Freeport-McMoRan 2011 Annual Report Download - page 89

2011 ANNUAL REPORT | 87
adjustments to the published net asset value that is provided on
an ongoing basis (active-market criteria is met), these investments
are classied within Level 1 of the fair value hierarchy.
Mutual funds and equity securities are valued at the closing
price reported on the active market on which the individual
securities are traded and, as such, are classied within Level 1 of
the fair value hierarchy.
Fixed income investments include government and corporate
bonds held directly by us or through commingled funds. Fixed
income securities are valued using a bid evaluation or a mid
evaluation and, as such, are classied within Level 2 of the fair
value hierarchy. A bid evaluation is an estimated price at which a
dealer would pay for a security. A mid evaluation is the average
of the estimated price at which a dealer would sell a security and
the estimated price at which a dealer would pay for a security.
ese evaluations are based on quoted prices, if available, or models
that use observable inputs.
Private equity investments are valued at net realizable value
using information from general partners and, as such, are classied
within Level 3 of the fair value hierarchy because of the inherent
restrictions on redemptions that may aect the ability to sell the
investments at their net asset value in the near term.
A summary of changes in the fair value of FCX’s Level 3 pension
plan assets for the years ended December 31 follows:
Private Equity Real Estate
Investments Property Total
Balance at January 1, 2010 $ 40 $ 25 $ 65
Actual return on plan assets:
Realized gains — 2 2
Net unrealized gains related to
assets still held at the end of the year 2 1 3
Purchases 7 — 7
Settlements, net (3) — (3)
Balance at December 31, 2010 46 28 74
Actual return on plan assets:
Realized gains (losses) (2) 2 —
Net unrealized gains related to
assets still held at the end of the year 5 5 10
Purchases 5 — 5
Settlements, net (4) — (4)
Balance at December 31, 2011 $ 50 $ 35 $ 85
A summary of the fair value hierarchy for pension plan assets
associated with the PT Freeport Indonesia plan follows:
Fair Value at December 31, 2011
Total Level 1 Level 2 Level 3
Common stocks $ 29 $ 29 $ — $ —
Government bonds 22 22 — —
Total investments 51 $ 51 $ — $ —
Cash and receivables 56
Total pension plan net assets $ 107
Fair Value at December 31, 2010
Total Level 1 Level 2 Level 3
Common stocks $ 29 $ 29 $ — $ —
Government bonds 19 19 — —
Total investments 48 $ 48 $ — $ —
Cash and receivables 49
Total pension plan net assets $ 97
Following is a description of the valuation techniques used for
pension plan assets measured at fair value associated with the
PT Freeport Indonesia plan. ere have been no changes in the
techniques used at December31,2011.
Common stocks and government bonds are valued at the closing
price reported on the active market on which the individual
securities are traded.
e techniques described above may produce a fair value
calculation that may not be indicative of net realizable value or
reective of future fair values. Furthermore, while FCX believes its
valuation techniques are appropriate and consistent with other
market participants, the use of dierent techniques or assumptions
to determine the fair value of certain nancial instruments could
result in a dierent fair value measurement at the reporting date.
Atlantic Copper’s plan is administered by a third-party insurance
company, and Atlantic Copper is not provided asset allocations.
e expected benet payments for FCX’s (including FMC’s
plans; and FCX’s SERP, director and excess benets plans),
PT Freeport Indonesia’s and Atlantic Copper’s pension plans
follow:
PT Freeport Atlantic
FCX Indonesia
a
Copper
b
2012 $ 88 $ 16 $ 7
2013 88 11 7
2014 90 11 7
2015 91 13 7
2016 94 14 7
2017 through 2021 515 123 36
a. Based on a December 31, 2011, exchange rate of 9,060 Indonesian rupiah to one
U.S. dollar.
b. Based on a December 31, 2011, exchange rate of $1.29 per euro.
Postretirement and Other Benefits. FCX also provides postretirement
medical and life insurance benets for certain U.S. employees
and, in some cases, employees of certain international subsidiaries.
ese postretirement benets vary among plans, and many plans
require contributions from retirees. e expected cost of providing
such postretirement benets is accrued during the years employees
render service.
e discount rate for FCX’s postretirement medical and life
insurance benet plans was determined on the same basis as FCX’s
pension plans.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS