Quarterly report pursuant to Section 13 or 15(d)

Financial Instruments and Fair Value Measurements

v3.4.0.3
Financial Instruments and Fair Value Measurements
 3 Months Ended
Mar. 31, 2016
Fair Value Disclosures [Abstract]  
Fair value disclosures
Financial Instruments and Fair Value Measurements
For assets and liabilities required to be reported or disclosed at fair value, U.S. 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, other than quoted market prices included within Level 1, are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability.
The Company's assets and liabilities measured or disclosed at fair value were as follows:

Fair value measurements at March 31, 2016 using
 
(in millions)
Total

Quoted prices
in active
markets for
identical
assets
(Level 1)

Significant
other
observable
inputs
(Level 2)

Significant
unobservable
inputs
(Level 3)

Current assets:




Cash equivalents
$
217

217

—

—

Short-term liabilities:




Net investment hedge
16

—

16

—

Long-term liabilities:




Debt (note 6)
5,390

—

5,390

—



Fair value measurements at December 31, 2015 using
 
(in millions)
Total

Quoted prices
in active
markets for
identical
assets
(Level 1)

Significant
other
observable
inputs
(Level 2)

Significant
unobservable
inputs
(Level 3)

Current assets:




Cash equivalents
$
218

218

—

—

Net investment hedge
3

—

3

—

Long-term liabilities:








Debt (note 6)
5,189

—

5,189

—


The majority of the Company's Level 2 financial liabilities are debt instruments with quoted market prices that are not considered to be traded on "active markets," as defined in U.S. GAAP. Accordingly, the financial instruments are reported in the foregoing tables as Level 2 fair value instruments.
QVC entered into a hedge of a net investment in a foreign subsidiary during the fourth quarter of 2015 and the underlying derivative matured on March 15, 2016. The Company entered into a similar hedge of the same net investment in a foreign subsidiary effective March 15, 2016. The purpose of this investment is similar to the previous hedge which is to protect QVC's investment in the foreign subsidiary against the variability of the U.S. dollar and Euro exchange rate. The current hedge contract entails both the exchange of a U.S. Libor and Euribor interest payments monthly over a six month term and the exchange of approximately $555 million, and the U.S. Dollar equivalent of Euro 500 million, at the maturity date. The gain or loss is and will be recognized in other comprehensive income and is classified as Level 2 in the table above. No amount of the gain or loss has been reclassified into earnings as of the balance sheet date nor is expected to be reclassified in the next twelve months.