3M 2011 Annual Report Download - page 101
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95
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 tables provide information by level for assets and liabilities that are measured at fair value on a
recurring basis.
Fair Value
(Millions)
at
Dec. 31,
Fair Value Measurements
Using Inputs Considered as
Description 2011 Level 1 Level 2 Level 3
A
ssets:
A
vailable-for-sale:
Marketable securities:
U.S. government agency securities ...... $ 480 $ — $ 480 $ —
Foreign government agency securities . 23 — 23 —
Corporate debt securities ...................... 668 — 668 —
Certificates of deposit/time deposits ..... 49 — 49 —
Commercial paper ................................. 30 — 30 —
Asset-backed securities:
Automobile loan related ..................... 718 — 718 —
Credit card related ............................. 268 — 268 —
Equipment lease related .................... 64 — 64 —
Other .................................................. 5 — 5 —
U.S. treasury securities ......................... 34 34
—
—
U.S. municipal securities ....................... 14 — 14 —
Auction rate securities ........................... 4 —
—
4
Investments .............................................. 4 4
—
—
Derivative instruments — assets:
Foreign currency forward/option contracts 107 98 9 —
Interest rate swap contracts ..................... 28 — 28 —
Liabilities:
Derivative instruments — liabilities:
Foreign currency forward/option contracts 42 42
—
—
Commodity price swap contracts .............. 7 7
—
—