v3.25.2
Fair Value Measurements And Disclosure
 6 Months Ended
Jun. 30, 2025
Fair Value Disclosures [Abstract]  
Fair Value Measurements And Disclosure
NOTE 7. FAIR VALUE MEASUREMENTS AND DISCLOSURE
 
The Fair Value Measurement and Disclosure framework in ASC 820, “Fair Value Measurement,” provides a three-tiered fair value hierarchy based on the reliability of the inputs used to determine fair value. Level 1 refers to fair values determined based on quoted prices in active markets for identical assets. Level 2 refers to fair values estimated using significant other observable inputs and Level 3 includes fair values estimated using significant unobservable inputs.
 
The level of an asset or liability within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Our valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs.
 
The valuation methodologies described above may produce a fair value calculation that may not be indicative of future net realizable value or reflective of future fair values. We believe our valuation methods are appropriate and consistent with other market participants. The use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. There have been no changes in the methodologies used since December 31, 2024.
 
Long-Term Debt and Other Financial Instruments
The carrying amounts and estimated fair values of our long-term debt, including current maturities, and other financial instruments are summarized as follows:
 June 30, 2025December 31, 2024
 CarryingFairCarryingFair
 AmountValueAmountValue
Notes and debentures1
$130,929 $124,807 $122,116 $114,167 
Investment securities2
1,598 1,598 1,603 1,603 
1Includes credit agreement borrowings.
2Excludes investments accounted for under the equity method.

The carrying amount of debt with an original maturity of less than one year approximates fair value. The fair value measurements used for notes and debentures are considered Level 2 and are determined using various methods, including quoted prices for identical or similar securities in both active and inactive markets.
 
Following is the fair value leveling for investment securities that are measured at fair value and derivatives as of June 30, 2025 and December 31, 2024. Derivatives designated as hedging instruments are reflected as “Prepaid and other current assets,” “Other Assets,” “Accounts payable and accrued liabilities,” and “Other noncurrent liabilities” on our consolidated balance sheets.
 June 30, 2025
 Level 1Level 2Level 3Total
Equity Securities    
Domestic equities$514 $— $— $514 
International equities9 — — 9 
Fixed income equities184 — — 184 
Available-for-Sale Debt Securities— 671 — 671 
Asset Derivatives
Cross-currency swaps— 1,203 — 1,203 
Liability Derivatives
Cross-currency swaps— (2,093)— (2,093)

 December 31, 2024
 Level 1Level 2Level 3Total
Equity Securities    
Domestic equities$484 $— $— $484 
International equities8 — — 8 
Fixed income equities178 — — 178 
Available-for-Sale Debt Securities— 689 — 689 
Asset Derivatives
Cross-currency swaps— 87 — 87 
Liability Derivatives
Cross-currency swaps— (4,163)— (4,163)

Investment Securities
Our investment securities include both equity and debt securities that are measured at fair value, as well as equity securities without readily determinable fair values. A substantial portion of the fair values of our investment securities is estimated based on quoted market prices. Investments in equity securities not traded on a national securities exchange are valued at cost, less any impairment, and adjusted for changes resulting from observable, orderly transactions for identical or similar securities.
Investments in debt securities not traded on a national securities exchange are valued using pricing models, quoted prices of securities with similar characteristics or discounted cash flows.
 
The components comprising total gains and losses in the period on equity securities are as follows:
 Three months endedSix months ended
 June 30,June 30,
 2025202420252024
Total gains (losses) recognized on equity securities$48 $29 $21 $126 
Gains (losses) recognized on equity securities sold— (5)— (8)
Unrealized gains (losses) recognized on equity securities held at end of period$48 $34 $21 $134 

At June 30, 2025, available-for-sale debt securities totaling $671 have maturities as follows - less than one year: $71; one to three years: $107; three to five years: $113; five or more years: $380.
 
Our cash equivalents (money market securities) and short-term investments (certificate and time deposits) are recorded at amortized cost, and the respective carrying amounts approximate fair values. Short-term investments are recorded in “Prepaid and other current assets” and our investment securities are recorded in “Other Assets” on the consolidated balance sheets.
 
Derivative Financial Instruments
We enter into derivative transactions to manage certain market risks, primarily interest rate risk and foreign currency exchange risk. This includes the use of interest rate swaps, interest rate locks, foreign exchange forward contracts and combined interest rate foreign exchange contracts (cross-currency swaps). We do not use derivatives for trading or speculative purposes. We record derivatives on our consolidated balance sheets at fair value that is derived from observable market data, including yield curves and foreign exchange rates (all of our derivatives are Level 2). Cash flows associated with derivative instruments are presented in the same category on the consolidated statements of cash flows as the item being hedged.
 
Fair Value Hedging Periodically, we enter into and designate fixed-to-floating interest rate swaps as fair value hedges. The purpose of these swaps is to manage interest rate risk by managing our mix of fixed-rate and floating-rate debt. These swaps involve the receipt of fixed-rate amounts for floating interest rate payments over the life of the swaps without exchange of the underlying principal amount.
 
We also designate most of our cross-currency swaps and foreign exchange contracts as fair value hedges. The purpose of these contracts is to hedge foreign currency risk associated with changes in spot rates on foreign denominated debt. For cross-currency hedges, we have elected to exclude the change in fair value of the swap related to both time value and cross-currency basis spread from the assessment of hedge effectiveness. For foreign exchange contracts, we have elected to exclude the change in fair value of forward points from the assessment of hedge effectiveness.
 
Unrealized and realized gains or losses from fair value hedges impact the same category on the consolidated statements of income as the item being hedged, including the earnings impact of excluded components. In instances where we have elected to exclude components from the assessment of hedge effectiveness related to fair value hedges, unrealized gains or losses on such excluded components are recorded as a component of accumulated OCI and recognized into earnings over the life of the hedging instrument. Unrealized gains on derivatives designated as fair value hedges are recorded at fair value as assets, and unrealized losses are recorded at fair market value as liabilities. Except for excluded components, changes in the fair value of derivative instruments designated as fair value hedges are offset against the change in fair value of the hedged assets or liabilities through earnings. In the six months ended June 30, 2025 and 2024, no ineffectiveness was measured on fair value hedges.
 
Cash Flow Hedging We designate some of our cross-currency swaps as cash flow hedges to hedge our exposure to variability in expected future cash flows that are attributable to foreign currency risk and interest rate risk generated from our foreign-denominated debt. These agreements include initial and final exchanges of principal from fixed foreign denominated amounts to fixed U.S. dollar denominated amounts, to be exchanged at a specified rate that is usually determined by the market spot rate upon issuance. They also include an interest rate swap of a fixed or floating foreign denominated interest rate to a fixed U.S. dollar denominated interest rate.
Unrealized gains on derivatives designated as cash flow hedges are recorded at fair value as assets and unrealized losses are recorded at fair value as liabilities. For derivative instruments designated as cash flow hedges, changes in fair value are reported as a component of accumulated OCI and are reclassified into the consolidated statements of income in the same period the hedged transaction affects earnings.

Periodically, we enter into and designate interest rate locks to partially hedge the risk of changes in interest payments attributable to increases in the benchmark interest rate during the period leading up to the probable issuance of fixed-rate debt. We designate our interest rate locks as cash flow hedges. Gains and losses when we settle our interest rate locks are amortized into income over the life of the related debt. Over the next 12 months, we expect to reclassify $59 from accumulated OCI to “Interest expense” due to the amortization of net losses on historical interest rate locks.

Collateral and Credit-Risk Contingency We have entered into agreements with our derivative counterparties establishing collateral thresholds based on respective credit ratings and netting agreements. At June 30, 2025, we had posted collateral of $355 (a deposit asset) and held collateral of $404 (a receipt liability). Under the agreements, if AT&T’s credit rating had been downgraded two ratings levels by Fitch Ratings, one level by S&P and one level by Moody’s before the final collateral exchange in June, we would have been required to post additional collateral of $50. If AT&T’s credit rating had been downgraded three ratings levels by Fitch Ratings, two levels by S&P and two levels by Moody’s, we would have been required to post additional collateral of $1,312. At December 31, 2024, we had posted collateral of $188 (a deposit asset) and held collateral of $0 (a receipt liability). We do not offset the fair value of collateral, whether the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) exists, against the fair value of the derivative instruments.
 
Following are the notional amounts of our outstanding derivative positions:
 June 30,December 31,
20252024
Cross-currency swaps$36,499 $34,884 
Total$36,499 $34,884 
Following are the related hedged items affecting our financial position and performance:
Effect of Derivatives on the Consolidated Statements of Income   
 Three months endedSix months ended
 June 30,June 30,
Fair Value Hedging Relationships2025202420252024
Interest rate swaps (“Interest expense”):    
Gain (loss) on interest rate swaps$(1)$(1)$(2)$(1)
Gain (loss) on long-term debt1 1 2 1 
Cross-currency swaps:
Gain (loss) on cross-currency swaps2,735 (178)3,859 (424)
Gain (loss) on long-term debt(2,735)178 (3,859)424 
Gain (loss) recognized in accumulated OCI128 (325)(703)(70)

In addition, the net swap settlements that accrued and settled in the periods above were offset against “Interest expense.” 
The following table presents information for our cash flow hedging relationships:
 Three months endedSix months ended
 June 30,June 30,
Cash Flow Hedging Relationships2025202420252024
Cross-currency swaps:    
Gain (loss) recognized in accumulated OCI$— $— $4 $5 
Interest rate locks:
Interest income (expense) reclassified from accumulated
OCI into income
(14)(14)(29)(29)