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Financial Instruments
12 Months Ended
Sep. 26, 2014
Financial Instruments, Owned, at Fair Value [Abstract]  
Financial Instruments
Financial Instruments
The Company's financial instruments consist primarily of cash and cash equivalents, accounts receivable, investments, accounts payable, debt and derivative financial instruments. The fair value of cash and cash equivalents, accounts receivable and accounts payable approximated book value as of September 26, 2014 and September 27, 2013. The fair value of derivative financial instruments was not material to any of the periods presented. See below for the fair value of investments and Note 10 for the fair value of debt.
Derivative Instruments
In the normal course of business, Tyco is exposed to market risk arising from changes in currency exchange rates, interest rates and commodity prices. The Company may use derivative financial instruments to manage exposures to foreign currency, commodity and interest rate risks. The Company's objective for utilizing derivative financial instruments is to manage these risks using the most effective methods to eliminate or reduce the impacts of these exposures. The Company does not use derivative financial instruments for trading or speculative purposes. Additionally, the Company did not have any derivative instruments designated as hedging instruments for accounting purposes during the years ended September 26, 2014 and September 27, 2013. During the year ended September 28, 2012, the Company terminated its interest rate swaps.
Foreign Currency Exposures
The Company manages foreign currency exchange rate risk through the use of derivative financial instruments comprised principally of forward contracts on foreign currency which are not designated as hedging instruments for accounting purposes. The objective of the derivative instruments is to minimize the income statement impact and potential variability in cash flows associated with intercompany loans, accounts receivable, accounts payable and forecasted transactions that are denominated in certain foreign currencies. As of September 26, 2014 and September 27, 2013, the total gross notional amount of the Company's foreign exchange contracts was $258 million and $278 million, respectively, including contracts of nil and $60 million, respectively, related to the South Korean security business.
Counterparty Credit Risk
The use of derivative financial instruments exposes the Company to counterparty credit risk. Tyco has established policies and procedures to limit the potential for counterparty credit risk, including establishing limits for credit exposure and continually assessing the creditworthiness of counterparties. As a matter of practice, the Company deals with major banks worldwide having strong investment grade long-term credit ratings. To further reduce the risk of loss, the Company generally enters into International Swaps and Derivatives Association master agreements with substantially all of its counterparties. The Company's derivative contracts do not contain any credit risk related contingent features and do not require collateral or other security to be furnished by the Company or the counterparties. The Company's exposure to credit risk associated with its derivative instruments is measured on an individual counterparty basis, as well as by groups of counterparties that share similar attributes. The Company does not anticipate any non-performance by any of our counterparties and the concentration of risk with financial institutions does not present significant credit risk to the Company.
Investments
Investments primarily include marketable securities such as U.S. government obligations, U.S. government agency securities and corporate debt securities, equity securities and time deposits with banks.
When available, the Company uses quoted market prices to determine the fair value of investment securities. Such investments are included in Level 1. When quoted market prices are not readily available, pricing determinations are made based on the results of market approach valuation models using observable market data such as recently reported trades, bid and offer information and benchmark securities. These investments are included in Level 2 and consist primarily of U.S. government agency securities and corporate debt securities.
During the year ended September 26, 2014, the Company liquidated its portfolio of corporate and U.S. Government debt securities and recorded a $1 million gain on the sale of investments related to this liquidation. As of September 26, 2014, the Company held time deposits with original time to maturity greater than three months of $275 million, which are recorded in Prepaid expenses and other current assets in the Consolidated Balance Sheet.
During the year ended September 26, 2014, the Company also purchased $62 million of trading securities that will serve to partially offset changes in the market value of liabilities for an unfunded non-qualified defined contribution pension plan. These securities, which primarily consist of exchange traded equity funds, are recorded in Prepaid expenses and other current assets in the Consolidated Balance Sheet, and gains or losses are recorded in Other income, expense (net) in the Consolidated Statement of Operations. For the year ended September 26, 2014, the trading securities had a realized gain of nil.
The following tables present the cost and fair market value of the Company's investments measured at fair value, by type of security, by level, and by classification on the Company's Consolidated Balance Sheets as of September 26, 2014 and September 27, 2013.
        As of September 26, 2014 ($ in millions):
 
 
Fair Value
 
Consolidated
Balance Sheet
Classification
Investment Assets:
 
Level 1
 
Level 2
 
Total
 
Prepaids
and Other
Current
Assets
 
Other
Assets
Time deposits
 
$
275

 
$

 
$
275

 
$
275

 
$

Exchange traded equity funds
 
62

 

 
62

 
62

 

 
 
$
337

 
$

 
$
337

 
$
337

 
$

        As of September 27, 2013 ($ in millions):
 
 
Fair Value
 
Consolidated
Balance Sheet
Classification
Available-for-sale securities:
 
Level 1
 
Level 2
 
Total
 
Prepaids
and Other
Current
Assets
 
Other
Assets
Corporate debt securities
 
$

 
$
34

 
$
34

 
$
11

 
$
23

U.S. Government debt securities
 
171

 
38

 
209

 
89

 
120

 
 
$
171

 
$
72

 
$
243

 
$
100

 
$
143


During 2014 and 2013, the Company did not have any significant transfers within the fair value hierarchy.
Investments with continuous unrealized losses for less than 12 months and 12 months or greater as of September 26, 2014 and September 27, 2013 were not material. The Company did not record any other-than-temporary impairments for the years 2014, 2013 and 2012.
Derivative Financial Instruments
The fair values for the Company's derivative financial instruments are derived from market approach pricing models that take into account the contractual terms and features of each instrument and forward foreign currency rates for the Company's foreign exchange contracts. Valuations are adjusted to reflect creditworthiness of the counterparty for assets and the creditworthiness of the Company for liabilities. Such adjustments are based on observable market evidence and are categorized as Level 2 exposures. Derivative financial instruments fair value details are not presented as the derivative financial instruments were not material to any of the periods presented.
Other
In addition to the gain related to the liquidation of the Company's investment portfolio as described above, the year ended September 26, 2014 also included a $7 million loss on the sale of an investment related to the Company's ROW Installation and Services business.
The Company had $1.5 billion and $1.4 billion of intercompany loans designated as permanent in nature as of September 26, 2014 and September 27, 2013, respectively. For the years ended September 26, 2014 and September 27, 2013, and September 28, 2012 the Company recorded a cumulative translation loss of $28 million, gain of $3 million and gain of $48 million, respectively, through Accumulated other comprehensive loss related to these loans.