K. Fair Value of Financial Instruments

The carrying amounts and fair values of the Company's financial instruments at March 31, 2012 and September 30, 2011 are as follows:


	March 31, 2012				September 30, 2011
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(Dollars in millions)
Assets:
Cash and cash equivalents	$	366	$	366	$	286	$	286
GAM Promissory Notes and Inventory Note		274		274		—		—
Accounts and notes receivable		759		759		659		659
Derivative instruments		2		2		1		1
Liabilities:
Notes payable to banks		79		79		86		86
Accounts payable and accrued liabilities		496		496		461		461
Long-term debt—fixed rate		574		630		585		633
Long-term debt—floating rate		10		10		15		15
Capital lease obligations		22		22		15		15
Derivative instruments		34		34		39		39

At March 31, 2012 and September 30, 2011, the fair values of cash and cash equivalents, accounts and notes receivable, accounts payable and accrued liabilities, and notes payable to banks approximated their carrying values due to the short-term nature of these instruments. The estimated fair values of derivative instruments are valued as described in Note J. The fair value of Cabot's fixed rate long-term debt and capital lease obligations are estimated based on comparable quoted market prices at the respective period ends. The carrying amount of Cabot's floating rate long-term debt approximates its fair value. As discussed in Note J, other than the GAM Promissory Notes and Inventory Note, all such measurements are based on observable inputs and are classified as Level 2 within the fair value hierarchy. The valuation technique used is the discounted cash flow model.

As described in Note J, the GAM Promissory Notes and Inventory Note 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 the GAM notes was $274 million at March 31, 2012, which approximated their carrying value. The valuation used is the discounted cash flow model and the significant inputs are the discount rate, Adjusted EBITDA forecast, and timing of expected cash flows from GAM.