $ 273 
1
 $ 334 
Actual return on plan assets —  1  6  7 
Purchases, sales, and settlements — net (18) (17) 4  (31)
Transfers into Level 3 — net 1  7  —  8 
Net foreign currency translation adjustments —  —  19  19 
Balance at end of year $ 4  $ 31  $ 302 
1
 $ 337 
1Includes purchased annuity insurance contracts.
Other Postretirement Benefit Plan Assets
The following table summarizes the levels within the fair value hierarchy for our other postretirement benefit plan assets (in millions):
December 31, 2020 December 31, 2019
Level 1 Level 2
Other 1
Total Level 1 Level 2
Other 1
Total
Cash and cash equivalents $ 29  $ 1  $ —  $ 30  $ 56  $ 1  $ —  $ 57 
Equity securities:    
U.S.-based companies 169  1  —  170  124  —  —  124 
International-based companies 12  —  —  12  9  —  —  9 
Fixed-income securities:  
Government bonds —  3  —  3  —  3  —  3 
Corporate bonds and debt securities —  80  —  80  —  47  —  47 
Mutual, pooled and commingled funds —  84  2  86  —  2  82  84 
Hedge funds/limited partnerships —  —  7  7  —  —  7  7 
Real estate —  —  4  4  —  —  4  4 
Other —  —  4  4  —  —  4  4 
Total $ 210  $ 169  $ 17  $ 396  $ 189  $ 53  $ 97  $ 339 
1Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy but are included to reconcile to the amounts presented in Note 13.
Other Fair Value Disclosures
The carrying amounts of cash and cash equivalents; short-term investments; trade accounts receivable; accounts payable and accrued expenses; and loans and notes payable approximate their fair values because of the relatively short-term maturities of these financial instruments. As of December 31, 2020, the carrying amount and fair value of our long-term debt, including the current portion, were $40,610 million and $43,218 million, respectively. As of December 31, 2019, the carrying amount and fair value of our long-term debt, including the current portion, were $31,769 million and $32,725 million, respectively.