Fair Value Measurements

3 Months Ended

Mar. 31, 2012

Fair Value Measurements [Abstract]

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

Fair value is measured based on an exit price, representing the amount that would be received to sell an asset or paid to satisfy a liability in an orderly transaction between market participants. Fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, a fair value hierarchy is established, which categorizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

A summary of financial instruments recognized at fair value, and the fair value measurements used, follows:

	Total		Quoted prices in active markets for identical assets (Level 1)		Other observable inputs (Level 2)		Unobservable inputs (Level 3)
March 31, 2012
Cash	$	367	$	367	$	—	$	—
Short-term investments	444		444		—		—
Net derivative contracts	46		—		46		—
Long-term debt converted to floating interest rates by    interest rate swaps - net	56		—		56		—
December 31, 2011
Cash	$	385	$	385	$	—	$	—
Short-term investments	699		699		—		—
Net derivative contracts	46		—		46		—
Long-term debt converted to floating interest rates by    interest rate swaps - net	66		—		66		—

Eaton values its financial instruments using an industry standard market approach, in which prices and other relevant information is generated by market transactions involving identical or comparable assets or liabilities. No financial instruments were recognized using unobservable inputs.

Other Fair Value Measurements

Long-term debt and the current portion of long-term debt had a carrying value of $3,664 and fair value of $4,212 at March 31, 2012 compared to $3,687 and $4,273, respectively, at December 31, 2011. The fair value of debt is determined based on trade information in the financial markets of the Company's public debt and is considered a Level 2 fair value measurement.