6. Fair Value Disclosures

Fair Value Hierarchy

Assets and liabilities measured at fair value on a recurring basis and other assets not held at fair value

December 31, 2015 (in millions)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Investments Measured at NAV⁽¹⁾		Other Assets Not Held at Fair Value⁽²⁾		December 31, 2015
Assets:
Investments
Available-for-sale	$	19	$	2	$	23	$	—	$	—	$	44
Held-to-maturity debt securities		—		—		—		—		108		108
Trading:
Deferred compensation plan mutual funds		65		—		—		—		—		65
Equity/Multi-asset mutual funds		278		—		—		—		—		278
Debt securities / fixed income mutual funds		2		438		2		—		—		442
Total trading		345		438		2		—		—		785
Other investments:
Equity method:
Equity and fixed income mutual funds		73		—		—		30		—		103
Other		—		—		—		400		10		410
Total equity method		73		—		—		430		10		513
Deferred compensation plan equity method investments		—		—		—		14		—		14
Cost method investments		—		—		—		—		95		95
Carried interest		—		—		—		—		19		19
Total investments		437		440		25		444		232		1,578
Separate account assets		109,761		40,152		—		—		938		150,851
Separate account collateral held under securities lending agreements:
Equity securities		26,062		—		—		—		—		26,062
Debt securities		—		5,274		—		—		—		5,274
Total separate account collateral held under securities lending agreements		26,062		5,274		—		—		—		31,336
Investments of consolidated VIEs:
Private / public equity⁽³⁾		6		4		196		145		—		351
Equity securities		298		—		—		—		—		298
Debt securities		—		242		—		—		—		242
Other		—		—		—		58		—		58
Carried interest		—		—		—		—		81		81
Total investments of consolidated VIEs		304		246		196		203		81		1,030
Total	$	136,564	$	46,112	$	221	$	647	$	1,251	$	184,795
Liabilities:
Separate account collateral liabilities under securities lending agreements	$	26,062	$	5,274	$	—	$	—	$	—	$	31,336
Other liabilities⁽⁴⁾		—		6		48		—		—		54
Total	$	26,062	$	5,280	$	48	$	—	$	—	$	31,390

(1)	Amounts are comprised of certain investments measured at fair value using NAV (or its equivalent) as a practical expedient. These investments have not been classified in the fair value hierarchy (see Note 2, Significant Accounting Policies, for more information on the adoption of ASU 2015-07).

(2)

Amounts are comprised of investments held at cost or amortized cost, carried interest and certain equity method investments, which include sponsored investment funds and other assets, which are not accounted for under a fair value measure. In accordance with GAAP, certain equity method investees do not account for both their financial assets and liabilities under fair value measures; therefore, the Company’s investment in such equity method investees may not represent fair value.

(3)	Level 3 amounts include direct investments in private equity companies held by private equity funds.

(4)	Amounts include a derivative (see Note 7, Derivatives and Hedging, for more information) and recorded contingent liabilities related to certain acquisitions (see Note 13, Commitments and Contingencies, for more information).

Assets and liabilities measured at fair value on a recurring basis and other assets not held at fair value

December 31, 2014 (in millions)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Investments Measured at NAV⁽¹⁾		Other Assets Not Held at Fair Value⁽²⁾		December 31, 2014
Assets:
Investments
Available-for-sale	$	198	$	3	$	—	$	—	$	—	$	201
Held-to-maturity debt securities		—		—		—		—		79		79
Trading:
Deferred compensation plan mutual funds		64		—		—		—		—		64
Equity/Multi-asset mutual funds		239		—		—		—		—		239
Debt securities / fixed income mutual funds		11		222		—		—		—		233
Total trading		314		222		—		—		—		536
Other investments:
Consolidated sponsored investment funds private / public equity⁽³⁾		11		11		80		168		—		270
Equity method:
Fixed income mutual funds		29		—		—		—		—		29
Other		98		—		—		493		13		604
Total equity method		127		—		—		493		13		633
Deferred compensation plan equity method investments		—		—		—		21		—		21
Cost method investments		—		—		—		—		96		96
Carried interest		—		—		—		—		85		85
Total investments		650		236		80		682		273		1,921
Separate account assets		113,566		46,866		—		—		855		161,287
Separate account collateral held under securities lending agreements:
Equity securities		30,387		—		—		—		—		30,387
Debt securities		—		3,267		—		—		—		3,267
Total separate account collateral held under securities lending agreements		30,387		3,267		—		—		—		33,654
Assets of consolidated VIEs:
Bank loans and other assets		—		2,958		302		—		32		3,292
Bonds		—		29		18		—		—		47
Private / public equity		—		3		—		10		—		13
Total assets of consolidated VIEs		—		2,990		320		10		32		3,352
Total	$	144,603	$	53,359	$	400	$	692	$	1,160	$	200,214
Liabilities:
Borrowings of consolidated VIEs	$	—	$	—	$	3,389	$	—	$	—	$	3,389
Separate account collateral liabilities under securities lending agreements		30,387		3,267		—		—		—		33,654
Other liabilities⁽⁴⁾		—		5		39		—		—		44
Total	$	30,387	$	3,272	$	3,428	$	—	$	—	$	37,087

(1)	Amounts are comprised of certain investments measured at fair value using NAV (or its equivalent) as a practical expedient. These investments have not been classified in the fair value hierarchy (see Note 2, Significant Accounting Policies, for more information on the adoption of ASU 2015-07).

(2)

(3)	Level 3 amounts include direct investments in private equity companies held by private equity funds.

(4)	Amounts include a derivative (see Note 7, Derivatives and Hedging, for more information) and contingent liabilities related to certain acquisitions (see Note 13, Commitments and Contingencies, for more information).

Level 3 Assets. Level 3 investments of consolidated VIEs of $196 million at December 31, 2015 and Level 3 investments of $80 million at December 31, 2014 related to direct investments in private equity companies held by private equity funds. Direct investments in private equity companies may be valued using the market approach or the income approach, or a combination thereof, and were valued based on an assessment of each underlying investment, incorporating evaluation of additional significant third-party financing, changes in valuations of comparable peer companies, the business environment of the companies, market indices, assumptions relating to appropriate risk adjustments for nonperformance and legal restrictions on disposition, among other factors. The fair value derived from the methods used is evaluated and weighted, as appropriate, considering the reasonableness of the range of values indicated. Under the market approach, fair value may be determined by reference to multiples of market-comparable companies or transactions, including earnings before interest, taxes, depreciation and amortization (“EBITDA”) multiples. Under the income approach, fair value may be determined by discounting the expected cash flows to a single present value amount using current expectations about those future amounts. Unobservable inputs used in a discounted cash flow model may include projections of operating performance generally covering a five-year period and a terminal value of the private equity direct investment. For investments utilizing the discounted cash flow valuation technique, a significant increase (decrease) in the discount rate, risk premium or discount for lack of marketability in isolation could result in a significantly lower (higher) fair value measurement. For investments utilizing the market comparable companies valuation technique, a significant increase (decrease) in the EBITDA multiple in isolation could result in a significantly higher (lower) fair value measurement.

Level 3 assets may include bank loans, investments in CLOs, and bonds valued based on single-broker nonbinding quotes and direct private equity investments valued using the market approach or the income approach as described above.

Level 3 Liabilities. Level 3 borrowings of consolidated VIEs at December 31, 2014 include CLO borrowings valued based upon single-broker nonbinding quotes.

Level 3 other liabilities primarily include recorded contingent liabilities related to certain acquisitions, which were valued based upon discounted cash flow analyses using unobservable market data inputs.

Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for 2015⁽¹⁾

(in millions)	December 31, 2014		Realized and Unrealized Gains (Losses) in Earnings and OCI		Purchases		Sales and Maturities		Issuances and Other Settlements⁽²⁾⁽³⁾			Transfers into Level 3		Transfers out of Level 3		December 31, 2015		Total Net Unrealized Gains (Losses) Included in Earnings⁽⁴⁾
Assets:
Investments:
Available-for-sale securities⁽⁵⁾	$	—	$	—	$	23	$	—	$	—		$	—	$	—	$	23	$	—
Trading		—		—		2		—		—			—		—		2		—
Consolidated sponsored investment funds- Private equity		80		—		—		—		(80	)		—		—		—		—
Total investments		80		—		25		—		(80	)		—		—		25		—
Assets of consolidated VIEs:
Private equity		—		37		79		—		80			—		—		196		37
Bank loans		302		—		—		—		(302	)		—		—		—		—
Bonds		18		—		—		—		(18	)		—		—		—		—
Total assets of consolidated VIEs		320		37		79		—		(240	)		—		—		196		37
Total Level 3 assets	$	400	$	37	$	104	$	—	$	(320	)	$	—	$	—	$	221	$	37
Liabilities:
Borrowings of consolidated VIEs	$	3,389	$	—	$	—	$	—	$	(3,389	)	$	—	$	—	$	—	$	—
Other liabilities		39		3		—		—		12			—		—		48		—
Total liabilities	$	3,428	$	3	$	—	$	—	$	(3,377	)	$	—	$	—	$	48	$	—

(1)	Upon adoption of ASU 2015-07, investments measured at NAV are no longer required to be categorized within the fair value hierarchy. See Note 2, Significant Accounting Policies, for further information.

(2)	Amounts include the consolidation (deconsolidation) of VIEs due to the adoption of ASU 2015-02 effective January 1, 2015.

(3)	Other liabilities amount includes contingent liabilities and payments of contingent liabilities related to certain acquisitions.

(4)	Earnings attributable to the change in unrealized gains (losses) relating to assets still held at the reporting date.

(5)	Amounts include investments in CLOs.

Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for 2014⁽¹⁾

(in millions)	December 31, 2013		Realized and Unrealized Gains (Losses) in Earnings and OCI			Purchases		Sales and Maturities			Issuances and Other Settlements⁽²⁾			Transfers into Level 3⁽³⁾		Transfers out of Level 3			December 31, 2014		Total Net Unrealized Gains (Losses) Included in Earnings⁽⁴⁾
Assets:
Investments
Consolidated sponsored investment funds:
Hedge funds	$	2	$	—		$	—	$	(1	)	$	(1	)		—	$	—		$	—	$	—
Private equity		28		(8	)		23		—			—			37		—			80		(8	)
Assets of consolidated VIEs:												—
Bank loans		129		(9	)		210		(96	)		46			302		(280	)		302
Bonds		35		—			—		(17	)		—			—		—			18
Total assets of consolidated VIEs		164		(9	)		210		(113	)		46			302		(280	)		320	N/A			⁽⁵⁾
Total assets	$	194	$	(17	)	$	233	$	(114	)	$	45		$	339	$	(280	)	$	400	$	(8	)
Liabilities:
Borrowings of consolidated VIEs	$	2,369	$	77		$	—	$	—		$	1,097			—	$	—		$	3,389	N/A			⁽⁵⁾
Other liabilities		42		(1	)		—		—			(4	)		—		—			39
Total liabilities	$	2,411	$	76		$	—	$	—		$	1,093		$	—	$	—		$	3,428

N/A – not applicable

(1)	Upon adoption of ASU 2015-07, investments measured at NAV are no longer required to be categorized within the fair value hierarchy. See Note 2, Significant Accounting Policies, for further information.

(2)	Amount primarily includes net proceeds from borrowings of consolidated VIEs.

(3)	Includes investments previously held at cost.

(4)	Earnings attributable to the change in unrealized gains (losses) relating to assets still held at the reporting date.

(5)	The net gain (loss) on consolidated VIEs is solely attributable to noncontrolling interests on the consolidated statements of income.

Realized and Unrealized Gains (Losses) for Level 3 Assets and Liabilities. Realized and unrealized gains (losses) recorded for Level 3 assets and liabilities are reported in nonoperating income (expense) on the consolidated statements of income. A portion of net income (loss) for consolidated sponsored investment funds are allocated to noncontrolling interests to reflect net income (loss) not attributable to the Company.

Transfers in and/or out of Levels. Transfers in and/or out of levels are reflected when significant inputs, including market inputs or performance attributes, used for the fair value measurement become observable/unobservable, or when the carrying value of certain equity method investments no longer represents fair value as determined under valuation methodologies.

Assets of Consolidated VIEs. During 2014, there were $280 million of transfers out of Level 3 to Level 2 related to bank loans. In addition, in 2014, there were $302 million of transfers into Level 3 from Level 2 related to bank loans. These transfers in and out of levels were primarily due to availability/unavailability of observable market inputs, including inputs from pricing vendors and brokers.

Significant Issuances and Other Settlements. During 2015, other settlements primarily included the impact of deconsolidating previously consolidated CLOs effective January 1, 2015 as a result of adopting ASU 2015-02. See Note 2, Significant Accounting Policies, for further information on ASU 2015-02.

In 2014, issuances and other settlements included $1,582 million of borrowings due to the consolidation of CLOs and $485 million of repayments of borrowings of consolidated CLOs.

Disclosures of Fair Value for Financial Instruments Not Held at Fair Value. At December 31, 2015 and 2014, the fair value of the Company’s financial instruments not held at fair value are categorized in the table below.

	December 31, 2015				December 31, 2014
(in millions)	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value		Fair Value Hierarchy
Financial Assets:
Cash and cash equivalents	$	6,083	$	6,083	$	5,723	$	5,723	Level 1	^(1),(2)
Accounts receivable		2,237		2,237		2,120		2,120	Level 1	⁽³⁾
Cash and cash equivalents of consolidated VIEs		148		148		278		278	Level 1	^(1),(2)

Financial Liabilities:
Accounts payable and accrued liabilities		1,068		1,068		1,035		1,035	Level 1	⁽³⁾
Long-term borrowings		4,930		5,223		4,922		5,309	Level 2	⁽⁴⁾

(1)	Cash and cash equivalents are carried at either cost or amortized cost, which approximates fair value due to their short-term maturities.

(2)

At December 31, 2015 and 2014, approximately $132 million and $100 million, respectively, of money market funds were recorded within cash and cash equivalents on the consolidated statements of financial condition. In addition, at December 31, 2015, approximately $68 million of money market funds was recorded within cash and cash equivalents of consolidated VIEs. Money market funds are valued based on quoted market prices, or $1.00 per share, which generally is the NAV of the fund.

(3)	The carrying amounts of accounts receivable, accounts payable and accrued liabilities approximate fair value due to their short-term nature.

(4)

Long-term borrowings are recorded at amortized cost, net of debt issuance costs. The fair value of the long-term borrowings, including the current portion of long-term borrowings, is estimated using market prices at the end of December 2015 and 2014, respectively. See Note 12, Borrowings, for the fair value of each of the Company’s long-term borrowings.

Investments in Certain Entities that Calculate Net Asset Value Per Share

As a practical expedient to value certain investments that do not have a readily determinable fair value and have attributes of an investment company, the Company uses NAV as the fair value. The following tables list information regarding all investments that use a fair value measurement to account for both their financial assets and financial liabilities in their calculation of a NAV per share (or equivalent).

December 31, 2015

(in millions)	Ref			Fair Value		Total Unfunded Commitments		Redemption Frequency	Redemption Notice Period
Equity method:⁽¹⁾
Hedge funds/funds of hedge funds		(b	)	$	230	$	33	Daily/Monthly (21%) Quarterly (49%) N/R (30%)	30 – 90 days
Private equity funds		(c	)		89		67	N/R	N/R
Real estate funds		(d	)		81		28	Quarterly (28%) N/R (72%)	60 days
Other		(e	)		44		5	Daily/Monthly (68%) N/R (32%)	3-5 days
Consolidated VIEs:
Private equity funds of funds		(a	)		145		19	N/R	N/R
Hedge fund		(b	)		58		—	Quarterly	90 days
Total				$	647	$	152

December 31, 2014

(in millions)

Ref

Fair Value

Total

Unfunded

Commitments

Redemption

Frequency

Redemption

Notice Period

Consolidated VREs:

Private equity funds of funds

(a)

168

N/R

Equity method:⁽¹⁾

Hedge funds/funds of hedge funds

(b)

277

Daily/Monthly (29%)

Quarterly (48%)

N/R (23%)

1 – 90 days

Private equity funds

(c)

107

N/R

Real estate funds

(d)

109

Quarterly (19%)

N/R (81%)

60 days

Deferred compensation plan investments

(e)

N/R

Consolidated VIEs:

Private equity fund of funds

(f)

N/R

Total

692

129

N/R – not redeemable

(1)	Comprised of equity method investments, which include investment companies, which account for their financial assets and most financial liabilities under fair value measures; therefore, the Company’s investment in such equity method investees approximates fair value.

(a)

This category includes the underlying third-party private equity funds within consolidated BlackRock sponsored private equity funds of funds. The fair values of the investments in the third-party funds have been estimated using capital accounts representing the Company’s ownership interest in each fund in the portfolio as well as other performance inputs. These investments are not subject to redemption; however, for certain funds, the Company may sell or transfer its interest, which may need approval by the general partner of the underlying funds. Due to the nature of the investments in this category, the Company reduces its investment by distributions that are received through the realization of the underlying assets of the funds. It is estimated that the underlying assets of these funds will be liquidated over a weighted-average period of approximately five years and seven years at December 31, 2015 and 2014, respectively. The total remaining unfunded commitments to other third-party funds were $19 million and $22 million at December 31, 2015 and 2014, respectively. The Company had contractual obligations to the consolidated funds of $31 million at both December 31, 2015 and 2014.

(b)

This category includes hedge funds and funds of hedge funds that invest primarily in equities, fixed income securities, distressed credit, opportunistic and mortgage instruments and other third-party hedge funds. The fair values of the investments have been estimated using the NAV of the Company’s ownership interest in partners’ capital. It was estimated that the investments in the funds that are not subject to redemption will be liquidated over a weighted-average period of approximately one year and two years at December 31, 2015 and 2014, respectively.

(c)

This category includes several private equity funds that initially invest in nonmarketable securities of private companies, which ultimately may become public in the future. The fair values of these investments have been estimated using capital accounts representing the Company’s ownership interest in the funds as well as other performance inputs. The Company’s investment in each fund is not subject to redemption and is normally returned through distributions as a result of the liquidation of the underlying assets of the private equity funds. It was estimated that the investments in these funds will be liquidated over a weighted-average period of approximately four years at both December 31, 2015 and 2014.

(d)

This category includes several real estate funds that invest directly in real estate and real estate related assets. The fair values of the investments have been estimated using capital accounts representing the Company’s ownership interest in the funds. A majority of the Company’s investments are not subject to redemption or are not currently redeemable and are normally returned through distributions as a result of the liquidation of the underlying assets of the real estate funds. It is estimated that the investments in these funds not subject to redemptions will be liquidated over a weighted-average period of approximately six years and seven years at December 31, 2015 and 2014, respectively.

(e)

This category for 2015 primarily includes a multi-asset fund that is redeemable. The fair values of the investments have been estimated using capital accounts representing the Company’s ownership interest in partners’ capital. In addition, for both 2014 and 2015, this category includes investments in several real estate funds. The fair values of the investments have been estimated using capital accounts representing the Company’s ownership interest in partners’ capital. The investments are not subject to redemption; however, distributions as a result of the liquidation of the underlying assets will be used to settle certain deferred compensation liabilities over time.

(f)

This category includes the underlying third-party private equity funds within one consolidated BlackRock sponsored private equity fund of funds. The fair values of the investments in the third-party funds have been estimated using capital accounts representing the Company’s ownership interest in each fund in the portfolio as well as other performance inputs. These investments are not subject to redemption; however, for certain funds the Company may sell or transfer its interest, which may need approval by the general partner of the underlying third-party funds. Due to the nature of the investments in this category, the Company reduces its investment by distributions that are received through the realization of the underlying assets of the funds. It is estimated that the underlying assets of these funds will be liquidated over a weighted-average period of approximately one year at December 31, 2014.

Fair Value Option.

As of December 31, 2015, assets for which the fair value option was elected were not material to the consolidated financial statements.

The following table summarizes information at December 31, 2014 related to those assets and liabilities for which the fair value option was elected:

(in millions)	December 31, 2014
CLO Bank Loans:
Aggregate principal amounts outstanding	$	3,338
Fair value		3,260
Aggregate unpaid principal balance in excess of (less than) fair value	$	78
Unpaid principal balance of loans more than 90 days past due	$	6
Aggregate fair value of loans more than 90 days past due		2
Aggregate unpaid principal balance in excess of fair value for loans more than 90 days past due	$	4

CLO Borrowings:
Aggregate principal amounts outstanding	$	3,508
Fair value	$	3,389

At December 31, 2014, the principal amounts outstanding of the borrowings issued by the CLOs mature between 2016 and 2027.

During 2014 and 2013, the change in fair value of the bank loans and bonds held by the CLOs resulted in a $69 million and $153 million gain, respectively, which were offset by a $65 million and $117 million loss, respectively, from the change in fair value of the CLO borrowings. The net gains (losses) were recorded in net gain (loss) on consolidated VIEs on the consolidated statements of income.

The change in fair value of the assets and liabilities included interest income and expense, respectively.

Effective January 1, 2015, the Company no longer consolidates CLOs due to the adoption of ASU 2015-02. See Note 2, Significant Accounting Policies, for further information.