3M 2010 Annual Report Download - page 78

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72
3M reviews impairments associated with its marketable securities in accordance with the measurement guidance
provided by ASC 320, Investments-Debt and Equity Securities, when determining the classification of the impairment
as “temporary” or “other-than-temporary”. A temporary impairment charge results in an unrealized loss being
recorded in the other comprehensive income component of shareholders’ equity. Such an unrealized loss does not
reduce net income attributable to 3M for the applicable accounting period because the loss is not viewed as other-
than-temporary. The factors evaluated to differentiate between temporary and other-than-temporary include the
projected future cash flows, credit ratings actions, and assessment of the credit quality of the underlying collateral, as
well as other factors.
The balance at December 31, 2010 for marketable securities by contractual maturity are shown below. Actual
maturities may differ from contractual maturities because the issuers of the securities may have the right to prepay
obligations without prepayment penalties.
Dec. 31,
(Millions)
2010
Due in one year or less ...............................
$
794
Due after one year through three years ......
796
Due after three years through five years .....
17
Due after five years .....................................
34
Total marketable securities .........................
$
1,641
3M has a diversified marketable securities portfolio of $1.641 billion as of December 31, 2010. Within this portfolio,
current and long-term asset-backed securities (estimated fair value of $592 million) are primarily comprised of
interests in automobile loans and credit cards. At December 31, 2010, the asset-backed securities credit ratings were
AAA or A-1+, with the exception of two securities rated AA+ with a fair market value of less than $2 million.
3M’s marketable securities portfolio includes auction rate securities that represent interests in investment grade
credit default swaps; however, currently these holdings comprise less than one percent of this portfolio. The
estimated fair value of auction rate securities are $7 million and $5 million as of December 31, 2010 and 2009,
respectively. Gross unrealized losses within accumulated other comprehensive income related to auction rate
securities totaled $6 million (pre-tax) and $8 million (pre-tax) as of December 31, 2010 and 2009, respectively. As of
December 31, 2010, auction rate securities associated with these balances have been in a loss position for more
than 12 months. Since the second half of 2007, these auction rate securities failed to auction due to sell orders
exceeding buy orders. Liquidity for these auction-rate securities is typically provided by an auction process that
resets the applicable interest rate at pre-determined intervals, usually every 7, 28, 35, or 90 days. The funds
associated with failed auctions will not be accessible until a successful auction occurs or a buyer is found outside of
the auction process. Refer to Note 13 for a table that reconciles the beginning and ending balances of auction rate
securities.