Freeport-McMoRan 2013 Annual Report Download - page 122

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
120 | FREEPORT-McMoRan
Equity securities are valued at the closing price reported on
the active market on which the individual securities are traded and,
as such, are classified within Level 1 of the fair value hierarchy.
FCX’s embedded derivatives on provisional copper
concentrate, copper cathode and gold purchases and sales have
critical observable inputs of quoted monthly LME or COMEX
copper forward prices and the London gold forward price at
each reporting date based on the month of maturity; however,
FCX’s contracts themselves are not traded on an exchange. As a
result, these derivatives are classified within Level 2 of the fair
value hierarchy.
Valuation Techniques
Money market funds are classified within Level 1 of the fair value
hierarchy because they are valued using quoted market prices in
active markets.
Fixed income securities (U.S. core fixed income funds,
government securities, corporate bonds, asset-backed securities
and municipal bonds) are valued using a bid evaluation price or
a mid-evaluation price. A bid evaluation price is an estimated price
at which a dealer would pay for a security. A mid-evaluation price
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. These evaluations are based on quoted prices, if
available, or models that use observable inputs and, as such,
are classified within Level 2 of the fair value hierarchy.
At December 31, 2012
Carrying Fair Value
Amount Total Level 1 Level 2 Level 3
Assets
Investment securities (current and long-term):
MMR investment
g
$ 446 $ 539 $ — $ 539 $ —
U.S. core fixed income fund
a,b
22 22 — 22 —
Money market funds
a,b
16 16 16 — —
Equity securities
a,b
8 8 8 — —
Total 492 585 24 561 —
Legally restricted funds (long-term):
a,b
U.S. core fixed income fund 50 50 — 50 —
Government mortgage-backed securities 36 36 — 36 —
Corporate bonds 30 30 — 30 —
Government bonds and notes 24 24 — 24 —
Money market funds 7 7 7 — —
Asset-backed securities 15 15 — 15 —
Municipal bonds 1 1 — 1 —
Total 163 163 7 156 —
Derivatives:
a,d
Embedded derivatives in provisional sales/purchase contracts
in a gross asset position 36 36 — 36 —
Copper futures and swap contracts 5 5 5 — —
Total 41 41 5 36 —
Total assets $ 789 $ 36 $ 753 $ —
Liabilities
Derivatives:
a,d
Embedded derivatives in provisional sales/purchase contracts
in a gross liability position $ 27 $ 27 $ — $ 27 $ —
Copper futures and swap contracts 1 1 1 — —
Total 28 28 1 27 —
Long-term debt, including current portion
f
3,527 3,589 — 3,589 —
Total liabilities $ 3,617 $ 1 $ 3,616 $ —
a. Recorded at fair value.
b. Current portion included in other current assets and long-term portion included in other assets.
c. Legally restricted funds excluded $210 million of time deposits (which approximated fair value) at December 31, 2013, associated with the Cerro Verde royalty dispute (refer to Note 12 for
further discussion).
d. Refer to Note 14 for further discussion and balance sheet classifications. At December 31, 2013, crude oil options are net of $444 million for deferred premiums and accrued interest.
e. Included in other liabilities. Refer to Note 2 for further discussion.
f. Recorded at cost except for debt assumed in the PXP and FMC acquisitions, which were recorded at fair value at the respective acquisition dates.
g. Recorded at cost and included in other assets.