Alcoa 2010 Annual Report Download - page 156

Material Limitations
The disclosures with respect to commodity prices, interest rates, and foreign currency exchange risk do not take into
account the underlying commitments or anticipated transactions. If the underlying items were included in the analysis,
the gains or losses on the futures contracts may be offset. Actual results will be determined by a number of factors that
are not under Alcoa’s control and could vary significantly from those factors disclosed.
Alcoa is exposed to credit loss in the event of nonperformance by counterparties on the above instruments, as well as
credit or performance risk with respect to its hedged customers’ commitments. Although nonperformance is possible,
Alcoa does not anticipate nonperformance by any of these parties. Contracts are with creditworthy counterparties and
are further supported by cash, treasury bills, or irrevocable letters of credit issued by carefully chosen banks. In
addition, various master netting arrangements are in place with counterparties to facilitate settlement of gains and
losses on these contracts.
Other Financial Instruments. The carrying values and fair values of Alcoa’s other financial instruments were as
follows:
December 31,
2010 2009
Carrying
value
Fair
value
Carrying
value
Fair
value
Cash and cash equivalents $1,543 $1,543 $1,481 $1,481
Restricted cash 1 1 8 8
Noncurrent receivables 23 23 24 24
Available-for-sale securities 93 93 105 105
Short-term borrowings 92 92 176 176
Long-term debt due within one year 231 231 669 669
Long-term debt, less amount due within one year 8,842 9,882 8,974 9,885
The following methods were used to estimate the fair values of other financial instruments:
Cash and cash equivalents, Restricted cash, Short-term borrowings, and Long-term debt due within one year.
The carrying amounts approximate fair value because of the short maturity of the instruments.
Noncurrent receivables. The fair value of noncurrent receivables was based on anticipated cash flows, which
approximates carrying value.
Available-for-sale securities. The fair value of such securities was based on quoted market prices. These financial
instruments consist of exchange-traded fixed income and equity securities, which are carried at fair value and were
classified in Level 1 of the fair value hierarchy.
Long-term debt, less amount due within one year. The fair value was based on quoted market prices for public debt
and on interest rates that are currently available to Alcoa for issuance of debt with similar terms and maturities for
non-public debt.
Y. Subsequent Events
Management evaluated all activity of Alcoa and concluded that no subsequent events have occurred that would require
recognition in the Consolidated Financial Statements or disclosure in the Notes to the Consolidated Financial
Statements, except as follows.
On January 24, 2011, Alcoa contributed 36,518,563 newly issued shares of its common stock to a master trust that
holds the assets of certain U.S. defined benefit pension plans in a private placement transaction. These shares were
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