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Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
2012 Financial Report
79
(k) The fair value of our long-term debt (not including the current portion of long-term debt) is $37.5 billion as of December 31, 2012 and $40.1 billion as of
December 31, 2011. The fair value measurements for our long-term debt are based on Level 2 inputs, using a market approach.
A single estimate of fair value can result from a complex series of judgments about future events and uncertainties and can rely heavily on
estimates and assumptions. For a description of our general accounting policies associated with developing fair value estimates, see Note 1E.
Basis of Presentation and Significant Accounting Policies: Fair Value. For a description of the risks associated with estimates and
assumptions, see Note 1C. Basis of Presentation and Significant Accounting Policies: Estimates and Assumptions.
The following methods and assumptions were used to estimate the fair value of our financial assets and liabilities:
• Trading equity securities—quoted market prices.
• Trading debt securities—observable market interest rates.
• Available-for-sale debt securities—third-party matrix-pricing model that uses significant inputs derived from or corroborated by observable
market data and credit-adjusted interest rate yield curves.
• Available-for-sale money market funds—observable Net Asset Value prices.
• Available-for-sale equity securities, excluding money market funds—third-party pricing services that principally use a composite of
observable prices.
• Derivative financial instruments (assets and liabilities)—third-party matrix-pricing model that uses significant inputs derived from or
corroborated by observable market data. Where applicable, these models discount future cash flow amounts using market-based
observable inputs, including interest rate yield curves, and forward and spot prices for currencies. The credit risk impact to our derivative
financial instruments was not significant.
• Held-to-maturity debt securities—third-party matrix-pricing model that uses significant inputs derived from or corroborated by observable
market data and credit-adjusted interest rate yield curves.
• Private equity securities, excluding equity-method investments—application of the implied volatility associated with an observable biotech
index to the carrying amount of our portfolio.
• Short-term borrowings and long-term debt—third-party matrix-pricing model that uses significant inputs derived from or corroborated by
observable market data and our own credit rating.
We periodically review the methodologies, inputs and outputs of third-party pricing services for reasonableness. Our procedures can include,
for example, referencing other third-party pricing models, monitoring key observable inputs (like LIBOR interest rates) and selectively
performing test-comparisons of values with actual sales of financial instruments.
The following table provides the classification of these selected financial assets and liabilities in our consolidated balance sheets:
As of December 31,
(MILLIONS OF DOLLARS) 2012 2011
Assets
Cash and cash equivalents $1,000 $900
Short-term investments 22,319 23,270
Long-term investments 14,149 9,814
Taxes and other current assets(a) 296 357
Taxes and other noncurrent assets(b) 1,086 1,042
$38,850 $35,383
Liabilities
Short-term borrowings, including current portion of long-term debt $6,424 $4,016
Other current liabilities(c) 330 459
Long-term debt 31,036 34,926
Other noncurrent liabilities(d) 374 1,306
$38,164 $40,707
(a) As of December 31, 2012, derivative instruments at fair value include foreign currency forward-exchange contracts ($152 million) and foreign currency swaps
($144 million) and, as of December 31, 2011, include foreign currency forward-exchange contracts ($349 million) and interest rate swaps ($8 million).
(b) As of December 31, 2012, derivative instruments at fair value include interest rate swaps ($1 billion) and foreign currency swaps ($50 million) and, as of
December 31, 2011, include interest rate swaps ($1 billion) and foreign currency swaps ($17 million).
(c) At December 31, 2012, derivative instruments at fair value include foreign currency forward-exchange contracts ($243 million) and foreign currency swaps ($87
million) and, as of December 31, 2011, include foreign currency forward-exchange contracts ($355 million) and foreign currency swaps ($104 million).
(d) At December 31, 2012, derivative instruments at fair value include foreign currency swaps ($341 million) and interest rate swaps ($33 million) and, as of
December 31, 2011, include foreign currency swaps ($1.3 billion) and interest rate swaps ($14 million).