Alcoa 2015 Annual Report Download - page 190

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,
2015 2014
Carrying
value
Fair
value
Carrying
value
Fair
value
Cash and cash equivalents $1,919 $1,919 $1,877 $1,877
Restricted cash 37 37 20 20
Noncurrent receivables 17 17 17 17
Available-for-sale securities 193 193 153 153
Short-term borrowings 38 38 54 54
Commercial paper - - - -
Long-term debt due within one year 21 21 29 29
Contingent payment related to an acquisition 130 130 130 130
Long-term debt, less amount due within one year 9,044 8,922 8,769 9,445
The following methods were used to estimate the fair values of other financial instruments:
Cash and cash equivalents, Restricted cash, Short-term borrowings, and Commercial paper. The carrying
amounts approximate fair value because of the short maturity of the instruments. The fair value amounts for Cash and
cash equivalents, Restricted cash, and Commercial paper were classified in Level 1, and Short-term borrowings were
classified in Level 2.
Noncurrent receivables. The fair value of noncurrent receivables was based on anticipated cash flows, which
approximates carrying value, and was classified in Level 2 of the fair value hierarchy.
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.
Contingent payment related to an acquisition (see Note F). The fair value was based on the net present value of
expected future cash flows and was classified in Level 3 of the fair value hierarchy.
Long-term debt due within one year and 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. The fair value amounts for all Long-term debt were
classified in Level 2 of the fair value hierarchy.
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