FAIR VALUE MEASUREMENTS

6 Months Ended

Jun. 30, 2023

The accounting guidance for fair value measurements and disclosures establishes a three-level fair value hierarchy:

•Level 1 - Inputs are based on quoted prices in active markets for identical assets and liabilities.

•Level 2 - Inputs are based on observable inputs other than quoted prices in active markets for identical or similar assets and liabilities.

•Level 3 - One or more inputs are unobservable and significant.

Financial and nonfinancial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

The following table sets forth the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis:


	June 30, 2023												December 31, 2022
	Level 1			Level 2			Level 3			Total			Level 1			Level 2			Level 3			Total
Assets
Foreign currency exchange contracts		$	—		$	44		$	—		$	44		$	—		$	93		$	—		$	93
Available for sale investments		61			197			—			258			87			559			—			646
Interest rate swap agreements		—			3			—			3			—			16			—			16
Cross currency swap agreements		—			38			—			38			—			90			—			90

Investments in equity securities		54			—			—			54			22			32			—			54
Right to HWI Net Sale Proceeds		—			—			9			9			—			—			295			295
Total assets		$	115		$	282		$	9		$	406		$	109		$	790		$	295		$	1,194
Liabilities
Foreign currency exchange contracts		$	—		$	16		$	—		$	16		$	—		$	8		$	—		$	8
Interest rate swap agreements		—			288			—			288			—			303			—			303
Commodity contracts		—			2			—			2			—			1			—			1
Cross currency swap agreements		—			22			—			22			—			—			—			—
Total liabilities		$	—		$	328		$	—		$	328		$	—		$	312		$	—		$	312

The foreign currency exchange contracts, interest rate swap agreements, cross currency swap agreements, and commodity contracts are valued using broker quotations, or market transactions in either the listed or over-the-counter markets. As such, these derivative instruments are classified within level 2. The Company also holds investments in commercial paper, certificates of deposits, time deposits, and corporate debt securities that are designated as available for sale. These investments are valued using published prices based on observable market data. As such, these investments are classified within level 2.

The Company holds certain available for sale investments in U.S. government securities and investments in equity securities. These investments are valued utilizing published prices based on quoted market pricing, which are classified within level 1.

The carrying value of cash and cash equivalents, trade accounts and notes receivables, payables, commercial paper, and other short-term borrowings approximates fair value.

As part of the NARCO Buyout (see Note 14 Commitments and Contingencies for definition), Honeywell holds a right to proceeds from the definitive sale agreement pursuant to which HarbisonWalker International Holdings, Inc. (HWI), the reorganized and renamed entity that emerged from the NARCO Bankruptcy, was acquired by an affiliate of Platinum Equity, LLC (HWI Sale). The right to these proceeds is considered a financial instrument. The significant input for the valuation of this right is unobservable, and as such, is classified within level 3.

The HWI Sale closed on February 16, 2023. During the six months ended June 30, 2023, Honeywell received $275 million of proceeds from the HWI Sale (HWI Net Sale Proceeds), of which $256 million was received during the first quarter of 2023 and $19 million during the second quarter of 2023. Additionally, during the three months ended June 30, 2023, the Company recorded a fair value adjustment for the HWI Net Sale Proceeds and reduced the estimate by $11 million. The fair value of the remaining HWI Net Sale Proceeds as of June 30, 2023, represents contingent consideration to be paid in future periods if certain conditions under the definitive sale agreement for the HWI Sale are met.

The following table sets forth a reconciliation of beginning and ending balances of assets and liabilities that were accounted for at fair value using level 3 measurements:


	Three Months Ended June 30, 2023			Six Months Ended June 30, 2023
Balance at beginning of period		$	39		$	295


Receipt of HWI Net Sale Proceeds		(19)			(275)
Fair value adjustment of HWI Net Sale Proceeds		(11)			(11)
Balance at end of period		$	9		$	9

The following table sets forth the Company’s financial assets and liabilities that were not carried at fair value:


	June 30, 2023						December 31, 2022
	Carrying Value			Fair Value			Carrying Value			Fair Value
Assets

Long-term receivables		$	229		$	168		$	229		$	183

Liabilities
Long-term debt and related current maturities		$	18,545		$	17,157		$	16,853		$	15,856

The Company determined the fair value of the long-term receivables by utilizing transactions in the listed markets for identical or similar assets. As such, the fair value of these receivables is considered level 2.