3M 2009 Annual Report Download - page 103
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97
Derivative instruments:
The Company’s derivative assets and liabilities within the scope of ASC 815 are required to be recorded at fair value.
The Company’s derivatives that are recorded at fair value include foreign currency forward and option contracts,
commodity price swaps, interest rate swaps, and net investment hedges where the hedging instrument is recorded at
fair value. Net investment hedges that use foreign currency denominated debt to hedge 3M’s net investment are not
impacted by the fair value measurement standard under ASC 820, as the debt used as the hedging instrument is
marked to a value with respect to changes in spot foreign currency exchange rates and not with respect to other
factors that may impact fair value.
3M has determined that foreign currency forwards and commodity price swaps will be considered level 1
measurements as these are traded in active markets which have identical asset or liabilities, while currency swaps,
foreign currency options, interest rate swaps and cross-currency swaps will be considered level 2. For level 2
derivatives, 3M uses inputs other than quoted prices that are observable for the asset. These inputs include foreign
currency exchange rates, volatilities, and interest rates. The level 2 derivative positions are primarily valued using
standard calculations/models that use as their basis readily observable market parameters. Industry standard data
providers are 3M’s primary source for forward and spot rate information for both interest rates and currency rates,
with resulting valuations periodically validated through third-party or counterparty quotes and a net present value
stream of cash flows model.
The following table provides information by level for assets and liabilities that are measured at fair value, as defined
by ASC 820, on a recurring basis.
(Millions)
Fair Value
at Dec, 31
Fair Value Measurements
Using Inputs Considered as
Description 2009 Level 1 Level 2 Level 3
Assets:
Available-for-sale:
Marketable securities:
Agency securities......................................... $ 491 $ — $ 491 $ —
Corporate securities..................................... 266
—
266
—
Asset-backed securities:
Automobile loans related.......................... 515
—
515
—
Credit cards related .................................. 107
—
107
—
Other......................................................... 83
—
83
—
Treasury securities....................................... 94 94 —
—
Auction rate securities.................................. 5
—
— 5
Other securities............................................ 8
—
8
—
Investments ..................................................... 11 11 —
—
Derivative instruments — assets......................... 79 25 54
—
Liabilities:
Derivative instruments — liabilities ..................... 94 94 —
—