Fair Value

Financial assets and liabilities that are measured at fair value on a recurring basis at September 30, 2011 and December 31, 2010 were (dollars in millions):



September 30, 2011	Level 1		Level 2		Level 3	Total		Balance Sheet Classification


Assets:
Cash and cash equivalents	$	900.6				$	900.6
Short-term investments	11.4					11.4
Available-for-sale securities	3.5					3.5		Other Assets

Liabilities:
Forward foreign exchange contracts			$	18.4		$	18.4	Other Current Liabilities



December 31, 2010	Level 1		Level 2		Level 3	Total		Balance Sheet Classification


Assets:
Cash and cash equivalents	$	2,288.7				$	2,288.7
Short-term investments	11.3					11.3
Forward foreign exchange contracts			$	7.2		7.2		Other Current Assets
Available-for-sale securities	3.4					3.4		Other Assets

Liabilities:
Interest rate swaps			$	24.2		$	24.2	Long-Term Liabilities

The carrying amounts and fair values of our financial instruments at September 30, 2011 and December 31, 2010 were (dollars in millions):



	2011				2010


	Carrying Amount		Fair Value		Carrying Amount		Fair Value


Assets:
Cash and cash equivalents	$	900.6	$	900.6	$	2,288.7	$	2,288.7
Short-term investments	11.4		11.4		11.3		11.3
Forward foreign exchange contracts	—		—		7.2		7.2
Available-for-sale securities	3.5		3.5		3.4		3.4
Cost method investments	23.8		23.8		24.8		24.8

Liabilities:
Short-term borrowings	$	16.4	$	16.4	$	50.2	$	50.2
Forward foreign exchange contracts	18.4		18.4		—		—
Interest rate swaps	—		—		24.2		24.2
Debt	3,185.2		3,367.7		3,126.0		3,328.0

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

Short-term investments

Short-term investments primarily consist of time deposits with financial institutions that we expect to convert into cash in our current operating cycle, generally within one year. Short-term investments are carried at cost, which approximates fair value.

Available-for-sale securities

Available-for-sale securities are carried at quoted market prices.

Forward foreign exchange contracts

The estimated fair values of derivative positions in forward foreign exchange contracts are based on quotations received from third party banks and represent the net amount required to terminate the positions, taking into consideration market rates and counterparty credit risk.

Cost method investments

Cost method investments are carried at cost, which approximates or is less than fair value.

Short-term borrowings

Short-term borrowings consist of bank overdrafts and credit lines of our international subsidiaries. Due to the short-term nature of these instruments, carrying value approximates fair value.

Interest rate swaps

Interest rate swaps are fair value hedges where the fair value is derived from the present value of future cash flows using valuation models that are based on readily observable market data such as interest rates and yield curves, taking into consideration counterparty credit risk.

Debt

Debt includes fixed rate debt and convertible debt. The fair value of these instruments is based on quoted market prices.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References

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