IBM 2010 Annual Report Download - page 90

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Notes to Consolidated Financial Statements
International Business Machines Corporation and Subsidiary Companies88
Note E.
Financial Instruments
(Excluding Derivatives)
Fair Value of Financial Instruments
Cash and cash equivalents, debt and marketable equity securities
are recognized and measured at fair value in the Consolidated
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
Fair values 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
Fair value of publicly traded long-term debt is based on quoted
market prices for the identical liability when traded as an asset in
an active market. For other long-term debt for which a quoted
market price is not available, an expected present value technique
that uses rates currently available to the company for debt with
similar terms and remaining maturities is used to estimate fair value.
The carrying amount of long-term debt is $21,846 million and
$21,932 million and the estimated fair value is $24,006 million and
$23,748 million at December 31, 2010 and 2009, respectively.
Debt and Marketable Equity Securities
The following tables summarize the company’s debt and marketable equity securities all of which are considered available for sale and
re cord ed at fair value in the Consolidated Statement of Finan cial Position.
($ in millions)
Gross Gross
Adjusted Unrealized Unrealized Fair
At December 31, 2010: Cost Gains Losses Value
Cash and cash equivalents
(1)
Time deposits and certificates of deposit $2,473 $ — $(0) $2,473
Commercial paper 2,673 — (0) 2,673
Money market funds 1,532 — — 1,532
Foreign government securities 1,054 — — 1,054
U.S. government securities 44 0 (0) 44
U.S. government agency securities 22 0 (0) 22
Other securities 3 — — 3
Tot a l $7,801 $ 0 $(0) $7,801
Debt securities—current
(2)
Commercial paper $ 490 $ — $(0) $ 490
U.S. government securities 500 — (0) 500
Other securities 1 — (0) 1
Tot a l $ 990 $ — $(0) $ 990
Debt securities—noncurrent
(3)
Other securities $ 6 $ 1 $(0) $ 7
Tot a l $ 6 $ 1 $(0) $ 7
Non-equity method alliance investments
(3) $ 194 $264 $(0) $ 458
(1) Included within cash and cash equivalents in the Consolidated Statement of Financial Position.
(2)
Reported as marketable securities in the Consolidated Statement of Financial Position.
(3) Included within investments and sundry assets in the Consolidated Statement of Financial Position.