IBM 2008 Annual Report Download - page 87

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Notes to Consolidated Financial Statements
INTERNATIONAL BUSINESS MACHINES CORPORATION and Subsidiary Companies
Note E.
Financial Instruments
(Excluding Derivatives)
    
Cash and cash equivalents, debt and marketable equity securities
and derivative financial instruments are recognized and measured at
fair value in the company’s financial statements. Notes and other
accounts receivable and other investments are financial assets with
carrying values that approximate fair value. Accounts payable, other
accrued expenses and short-term debt are financial liabilities with
carrying values that approximate fair value. In the absence of quoted
prices in active markets, considerable judgment is required in
developing estimates of fair value. Estimates are not necessarily
indicative of the amounts the company could realize in a current
market transaction. The following methods and assumptions are
used to estimate fair values:
Loans and Long-term Receivables
Estimates of fair value are based on discounted future cash flows
using current interest rates offered for similar loans to clients with
similar credit ratings for the same remaining maturities.
Long-Term Debt
For publicly-traded debt, estimates of fair value are based on market
prices. For other debt, fair value is estimated based on rates currently
available to the company for debt with similar terms and remaining
maturities. The carrying amount of long-term debt is $, million
and $, million and the estimated fair value is $, million
and $, million at December ,  and , respectively.
    
The following table summarizes the company’s debt and marketable
equity securities all of which are considered available-for-sale and re -
cord ed at fair value in the Consolidated Statement of Finan cial Position.
($  )
Fair Value
At December : 2008 2007
Cash and cash equivalents:*
Time deposits and certificates of deposit
$ 4,805 $ 5,573
Commercial paper 3,194 3,375
Money market funds 1,950 3,632
Other securities 60 4
TOTAL $10,009 $12,584
Debt securities—current:**
Commercial paper $ 166 $ —
Time deposits and certificates of deposit — 782
Securities of other U.S. political subdivisions
(states and municipalities) — 283
Other securities — 90
TOTAL $ 166 $ 1,155
Debt securities — noncurrent:***
Securities of U.S. federal government
and its agencies $ — $ 106
Other securities 6 425
TOTAL $ 6 $ 531
Non-equity method alliance investments***
$ 165 $ 746
* Included within cash and cash equivalents in the Consolidated Statement of Financial
Position.
** Reported as marketable securities within the Consolidated Statement of Financial Position.
*** Included within investments and sundry assets in the Consolidated Statement of
Financial Position. See note I, “Investments and Sundry Assets,” on page 87.
Gross unrealized gains (before taxes) on debt securities were $ mil-
lion and $ million at December ,  and , respectively.
Gross unrealized gains (before taxes) on marketable equity securities
were $ million and $ million at December ,  and ,
respectively. Gross unrealized losses (before taxes) on debt securities
were immaterial to the Consolidated Financial Statements at
December ,  and . Gross unrealized losses (before taxes)
on marketable equity securities were $ million and $ million at
December ,  and , respectively. Based on an evaluation of
available evidence as of December , , the company believes that
unrealized losses on marketable equity securities are temporary and
do not represent a need for an other-than-temporary impairment. See
note N, “Stockholders’ Equity Activity,” on page  for net change in
unrealized gains and losses on debt and marketable equity securities.