3M 2014 Annual Report Download - page 105

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99
Derivative instruments:
The Company’s derivative assets and liabilities within the scope of ASC 815, Derivatives and Hedging, 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, commodity price swaps, currency swaps, foreign currency options,
interest rate swaps and cross-currency swaps will be considered level 2 measurements. 3M uses inputs other than quoted
prices that are observable for the asset. These inputs include foreign currency exchange rates, volatilities, and interest
rates. 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 Company revised classification of amounts
previously presented in the table below for foreign currency forward/option contracts for the year ended December 31,
2013. These immaterial corrections reclassified previously presented amounts from level 1 to level 2.
The following tables provide information by level for assets and liabilities that are measured at fair value on a recurring
basis.
Fair Value Measurements
(Millions) Fair Value at Using Inputs Considered as
Description
Dec. 31, 2014
Level 1
Level 2
Level 3
Assets:
Available-for-sale:
Marketable securities:
U.S. government agency securities $
108
$
―
$
108
$
―
Foreign government agency securities 95
―
95
―
Corporate debt securities 619
―
619
―
Certificates of deposit/time deposits 41
―
41
―
Asset-backed securities:
Automobile loan related 282
―
282
―
Credit card related 162
―
162
―
Equipment lease related 48
―
48
―
Other 46
―
46
―
U.S. treasury securities 38
38
―
―
U.S. municipal securities 15
―
―
15
Investments 1
1
―
―
Derivative instruments — assets:
Foreign currency forward/option contracts 229
―
229
―
Interest rate swap contracts 27
―
27
―
Liabilities:
Derivative instruments — liabilities:
Foreign currency forward/option contracts 36
―
36
―
Commodity price swap contracts 4
―
4
―
Interest rate swap contracts 3
―
3
―