Fair Value Measurement

6 Months Ended

Jun. 30, 2012

Fair Value Measurement

3. Fair Value Measurement

The accounting guidance on fair value measurement establishes a hierarchy with three levels of inputs used to determine fair value. Level 1 inputs are quoted prices in active markets for identical assets and liabilities, considered to be the most reliable evidence of fair value, and should be used whenever available. Level 2 inputs are observable prices that are not quoted on active exchanges. Level 3 inputs are unobservable inputs used for measuring the fair value of assets or liabilities.

Assets and liabilities reported at fair value on a recurring basis:

(Millions)

	Level 1		Level 2		Level 3		Total
At June 30, 2012
Short-term investments:
Marketable equity securities	$	4	$	—	$	—	$	4
Other current assets:
Foreign currency contracts(1)		—		2		—		2
Equity forward arrangement(2)		—		89		—		89
Investments:
Marketable equity securities		60		—		—		60
Other assets:
Interest rate swaps(2)		—		27		—		27
Accounts payable and accrued liabilities:
Foreign currency contracts(2)		—		8		—		8
Forward starting swaps(2)		—		108		—		108
Natural gas swap contracts(2)		—		1		—		1
Other liabilities:
Cross currency swaps(2)		—		38		—		38
Foreign currency contracts(2)		—		1		—		1

At December 31, 2011
Short-term investments:
Commercial paper and restricted cash	$	—	$	21	$	—	$	21
Marketable equity securities		4		—		—		4
Other current assets:
Foreign currency contracts(2)		—		1		—		1
Interest Rate Swaps(2)		—		1		—		1
Equity forward arrangement(2)		—		56		—		56
Investments:
Marketable equity securities		56		—		—		56
Other assets:
Interest rate swaps(2)		—		25		—		25
Accounts payable and accrued liabilities:
Foreign currency contracts(2)		—		6		—		6
Forward starting swaps(2)		—		92		—		92
Natural gas swap contracts(2)		—		9		—		9
Other liabilities:
Cross currency swaps(2)		—		120		—		120
Foreign currency contracts(2)		—		1		—		1

(1) $1 million of this balance is designated as a hedging instrument under U.S. GAAP.

(2) This entire balance is designated as a hedging instrument under U.S. GAAP.

Assets and liabilities reported at fair value on a nonrecurring basis:

(Millions)

As a result of finalizing a restructuring plan, as discussed in Note 7, “Business Restructuring”, long-lived assets with a carrying amount of $10 million were written-down to their fair value of $7 million, resulting in a charge of $3 million, which was included in the business restructuring expense reported in the six months ended June 30, 2012. These long-lived assets were valued using Level 3 inputs.