United Technologies 2011 Annual Report Download - page 83

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the fair value of derivative instruments as of December 31:
(Dollars in millions) Balance Sheet Asset Location 2011 2010
Derivatives designated as hedging instruments:
Foreign Exchange Contracts Other assets, current $69 $73
Foreign Exchange Contracts Other assets 324
72 97
Derivatives not designated as hedging instruments:
Foreign Exchange Contracts Other assets, current 40 31
Foreign Exchange Contracts Other assets 25
42 36
Total Asset Derivative Contracts $114 $133
Balance Sheet Liability Location
Derivatives designated as hedging instruments:
Foreign Exchange Contracts Accrued liabilities $81 $16
Foreign Exchange Contracts Other long-term liabilities 43 1
124 17
Derivatives not designated as hedging instruments:
Foreign Exchange Contracts Accrued liabilities 40 33
Foreign Exchange Contracts Other long-term liabilities 13
41 36
Total Liability Derivative Contracts $165 $53
The impact from foreign exchange derivative instruments
that qualified as cash flow hedges for the period was as
follows:
December 31,
(Dollars in millions) 2011 2010
(Loss) gain recorded in Accumulated other comprehensive
loss $(46) $72
Gain reclassified from Accumulated other comprehensive
loss into Product sales (effective portion) 96 119
Assuming current market conditions continue, a $31 million
pre-tax loss is expected to be reclassified from Accumulated
other comprehensive loss into Product sales to reflect the
fixed prices obtained from foreign exchange hedging within
the next 12 months. At December 31, 2011, all derivative
contracts accounted for as cash flow hedges mature by
February 2014.
The effect on the Consolidated Statement of Operations from
foreign exchange contracts not designated as hedging
instruments was as follows:
December 31,
(Dollars in millions) 2011 2010
(Loss) gain recognized in Other income, net $(39) $153
Fair Value Disclosure. The Fair Value Measurements and
Disclosure Topic of the FASB ASC defines fair value,
establishes a framework for measuring fair value and expands
the related disclosure requirements. The Topic indicates,
among other things, that a fair value measurement assumes
that the transaction to sell an asset or transfer a liability
occurs in the principal market for the asset or liability or, in
the absence of a principal market, the most advantageous
market for the asset or liability, and also defines fair value
based upon an exit price model.
During 2011, we recorded other-than-temporary impairment
charges of $66 million on an equity investment. The
impairment charge recorded on our investment was
determined by comparing the carrying value of our
investment to the closing market value of the shares on the
dates the investment was deemed to be impaired.
During 2010, we had certain non-recurring measurements
resulting in impairment charges as well as a gain on the
re-measurement to fair value of a previously held equity
interest. As previously disclosed, during 2010, we recorded
approximately $86 million of asset impairment charges
associated with disposition activity within both Carrier and
Hamilton Sundstrand and also recorded an other-than-
temporary impairment charge of $159 million on our equity
investment in Clipper, which had a previous carrying value of
approximately $248 million. The impairment charge recorded
on our investment in Clipper was determined by comparing
the carrying value of our investment to the closing market
value of the shares on September 30, 2010. In December
2010, as a result of the acquisition of a controlling interest
and all of the remaining shares of Clipper, we recorded a $21
million gain from the re-measurement to fair value of our
previously held equity interest. Refer to Note 2 to the
Consolidated Financial Statements for further discussion.
Valuation Hierarchy. The Fair Value Measurements and
Disclosure Topic of the FASB ASC establishes a valuation
hierarchy for disclosure of the inputs to the valuations used
2011 ANNUAL REPORT 81