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TableofContents
liabilitiesthatarerecognizedordisclosedatfairvalueintheCompany’sfinancialstatementsonarecurringbasisfor2015and2014.
3Musesvariousvaluationtechniques,whichareprimarilybaseduponthemarketandincomeapproaches,withrespecttofinancial
assetsandliabilities.Followingisadescriptionofthevaluationmethodologiesusedfortherespectivefinancialassetsandliabilities
measuredatfairvalue.
Available-for-salemarketablesecurities—exceptcertainU.S.municipalsecurities:
Marketablesecurities,exceptcertainU.S.municipalsecurities,arevaluedutilizingmultiplesources.Aweightedaveragepriceis
usedforthesesecurities.Marketpricesareobtainedforthesesecuritiesfromavarietyofindustrystandarddataproviders,security
masterfilesfromlargefinancialinstitutions,andotherthird-partysources.Thesemultiplepricesareusedasinputsintoa
distribution-curve-basedalgorithmtodeterminethedailyfairvaluetobeused.3MclassifiesU.S.treasurysecuritiesaslevel1,while
allothermarketablesecurities(excludingcertainU.S.municipalsecurities)areclassifiedaslevel2.Marketablesecuritiesare
discussedfurtherinNote9.
Available-for-salemarketablesecurities—certainU.S.municipalsecuritiesonly:
Inthefourthquarter2014,3MobtainedamunicipalbondwiththeCityofNevada,Missouri,whichrepresent3M’sonlyU.S.
municipalsecuritiesholdingasofDecember31,2015.Duetothenatureofthissecurity,thevaluationmethodutilizedwillinclude
thefinancialhealthoftheCityofNevada,anyrecentmunicipalbondissuancesbyNevada,andmacroeconomicconsiderations
relatedtothedirectionofinterestratesandthehealthoftheoverallmunicipalbondmarket,andassuchwillbeclassifiedasalevel3
security.
Available-for-saleinvestments:
Investmentsincludeequitysecuritiesthataretradedinanactivemarket.Closingstockpricesarereadilyavailablefromactive
marketsandareusedasbeingrepresentativeoffairvalue.3Mclassifiesthesesecuritiesaslevel1.
Derivativeinstruments:
TheCompany’sderivativeassetsandliabilitieswithinthescopeofASC815,DerivativesandHedging,arerequiredtoberecorded
atfairvalue.TheCompany’sderivativesthatarerecordedatfairvalueincludeforeigncurrencyforwardandoptioncontracts,
commoditypriceswaps,interestrateswaps,andnetinvestmenthedgeswherethehedginginstrumentisrecordedatfairvalue.Net
investmenthedgesthatuseforeigncurrencydenominateddebttohedge3M’snetinvestmentarenotimpactedbythefairvalue
measurementstandardunderASC820,asthedebtusedasthehedginginstrumentismarkedtoavaluewithrespecttochangesin
spotforeigncurrencyexchangeratesandnotwithrespecttootherfactorsthatmayimpactfairvalue.
3Mhasdeterminedthatforeigncurrencyforwards,commoditypriceswaps,currencyswaps,foreigncurrencyoptions,interestrate
swapsandcross-currencyswapswillbeconsideredlevel2measurements.3Musesinputsotherthanquotedpricesthatare
observablefortheasset.Theseinputsincludeforeigncurrencyexchangerates,volatilities,andinterestrates.Derivativepositionsare
primarilyvaluedusingstandardcalculations/modelsthatuseastheirbasisreadilyobservablemarketparameters.Industrystandard
dataprovidersare3M’sprimarysourceforforwardandspotrateinformationforbothinterestratesandcurrencyrates,withresulting
valuationsperiodicallyvalidatedthroughthird-partyorcounterpartyquotesandanetpresentvaluestreamofcashflowsmodel.
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