United Technologies 2011 Annual Report Download - page 77

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The fair value measurement of plan assets using significant unobservable inputs (Level 3) changed due to the following:
(Dollars in millions)
Global
Equities
Enhanced
Global
Equities
Private
Equities
Corporate
Bonds Real Estate Total
Balance, December 31, 2009 $— $ 11 $1,045 $ — $ 715 $ 1,771
Realized gains (losses) — — 157 — (6) 151
Unrealized gains relating to instruments still held in the reporting period — 9 51 — 63 123
Purchases, sales, and settlements, net 1 225 (119) — 150 257
Transfers in, net — — — — 22 22
Balance, December 31, 2010 1 245 1,134 — 944 2,324
Realized (losses) gains — (1) 108 — (6) 101
Unrealized (losses) gains relating to instruments still held in the
reporting period — (1) 17 6 137 159
Purchases, sales, and settlements, net (1) (4) (100) 104 289 288
BALANCE, DECEMBER 31, 2011 $— $239 $ 1,159 $ 110 $1,364 $2,872
Quoted market prices are used to value investments when
available. Investments in securities traded on exchanges,
including listed futures and options, are valued at the last
reported sale prices on the last business day of the year or, if
not available, the last reported bid prices. Fixed income
securities are primarily measured using a market approach
pricing methodology, where observable prices are obtained
by market transactions involving identical or comparable
securities of issuers with similar credit ratings. Mortgages
have been valued on the basis of their future principal and
interest payments discounted at prevailing interest rates for
similar investments. Investment contracts are valued at fair
value by discounting the related cash flows based on current
yields of similar instruments with comparable durations. Real
estate investments are valued on a quarterly basis using
discounted cash flow models which consider long-term lease
estimates, future rental receipts and estimated residual
values. Valuation estimates are supplemented by third-party
appraisals on an annual basis.
Private equity limited partnerships are valued quarterly using
discounted cash flows, earnings multiples and market
multiples. Valuation adjustments reflect changes in operating
results, financial condition, or prospects of the applicable
portfolio company. Over-the-counter securities and
government obligations are valued at the bid prices or the
average of the bid and ask prices on the last business day of
the year from published sources or, if not available, from
other sources considered reliable, generally broker quotes.
Temporary cash investments are stated at cost, which
approximates fair value.
ESTIMATED FUTURE CONTRIBUTIONS AND BENEFIT
PAYMENTS
We expect to make contributions of approximately $100
million to our foreign defined benefit pension plans in 2012.
Although we are not required to make contributions to our
domestic defined benefit pension plans through the end of
2012, we may elect to make discretionary contributions in
2012. Contributions do not reflect benefits to be paid directly
from corporate assets.
Benefit payments, including amounts to be paid from
corporate assets, and reflecting expected future service, as
appropriate, are expected to be paid as follows: $1,356 million
in 2012, $1,378 million in 2013, $1,433 million in 2014, $1,493
million in 2015, $1,556 million in 2016, and $8,788 million from
2017 through 2021.
Postretirement Benefit Plans. We sponsor a number of
postretirement benefit plans that provide health and life
benefits to eligible retirees. Such benefits are provided
primarily from domestic plans, which comprise approximately
84% of the benefit obligation. The postretirement plans are
primarily unfunded. Assets in funded plans are primarily
invested in cash and cash equivalents.
(Dollars in millions) 2011 2010
CHANGE IN BENEFIT OBLIGATION:
Beginning balance $832 $876
Service cost 32
Interest cost 39 46
Actuarial gain (7) (29)
Total benefits paid (104) (105)
Other 21 42
Ending balance $784 $ 832
CHANGE IN PLAN ASSETS:
Beginning balance $10 $11
Actual return on plan assets 2(1)
Employer contributions 76 76
Benefits paid from plan assets (104) (105)
Other 16 29
Ending balance $— $10
FUNDED STATUS:
Fair value of plan assets $— $10
Benefit obligations (784) (832)
Funded status of plan $(784) $(822)
AMOUNTS RECOGNIZED IN THE CONSOLIDATED
BALANCE SHEET CONSIST OF:
Current liability $(74) $(66)
Noncurrent liability (710) (756)
Net amount recognized $(784) $(822)
AMOUNTS RECOGNIZED IN ACCUMULATED OTHER
COMPREHENSIVE LOSS CONSIST OF:
Net actuarial gain $(120) $ (130)
Prior service cost 21
Net amount recognized $ (118) $ (129)
2011 ANNUAL REPORT 75