Fair Value of Financial Instruments (Disclosures)

9 Months Ended

Dec. 31, 2011

Fair Value Disclosures [Abstract]

Fair Value Disclosures Text Block

Note 3 - Fair Value of Financial Instruments

The accounting guidance for financial instruments requires disclosure of the estimated fair value of certain financial instruments as well as the methods and significant assumptions used to estimate their fair value. Financial instruments that are within the scope of this accounting guidance are included in the table below.

The following is a description of financial instruments for which the ending balances as of December 31, 2011 and March 31, 2011 are not carried at fair value in their entirety on the Consolidated Balance Sheet.

Finance Receivables

Finance receivables primarily consist of retail and dealer loans. The fair value of finance receivables is generally determined by valuing expected discounted cash flows. We estimate cash flows expected to be collected using contractual principal and interest cash flows adjusted for specific factors, such as prepayments, default rates, loss severity, credit scores, and collateral type. A securitization model is used for valuing retail loans, and utilizes quoted secondary market rates if available, or estimated market rates that incorporate management's best estimate of investor assumptions about the portfolio. For dealer loans, we generally use a discounted cash flow model based on market rates for equivalent portfolio bond ratings.

Commercial Paper

The carrying value of commercial paper issued is assumed to approximate fair value due to its short duration and generally negligible credit risk. We validate this assumption using quoted market prices where available.

Unsecured Notes and Loans Payable

We use quoted market prices for debt when available. Where quoted market prices are unavailable, fair value is estimated based on current market rates and credit spreads for debt with similar maturities.

Note 3 - Fair Value of Financial Instruments (Continued)

Secured Notes and Loans Payable

Fair value is estimated based on current market rates and credit spreads for debt with similar maturities. We also use internal assumptions, including prepayment speeds and expected credit losses on the underlying securitized assets, to estimate the timing of cash flows to be paid on these instruments.

The carrying value and estimated fair value of certain financial instruments at December 31, 2011 and March 31, 2011 were as follows:

			December 31, 2011				March 31, 2011
		Carrying				Carrying
(Dollars in millions)		value		Fair value		value		Fair value
Financial assets
	Finance receivables, net	$	56,971	$	58,129	$	57,460	$	59,143
Financial liabilities
	Commercial paper	$	21,190	$	21,190	$	19,943	$	19,943
	Unsecured notes and loans payable	$	45,686	$	46,525	$	46,713	$	47,067
	Secured notes and loans payable	$	8,879	$	8,885	$	10,626	$	10,633

Finance receivables are presented net of deferred costs, unearned income and the allowance for credit losses; the amount excludes related party transactions of $39 millionat both December 31, 2011 and March 31, 2011 and direct finance leases of $209 millionand $237 million at December 31, 2011 and March 31, 2011, respectively.

The carrying value of unsecured notes and loans payable represents the sum of unsecured notes and loans payable and carrying value adjustment. Also included in unsecured notes and loans payable is $4.3 billion and $4.2billion of loans payable to affiliates at December 31, 2011 and March 31, 2011, respectively,that are carried at amounts that approximate fair value.