v2.4.0.6
Fair Value Measurements
 6 Months Ended
Jun. 30, 2012
Fair Value Measurements

Fair Value Measurements

The Company measures certain financial assets and liabilities at fair value on a recurring basis, and certain non-financial assets and liabilities on a nonrecurring basis. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. Fair value disclosures are reflected in a three-level hierarchy, maximizing the use of observable inputs and minimizing the use of unobservable inputs.

The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability on the measurement date. The three levels are defined as follows:

 

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Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for an identical asset or liability in an active market.

 

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Level 2 – inputs to the valuation methodology include quoted prices for a similar asset or liability in an active market or model-derived valuations in which all significant inputs are observable for substantially the full term of the asset or liability.

 

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Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement of the asset or liability.

Certain of the Company’s derivatives are valued using various pricing models or discounted cash flow analyses that incorporate observable market parameters, such as interest rate yield curves, option volatilities and currency rates, classified as Level 2 within the valuation hierarchy. Derivative valuations incorporate credit risk adjustments that are necessary to reflect the probability of default by the counterparty or the Company.

 

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Certain Financial Assets and Liabilities Measured at Fair Value

The following table presents financial assets and liabilities measured at fair value on a recurring basis by the valuation hierarchy as defined in the fair value guidance:

 

In millions    Level 1     Level 2     Level 3    Carrying
Value		  

June 30, 2012

                              

Cash equivalents

    $ 354.3           $ 354.3   

Investments

      145.6 *           145.6   

Derivative assets

      137.3 *    $ 71.5             208.8   

Total assets at fair value

    $ 637.2      $ 71.5           $ 708.7   

Derivative liabilities

            $ (10.2 )         $ (10.2 ) 

Total liabilities at fair value

            $ (10.2 )         $ (10.2 ) 

December 31, 2011

                              

Cash equivalents

    $ 581.7           $ 581.7   

Investments

      132.4 *           132.4   

Derivative assets

      154.5 *    $ 71.1             225.6   

Total assets at fair value

    $ 868.6      $ 71.1           $ 939.7   

Derivative liabilities

            $ (15.6 )         $ (15.6 ) 

Total liabilities at fair value

            $ (15.6 )         $ (15.6 ) 
* Includes long-term investments and derivatives that hedge market-driven changes in liabilities associated with the Company’s supplemental benefit plans.

 

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Non-Financial Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain assets and liabilities are measured at fair value on a nonrecurring basis; that is, the assets and liabilities are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (e.g., when there is evidence of impairment). At June 30, 2012, no material fair value adjustments or fair value measurements were required for non-financial assets or liabilities.

 

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Certain Financial Assets and Liabilities not Measured at Fair Value

At June 30, 2012, the fair value of the Company’s debt obligations was estimated at $15.3 billion, compared to a carrying amount of $13.6 billion. The fair value was based on quoted market prices, Level 2 within the valuation hierarchy. The carrying amount for both cash and equivalents and notes receivable approximate fair value.