Fair Value Measurements

9 Months Ended

Sep. 30, 2021

3M follows ASC 820, Fair Value Measurements and Disclosures, with respect to assets and liabilities that are measured at fair value on a recurring basis and nonrecurring basis.

In addition to the information above, refer to Note 15 in 3M’s 2020 Annual Report on Form 10-K for a qualitative discussion of the assets and liabilities that are measured at fair value on a recurring and nonrecurring basis, a description of the valuation methodologies used by 3M, and categorization within the valuation framework of ASC 820.

The following tables provide information by level for assets and liabilities that are measured at fair value on a recurring basis.


Description	Fair Value at September 30, 2021		Fair Value Measurements Using Inputs Considered as
(Millions)			Level 1		Level 2		Level 3
Assets:
Available-for-sale:
Marketable securities:
Corporate debt securities	$	—	$	—	$	—	$	—
Commercial paper	501		—		501		—
Certificates of deposit/time deposits	45		—		45		—
U.S. treasury securities	305		305		—		—
U.S. municipal securities	34		—		—		34
Derivative instruments — assets:
Foreign currency forward/option contracts	80		—		80		—
Interest rate contracts	4		—		4		—

Liabilities:
Derivative instruments — liabilities:
Foreign currency forward/option contracts	40		—		40		—


Description	Fair Value at December 31, 2020		Fair Value Measurements Using Inputs Considered as
(Millions)			Level 1		Level 2		Level 3
Assets:
Available-for-sale:
Marketable securities:
Corporate debt securities	$	7	$	—	$	7	$	—
Commercial paper	237		—		237		—
Certificates of deposit/time deposits	31		—		31		—
U.S. treasury securities	125		125		—		—
U.S. municipal securities	34		—		—		34
Derivative instruments — assets:
Foreign currency forward/option contracts	37		—		37		—
Interest rate contracts	7		—		7		—

Liabilities:
Derivative instruments — liabilities:
Foreign currency forward/option contracts	106		—		106		—

The following table provides a reconciliation of the beginning and ending balances of items measured at fair value on a recurring basis in the table above that used significant unobservable inputs (level 3).


Marketable securities — certain U.S. municipal securities only	Three months ended September 30,				Nine months ended September 30,
(Millions)	2021		2020		2021		2020
Beginning balance	$	34	$	37	$	34	$	46
Total gains or losses:
Included in earnings	—		—		—		—
Included in other comprehensive income	—		—		—		—
Purchases and issuances	—		—		—		10
Sales and settlements	—		—		—		(19)
Transfers in and/or out of level 3	—		—		—		—
Ending balance	$	34	$	37	$	34	$	37
Change in unrealized gains or losses for the period included in earnings for securities held at the end of the reporting period	—		—		—		—

In addition, the plan assets of 3M’s pension and postretirement benefit plans are measured at fair value on a recurring basis (at least annually). Refer to Note 13 in 3M’s 2020 Annual Report on Form 10-K.

Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis:

Disclosures are required for certain assets and liabilities that are measured at fair value, but are recognized and disclosed at fair value on a nonrecurring basis in periods subsequent to initial recognition. For 3M, such measurements of fair value relate primarily to indefinite-lived and long-lived asset impairments, goodwill impairments, and adjustment in carrying value of equity securities for which the measurement alternative of cost less impairment plus or minus observable price changes is used. There were no material impairments of assets or adjustments to equity securities using the measurement alternative for the three and nine months ended September 30, 2021. 3M reflected an immaterial charge related to impairment of certain indefinite-lived assets and a net charge of $22 million related to adjustment to the carrying value of equity securities using the measurement alternative during the first quarter of 2020. There were no material impairments of assets or adjustments to equity securities using the measurement alternative for the three months ended September 30, 2020.

Fair Value of Financial Instruments:

The Company’s financial instruments include cash and cash equivalents, marketable securities, accounts receivable, certain investments, accounts payable, borrowings, and derivative contracts. The fair values of cash equivalents, accounts receivable, accounts payable, and short-term borrowings and current portion of long-term debt approximated carrying values because of the short-term nature of these instruments. Available-for-sale marketable securities, in addition to certain derivative instruments, are recorded at fair values as indicated in the preceding disclosures. To estimate fair values (classified as level 2) for its long-term debt, the Company utilized third-party quotes, which are derived all or in part from model prices, external sources, market prices, or the third-party’s internal records. Information with respect to the carrying amounts and estimated fair values of these financial instruments follow:


	September 30, 2021				December 31, 2020
(Millions)	Carrying Value		Fair Value		Carrying Value		Fair Value
Long-term debt, excluding current portion	$	16,193	$	17,836	$	17,989	$	20,496

The fair values reflected above consider the terms of the related debt absent the impacts of derivative/hedging activity. The carrying amount of long-term debt referenced above is impacted by certain fixed-to-floating interest rate swaps that are designated as fair value hedges and by the designation of certain fixed rate Eurobond securities issued by the Company as hedging instruments of the Company’s net investment in its European subsidiaries. A number of 3M’s fixed-rate bonds were trading at a premium at September 30, 2021 and December 31, 2020 due to the lower interest rates and tighter credit spreads compared to issuance levels.

- 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.

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