ASC 820 (formerly FAS 157, Fair Value Measurements) defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. ASC 820 details the disclosures that are required for items measured at fair value.
We have financial instruments such as certain Treasury securities, debt and long-term receivables (Revenue Forgone) that we must measure for disclosure purposes on a recurring basis under ASC 820. We also apply the provisions of ASC 820 to various non-recurring measurements of our financial and non-financial assets and liabilities such as the impairment of fixed assets. We measure our assets and liabilities using inputs from the following three levels of the fair value hierarchy:
Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from, or corroborated by, observable market data by correlation or other means (market corroborated inputs).
Non-financial Items Measured at Fair Value on a Nonrecurring Basis — Non-financial assets such as property, plant and equipment are measured at fair value when there is an indicator of impairment and recorded at fair value only when impairment is recognized. We performed impairment analyses in each quarter of 2009. In Quarter IV 2009, we identified and recorded an impairment of $71 million of property, plant and equipment.
