Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2012

Assets and liabilities measured at fair value

Assets and liabilities measured on a recurring basis at fair value, primarily related to Financial Products, included in our Consolidated Statement of Financial Position as of September 30, 2012 and December 31, 2011 are summarized below:



(Millions of dollars)	September 30, 2012
	Level 1		Level 2		Level 3		Total Assets / Liabilities, at Fair Value
Assets
Available-for-sale securities
Government debt
U.S. treasury bonds	$	10	$	—	$	—	$	10
Other U.S. and non-U.S. government bonds	—		118		—		118
Corporate bonds
Corporate bonds	—		672		—		672
Asset-backed securities	—		94		—		94
Mortgage-backed debt securities
U.S. governmental agency	—		298		—		298
Residential	—		27		—		27
Commercial	—		131		—		131
Equity securities
Large capitalization value	177		—		—		177
Smaller company growth	34		—		—		34
Total available-for-sale securities	221		1,340		—		1,561
Derivative financial instruments, net	—		156		—		156
Total Assets	$	221	$	1,496	$	—	$	1,717
Liabilities
Guarantees	$	—	$	—	$	17	$	17
Total Liabilities	$	—	$	—	$	17	$	17



(Millions of dollars)	December 31, 2011
	Level 1		Level 2		Level 3		Total Assets / Liabilities, at Fair Value
Assets
Available-for-sale securities
Government debt
U.S. treasury bonds	$	10	$	—	$	—	$	10
Other U.S. and non-U.S. government bonds	—		92		—		92
Corporate bonds
Corporate bonds	—		572		—		572
Asset-backed securities	—		111		—		111
Mortgage-backed debt securities
U.S. governmental agency	—		310		—		310
Residential	—		30		—		30
Commercial	—		145		—		145
Equity securities
Large capitalization value	148		—		—		148
Smaller company growth	29		—		—		29
Total available-for-sale securities	187		1,260		—		1,447
Derivative financial instruments, net	—		145		—		145
Total Assets	$	187	$	1,405	$	—	$	1,592
Liabilities
Guarantees	$	—	$	—	$	7	$	7
Total Liabilities	$	—	$	—	$	7	$	7

Roll-forward of liabilities measured at fair value using Level 3 inputs

Below are roll-forwards of liabilities measured at fair value using Level 3 inputs for the nine months ended September 30, 2012 and 2011. These instruments were valued using pricing models that, in management’s judgment, reflect the assumptions of a marketplace participant.



(Millions of dollars)	Guarantees
Balance at December 31, 2011	$	7
Acquisitions	6
Issuance of guarantees	7
Expiration of guarantees	(3		)
Balance at September 30, 2012	$	17

Balance at December 31, 2010	$	10
Issuance of guarantees	2
Expiration of guarantees	(5		)
Balance at September 30, 2011	$	7

Fair Values of Financial Instruments

Please refer to the table below for the fair values of our financial instruments.



Fair Value of Financial Instruments
	September 30, 2012				December 31, 2011
(Millions of dollars)	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Fair Value Levels	Reference
Assets
Cash and short-term investments	$	5,689	$	5,689	$	3,057	$	3,057	1
Restricted cash and short-term investments	112		112		87		87		1
Available-for-sale securities	1,561		1,561		1,447		1,447		1 & 2	Note 8
Finance receivables—net (excluding finance leases ¹)	14,503		14,508		12,689		12,516		2	Note 15
Wholesale inventory receivables—net (excluding finance leases ¹)	1,677		1,611		1,591		1,505		2	Note 15
Interest rate swaps—net	239		239		241		241		2	Note 4
Commodity contracts—net	1		1		—		—		2	Note 4

Liabilities
Short-term borrowings	5,067		5,067		3,988		3,988		1
Long-term debt (including amounts due within one year)
Machinery and Power Systems	10,276		12,620		8,973		10,737		2
Financial Products	24,509		25,607		21,631		22,674		2
Foreign currency contracts—net	84		84		89		89		2	Note 4
Commodity contracts—net	—		—		7		7		2	Note 4
Guarantees	17		17		7		7		3	Note 10

¹Total excluded items have a net carrying value at September 30, 2012 and December 31, 2011 of $7,974 million and $7,324 million, respectively.

- Definition

Tabular disclosure of the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments, assets, and liabilities. Such certain disclosures about the financial instruments, assets, and liabilities include: (1) the fair value of the required items together with their carrying amounts (as appropriate) and (2) the methodology and assumptions used in developing such estimates of fair value.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 107

-Paragraph 14

-Subparagraph a

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 159

-Paragraph 18

-Subparagraph c(2), d, e, f

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 50

-Paragraph 10

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-URI http://asc.fasb.org/extlink&oid=7491637&loc=d3e13433-108611

Reference 4: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 107

-Paragraph 15

-Subparagraph b-d

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 5: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 50

-Paragraph 11

-URI http://asc.fasb.org/extlink&oid=7491637&loc=d3e13467-108611

Reference 6: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 159

-Paragraph 19

-Subparagraph a, b, c(1), d(1)

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 7: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 820

-SubTopic 10

-Section 50

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-Subparagraph (a)

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-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 45

-Paragraph 2

-URI http://asc.fasb.org/extlink&oid=6447952&loc=d3e13220-108610

Reference 9: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 157

-Paragraph 32

-Subparagraph a, c(1), c(2), c(3), d

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 10: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 107

-Paragraph 10

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 11: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 50

-Paragraph 12

-URI http://asc.fasb.org/extlink&oid=7491637&loc=d3e13476-108611

Reference 12: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 50

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-Subparagraph (a)

-URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612

+ Details

- Definition

Tabular disclosure of the fair value measurement of liabilities using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets), and gains or losses recognized in other comprehensive income (loss) and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs) by class of liability.

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