IBM 2012 Annual Report Download - page 94

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Notes to Consolidated Financial Statements
International Business Machines Corporation and Subsidiary Companies
93
($ in millions)
At December 31, 2011: Level 1 Level 2 Level 3 To t a l
Assets
Cash equivalents (1)
Time deposits and certificates of deposit* $ — $1,931 $— $1,931
Commercial paper * — 777 — 777
Money market funds 1,886 — — 1,886
U.S. government securities — 2,750 — 2,750
Canada government securities* — 983 — 983
Other securities — 8 — 8
To ta l 1,886 6,449 — 8,335(5)
Debt securities—noncurrent (2) 1 7 — 8
Available-for-sale equity investments (2) 69 14 — 83
Derivative assets (3)
Interest rate contracts — 783 — 783
Foreign exchange contracts — 510 — 510
Equity contracts — 7 — 7
To ta l — 1,300 — 1,300 (6)
Total assets $1,956 $7,770 $— $9,726 (6)
Liabilities
Derivative liabilities (4)
Foreign exchange contracts $ — $ 523 $— $ 523
Equity contracts — 8 — 8
Total liabilities $ — $ 531 $— $ 531 (6)
* Represents a change from the 2011 Annual Report to reflect Canada government securities of $983 million previously reported in Commercial paper, and a reduction of $151
million in Time deposits and certificates of deposit due to certain holdings which were out of the scope of this disclosure.
(1) Included within cash and cash equivalents in the Consolidated Statement of Financial Position.
(2) Included within investments and sundry assets in the Consolidated Statement of Financial Position.
(3)
The gross balances of derivative assets contained within prepaid expenses and other current assets, and investments and sundry assets in the Consolidated Statement
of Financial Position at December 31, 2011 are $546 million and $754 million, respectively.
(4)
The gross balances of derivative liabilities contained within other accrued expenses and liabilities, and other liabilities in the Consolidated Statement of Financial Position
at December 31, 2011 are $365 million and $166 million, respectively.
(5) Available-for-sale securities with carrying values that approximate fair value.
(6)
If derivative exposures covered by a qualifying master netting agreement had been netted in the Consolidated Statement of Financial Position, the total derivative asset and liability
positions would have been reduced by $324 million each.
There were no transfers between Levels 1 and 2 for the years ended
December 31, 2012 and 2011.
Financial Assets and Liabilities Not Measured at Fair Value
Short-Term Receivables and Payables
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
(excluding the current portion of long-term debt) are financial liabili-
ties with carrying values that approximate fair value. If measured
at fair value in the financial statements, these financial instruments
would be classified as Level 3 in the fair value hierarcy.
Loans and Long-Term Receivables
Fair values are based on discounted future cash flows using cur-
rent interest rates offered for similar loans to clients with similar
credit ratings for the same remaining maturities. At December 31,
2012 and 2011, the difference between the carrying amount and
estimated fair value for loans and long-term receivables was
immaterial. If measured at fair value in the financial statements,
these financial instruments would be classified as Level 3 in the
fair value hierarcy.
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 $24,088 million and
$22,857 million and the estimated fair value is $27,119 million and
$27,383 million at December 31, 2012 and 2011, respectively. If mea-
sured at fair value in the financial statements, long-term debt
(including the current portion) would be classified as Level 2 in the
fair value hierarcy.