Fair Value Measurement

3 Months Ended

Mar. 31, 2012

Fair Value Measurement Abstract

Fair Value Measurement

Fair Value Measurement

FASB ASC 820, “Fair Value Measurements and Disclosures” (ASC 820) establishes a framework for measuring fair value that is based on the inputs market participants use to determine the fair value of an asset or liability and establishes a fair value hierarchy to prioritize those inputs. The fair value hierarchy outlined in ASC 820 is comprised of three levels that are described below:

• Level 1 – Inputs based on quoted prices in active markets for identical assets or liabilities.

• Level 2 – Inputs other than Level 1 quoted prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.

• Level 3 – Unobservable inputs based on little or no market activity and that are significant to the fair value of the assets and liabilities.

The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs are obtained from independent sources and can be validated by a third party, whereas unobservable inputs reflect assumptions regarding what a third party would use in pricing an asset or liability based on the best information available under the circumstances. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

Assets and liabilities measured at fair value at March 31, 2012 were as follows:

	Fair value measurements						Total fair value
In millions	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Recurring fair value measurements
Assets:
Marketable securities	$	12.9	$	—	$	—	$	12.9
Derivative instruments	—		9.6		—		9.6
Total asset recurring fair value measurements	$	12.9	$	9.6	$	—	$	22.5
Liabilities:
Derivative instruments	$	—	$	11.3	$	—	$	11.3
Total liability recurring fair value measurements	$	—	$	11.3	$	—	$	11.3
Nonrecurring fair value measurements
Assets:
Cash and cash equivalents	$	1,089.5	$	—	$	—	$	1,089.5
Total asset nonrecurring fair value measurements	$	1,089.5	$	—	$	—	$	1,089.5
Liabilities:
Total debt	$	—	$	4,544.2	$	—	$	4,544.2
Total liability nonrecurring fair value measurements	$	—	$	4,544.2	$	—	$	4,544.2

Assets and liabilities measured at fair value at December 31, 2011 were as follows:

	Fair value measurements						Total fair value
In millions	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Recurring fair value measurements
Assets:
Marketable securities	$	10.4	$	—	$	—	$	10.4
Derivative instruments	—		9.3		—		9.3
Total asset recurring fair value measurements	$	10.4	$	9.3	$	—	$	19.7
Liabilities:
Derivative instruments	$	—	$	22.2	$	—	$	22.2
Total liability recurring fair value measurements	$	—	$	22.2	$	—	$	22.2
Nonrecurring fair value measurements
Assets:
Cash and cash equivalents	$	1,160.7	$	—	$	—	$	1,160.7
Total asset nonrecurring fair value measurements	$	1,160.7	$	—	$	—	$	1,160.7
Liabilities:
Total debt	$	—	$	4,359.2	$	—	$	4,359.2
Total liability nonrecurring fair value measurements	$	—	$	4,359.2	$	—	$	4,359.2

In prior periods, the Company included benefit trust assets and liabilities within its fair value disclosures. Benefit trust assets consist primarily of insurance contracts and are recorded at cash surrender value. Benefit trust liabilities include deferred compensation and executive death benefits, and are recorded based on the underlying investment portfolio of the deferred compensation plan and the specific benefits guaranteed in the death benefit contract with each executive. Benefit trust assets and liabilities of $169.5 million and $178.3 million, respectively, have been removed from the December 31, 2011 table above.

ASC 820 defines fair value as the exchange price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company determines the fair value of its financial assets and liabilities using the following methodologies:

• Cash and cash equivalents – These amounts include cash on hand, demand deposits and all highly liquid investments with original maturities at the time of purchase of three months or less and are held in U.S and non-U.S. currencies.

• Marketable securities – These securities include investments in publicly traded stock of non-U.S. companies held by non-U.S. subsidiaries of the Company. The fair value is obtained for the securities based on observable market prices quoted on public stock exchanges.

• Derivative instruments – These instruments include forward contracts related to non-U.S. currencies. The fair value of the derivative instruments are determined based on a pricing model that uses inputs from actively quoted currency markets that are readily accessible and observable.

• Debt - These securities are recorded at cost and include fixed-rate debentures maturing in 2027 and 2028, which only require early prepayment at the option of the holder; exchangeable senior notes, which may be exchanged at the option of the holder through April 12, 2012; other senior notes maturing through 2025, and other short term borrowings. The fair value of the long-term debt instruments is obtained based on observable market prices quoted on public exchanges for similar assets.

The carrying value of cash and cash equivalents, accounts receivable, short-term borrowings and accounts payable are a reasonable estimate of their fair value due to the short-term nature of these instruments.

These methodologies used by the Company to determine the fair value of its financial assets and liabilities at March 31, 2012 are the same as those used at December 31, 2011. There have been no transfers between Level 1 and Level 2 categories