J. Fair Value Measurements

The FASB authoritative guidance on fair value measurements defines fair value, provides a framework for measuring fair value in generally accepted accounting principles, and requires certain disclosures about fair value measurements. The disclosures focus on the inputs used to measure fair value. The guidance establishes the following hierarchy for categorizing these inputs:


Level 1	—	Quoted market prices in active markets for identical assets or liabilities

Level 2	—	Significant other observable inputs (e.g., quoted prices for similar items in active markets, quoted prices for identical or similar items in markets that are not active, inputs other than quoted prices that are observable such as interest rate and yield curves, and market-corroborated inputs)

Level 3	—	Significant unobservable inputs

There were no transfers between Level 1 and Level 2, or transfers into or out of Level 3, during the first six months of either fiscal 2012 or 2011.

As described in Note C, the GAM Promissory Notes and Inventory Note were recorded at their fair value of $273 million at the closing date of the sale of the Supermetals business to GAM. These notes are classified as Level 3 instruments within the fair value hierarchy because they are valued using a valuation model with significant unobservable inputs. The fair value of these notes was $274 million at March 31, 2012, which approximated their carrying value. See Note K for information on the valuation model and inputs used.

The following table presents information about the Company's financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2012 and September 30, 2011. The derivatives presented in the table below are presented by derivative type, net of the legal right to offset derivative settlements by each counterparty:


	March 31, 2012		September 30, 2011
	Level 2 Inputs		Level 2 Inputs
	(Dollars in millions)
Assets at fair value:
Guaranteed investment contract⁽¹⁾	$	14	$	14
Derivatives relating to interest rates⁽²⁾		2		3
Derivatives relating to foreign currency⁽²⁾		2		—

Total assets at fair value	$	18	$	17

Liabilities at fair value:
Derivatives relating to foreign currency⁽²⁾	$	36	$	41
Hedged long-term debt⁽³⁾		60		61

Total liabilities at fair value	$	96	$	102

⁽¹ ⁾	Included in "Other assets" in the Consolidated Balance Sheets.

⁽²⁾	Included in "Prepaid expenses and other current assets", "Other assets", "Accounts payable and accrued liabilities" or "Other liabilities" in the Consolidated Balance Sheets.

⁽³ ⁾	Included in "Current portion of long-term debt" and "Long-term debt" in the Consolidated Balance Sheets.

There was no change to assets measured at fair value on a nonrecurring basis during the three or six months ended March 31, 2012 or 2011.