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Registration of securities issued in business combination transactions

FAIR VALUE

v2.4.0.8
FAIR VALUE
 12 Months Ended
Dec. 31, 2013
FAIR VALUE Ìý
FAIR VALUE

15. FAIR VALUE

ÌýÌýÌýÌýÌýÌýÌýÌýThe fair values of our financial instruments were as follows (dollars in millions):

Ìý
 Ìý DecemberÌý31, Ìý
Ìý
 Ìý 2013 Ìý 2012 Ìý
Ìý
 Ìý Carrying
Value		 Ìý Estimated
Fair Value		 Ìý Carrying
Value		 Ìý Estimated
Fair Value		 Ìý

Non-qualified employee benefit plan investments

 Ìý $ 21 Ìý $ 21 Ìý $ 14 Ìý $ 14 Ìý

Cross-currency interest rate contacts

 Ìý Ìý 2 Ìý Ìý 2 Ìý Ìý 18 Ìý Ìý 18 Ìý

Interest rate contracts

 Ìý Ìý (10 ) Ìý (10 ) Ìý (18 ) Ìý (18 )

Long-term debt (including current portion)

 Ìý Ìý (3,910 ) Ìý (4,010 ) Ìý (3,702 ) Ìý (3,869 )

ÌýÌýÌýÌýÌýÌýÌýÌýThe carrying amounts reported in the balance sheets of cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of the immediate or short-term maturity of these financial instruments. The fair value of non-qualified employee benefit plan investments is obtained through market observable pricing using prevailing market prices. The estimated fair values of our long-term debt are based on quoted market prices for the identical liability when traded as an asset in an active market (LevelÌý1).

ÌýÌýÌýÌýÌýÌýÌýÌýThe fair value estimates presented herein are based on pertinent information available to management as of DecemberÌý31, 2013 and 2012. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since DecemberÌý31, 2013, and current estimates of fair value may differ significantly from the amounts presented herein.

ÌýÌýÌýÌýÌýÌýÌýÌýThe following assets and liabilities are measured at fair value on a recurring basis (dollars in millions):

Ìý
 Ìý Ìý
 Ìý Fair Value Amounts Using Ìý
Description
Ìý DecemberÌý31,
2013		 Ìý Quoted prices
in active
markets for
identical
assets
(LevelÌý1)(3)		 Ìý Significant
other
observable
inputs
(LevelÌý2)(3)		 Ìý Significant
unobservable
inputs
(LevelÌý3)		 Ìý

Assets:

 Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý

Available-for sale equity securities:

 Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý

Equity mutual funds

 Ìý $ 21 Ìý $ 21 Ìý $ â€� Ìý $ â€� Ìý

Derivatives:

 Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý

Cross-currency interest rate contracts(1)

 Ìý Ìý 2 Ìý Ìý â€� Ìý Ìý 2 Ìý Ìý â€� Ìý
Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý
� � � � � � � � � � � � � �

Total assets

 Ìý $ 23 Ìý $ 21 Ìý $ 2 Ìý $ â€� Ìý
Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý
� � � � � � � � � � � � � �
� � � � � � � � � � � � � �
Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý

Liabilities:

 Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý

Derivatives:

 Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý

Interest rate contracts(2)

 Ìý $ (10 ) $ â€� Ìý $ (10 ) $ â€� Ìý
Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý
� � � � � � � � � � � � � �
� � � � � � � � � � � � � �
Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý


Ìý

Ìý
 Ìý Ìý
 Ìý Fair Value Amounts Using Ìý
Description
Ìý DecemberÌý31,
2012		 Ìý Quoted prices
in active
markets for
identical assets
(LevelÌý1)(3)		 Ìý Significant
other
observable
inputs
(LevelÌý2)(3)		 Ìý Significant
unobservable
inputs
(LevelÌý3)		 Ìý

Assets:

 Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý

Available-for sale equity securities:

 Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý

Equity mutual funds

 Ìý $ 14 Ìý $ 14 Ìý $ â€� Ìý $ â€� Ìý

Derivatives:

 Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý

Cross-currency interest rate contracts(1)

 Ìý Ìý 18 Ìý Ìý â€� Ìý Ìý 18 Ìý Ìý â€� Ìý
Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý
� � � � � � � � � � � � � �

Total assets

 Ìý $ 32 Ìý $ 14 Ìý $ 18 Ìý $ â€� Ìý
Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý
� � � � � � � � � � � � � �
� � � � � � � � � � � � � �
Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý

Liabilities:

 Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý

Derivatives:

 Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý

Interest rate contracts(2)

 Ìý $ (18 ) $ â€� Ìý $ (18 ) $ â€� Ìý
Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý
� � � � � � � � � � � � � �
� � � � � � � � � � � � � �
Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý Ìý
(1)
The income approach is used to calculate the fair value of these instruments. Fair value represents the present value of estimated future cash flows, calculated using relevant interest rates, exchange rates, and yield curves at stated intervals.

(2)
The income approach is used to calculate the fair value of these instruments. Fair value represents the present value of estimated future cash flows, calculated using relevant interest rates and yield curves at stated intervals. There were no material changes to the valuation methods or assumptions used to determine the fair value during the current period.

(3)
There were no transfers between LevelsÌý1 and 2 within the fair value hierarchy for the years ended DecemberÌý31, 2013 and 2012. During the year ended DecemberÌý31, 2013, there were no instruments categorized as LevelÌý3 within the fair value hierarchy.

ÌýÌýÌýÌýÌýÌýÌýÌýThe following table shows a reconciliation of beginning and ending balances for the year ended DecemberÌý31, 2012 for instruments measured at fair value on a recurring basis using significant unobservable inputs (LevelÌý3) (dollars in millions). During the year ended DecemberÌý31, 2013, there were no instruments categorized as LevelÌý3 within the fair value hierarchy.

Fair Value Measurements Using Significant Unobservable Inputs (LevelÌý3)
Ìý Cross-Currency
Interest
Rate Contracts		 Ìý

Beginning balance, JanuaryÌý1, 2012

 Ìý $ 27 Ìý

Transfers into LevelÌý3

 Ìý Ìý â€� Ìý

Transfers out of LevelÌý3(1)

 Ìý Ìý (27 )

Total gains (losses):

 Ìý Ìý Ìý Ìý

Included in earnings

 Ìý Ìý â€� Ìý

Included in other comprehensive income (loss)

 Ìý Ìý â€� Ìý

Purchases, sales, issuances and settlements

 Ìý Ìý â€� Ìý
Ìý Ìý Ìý Ìý
� � � � �

Ending balance, DecemberÌý31, 2012

 Ìý $ â€� Ìý
Ìý Ìý Ìý Ìý
� � � � �
� � � � �
Ìý Ìý Ìý Ìý

The amount of total gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets still held at DecemberÌý31, 2012

 Ìý $ â€� Ìý
Ìý Ìý Ìý Ìý
� � � � �
� � � � �
Ìý Ìý Ìý Ìý
(1)
We are party to cross-currency interest rate contracts that are measured at fair value in our consolidated financial statements. These instruments have historically been categorized by us as LevelÌý3 within the fair value hierarchy due to an unobservable input associated with the credit valuation adjustment, which we deemed to be a significant input to the overall measurement of fair value at inception. During 2012, this credit valuation adjustment has ceased to be a significant input to the entire fair value measurement of these instruments. The remaining inputs which are significant to the fair value measurement of these instruments represent observable market inputs that are inputs other than quoted prices (LevelÌý2 inputs).

  • Our policy is to recognize transfers between levels within the fair value hierarchy as of the beginning of the reporting period. Due to the change in significance of the credit valuation adjustment to the entire fair value measurement of these instruments, effective JanuaryÌý1, 2012, we have categorized our cross-currency interest rate contracts as LevelÌý2 within the fair value hierarchy.

ÌýÌýÌýÌýÌýÌýÌýÌýWe also have assets that under certain conditions are subject to measurement at fair value on a non-recurring basis. These assets include property, plant and equipment and those associated with acquired businesses, including goodwill and intangible assets. For these assets, measurement at fair value in periods subsequent to their initial recognition is applicable if one or more is determined to be impaired. During 2013 and 2012, we had no impairments related to these assets.