Emerson 2012 Annual Report Download - page 49

2012 Annual Report | 47
ASSET CLASSES
U.S. Equities reflects companies domiciled in the U.S., including multinational companies. International Equities is
comprised of companies domiciled in developed nations outside the U.S. Emerging Market Equities is comprised of
companies domiciled in portions of Asia, Eastern Europe and Latin America. Corporate Bonds represent investment-
grade debt of issuers primarily from the U.S. Government Bonds include investment-grade instruments issued by
federal, state and local governments, primarily in the U.S. High Yield Bonds include non-investment-grade debt from a
diverse group of developed market issuers. Other includes cash, interests in mixed asset funds investing in commodi-
ties, natural resources, agriculture and exchange-traded real estate funds, life insurance contracts (U.S.), and shares in
certain general investment funds of financial institutions or insurance arrangements (non-U.S.) that typically ensure no
market losses or provide for a small minimum return guarantee.
FAIR VALUE HIERARCHY CATEGORIES
Valuations of Level 1 assets for all classes are based on quoted closing market prices from the principal exchanges
where the individual securities are traded. Cash is valued at cost, which approximates fair value. Equity securities
categorized as Level 2 assets are primarily non-exchange-traded commingled or collective funds where the underlying
securities have observable prices available from active markets. Valuation is based on the net asset value of fund units
held as derived from the fair value of the underlying assets. Debt securities categorized as Level 2 assets are generally
valued based on independent broker/dealer bids or by comparison to other debt securities having similar durations,
yields and credit ratings. Other Level 2 assets are valued based on a net asset value of fund units held, which is derived
from either market-observed pricing for the underlying assets or broker/dealer quotation. U.S. equity securities clas-
sified as Level 3 are fund investments in private companies. Valuation techniques and inputs for these assets include
discounted cash flow analysis, earnings multiple approaches, recent transactions, transferability restrictions, prevailing
discount rates, volatilities, credit ratings and other factors. In the Other class, interests in mixed assets funds are Level 2,
and U.S. life insurance contracts and non-U.S. general fund investments and insurance arrangements are Level 3.
A reconciliation of the change in value for Level 3 assets follows:
2011 2012
Beginning balance, October 1 $249 267
Gains (Losses) on assets held 34 9
Gains (Losses) on assets sold (9) (16)
Purchases, sales and settlements, net (7) (10)
Ending balance, September 30 $267 250
(11) Postretirement Plans
The Company sponsors unfunded postretirement benefit plans (primarily health care) for U.S. retirees and their
dependents. The components of net postretirement benefits expense for the years ended September 30 follow:
2010 2011 2012
Service cost $ 5 3 2
Interest cost 24 17 16
Net amortization 1 (7) (11)
Net postretirement expense $30 13 7
Reconciliations of the actuarial present value of accumulated postretirement benefit obligations follow:
2011 2012
Benefit obligation, beginning $417 392
Service cost 3 2
Interest cost 17 16
Actuarial (gain) loss (25) (10)
Benefits paid (20) (17)
Plan amendments – (16)
Benefit obligation, ending (recognized in balance sheet) $392 367