Honeywell 2003 Annual Report Download - page 374

Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities", as amended (SFAS No. 133). Under SFAS No. 133, all derivatives are
recorded on the balance sheet as assets or liabilities and measured at fair
value. For derivatives designated as hedges of the fair value of assets or
liabilities, the changes in fair values of both the derivatives and the hedged
items are recorded in current earnings. For derivatives designated as cash flow
hedges, the effective portion of the changes in fair value of the derivatives
are recorded in Accumulated Other Nonowner Changes and subsequently recognized
in earnings when the hedged items impact income. Changes in the fair value of
derivatives not designated as hedges and the ineffective portion of cash flow
hedges are recorded in current earnings.
Transfers of Financial Instruments
Sales, transfers and securitization of financial instruments are accounted for
under Statement of Financial Accounting Standards No. 140, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities".
We sell interests in designated pools of trade accounts receivables to third
parties. The receivables are removed from the Consolidated Balance Sheet at the
time they are sold. The value assigned to our subordinated interests and
undivided interests retained in trade receivables sold is based on the
51