Honeywell 2014 Annual Report Download - page 37

Download and view the complete annual report

Please find page 37 of the 2014 Honeywell annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 101

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101

based on a 10% weakening of the U.S. Dollar versus local currency exchange rates across all
maturities at December 31, 2014 and 2013.
Face or
Notional
Amount
Carrying
Value(1)
Fair
Value(1)
Estimated
Increase
(Decrease)
in Fair
Value(2)
December 31, 2014
Interest Rate Sensitive Instruments
Long-term debt (including current maturities) . . . . . . . . . . . . $6,985 $(6,985) $(7,817) $(478)
Interest rate swap agreements . . . . . . . . . . . . . . . . . . . . . . . . . 1,100 93 93 (69)
Foreign Exchange Rate Sensitive Instruments
Foreign currency exchange contracts(3). . . . . . . . . . . . . . . . . 7,291 10 10 86
December 31, 2013
Interest Rate Sensitive Instruments
Long-term debt (including current maturities) . . . . . . . . . . . . $7,433 $(7,433) $(8,066) $(466)
Interest rate swap agreements . . . . . . . . . . . . . . . . . . . . . . . . . 1,700 55 55 (77)
Foreign Exchange Rate Sensitive Instruments
Foreign currency exchange contracts(3). . . . . . . . . . . . . . . . . 7,298 (7) (7) 296
(1) Asset or (liability).
(2) A hypothetical immediate one percentage point decrease in interest rates across all maturities and
a potential change in fair value of foreign exchange rate sensitive instruments based on a 10%
strengthening of the U.S. dollar versus local currency exchange rates across all maturities will
result in a change in fair value equal to the inverse of the amount disclosed in the table.
(3) Changes in the fair value of foreign currency exchange contracts are offset by changes in the fair
value or cash flows of underlying hedged foreign currency transactions.
See Note 14 Financial Instruments and Fair Value Measures of Notes to Financial Statements for
further discussion.
CRITICAL ACCOUNTING POLICIES
The preparation of our consolidated financial statements in accordance with generally accepted
accounting principles is based on the selection and application of accounting policies that require us to
make significant estimates and assumptions about the effects of matters that are inherently uncertain.
We consider the accounting policies discussed below to be critical to the understanding of our financial
statements. Actual results could differ from our estimates and assumptions, and any such differences
could be material to our consolidated financial statements.
Contingent Liabilities—We are subject to a number of lawsuits, investigations and claims (some
of which involve substantial dollar amounts) that arise out of the conduct of our global business
operations or those of previously owned entities, including matters relating to commercial transactions,
government contracts, product liability (including asbestos), prior acquisitions and divestitures,
employee benefit plans, intellectual property, and environmental, health and safety matters. We
continually assess the likelihood of any adverse judgments or outcomes to our contingencies, as well
as potential amounts or ranges of probable losses, and recognize a liability, if any, for these
contingencies based on a careful analysis of each matter with the assistance of outside legal counsel
and, if applicable, other experts. Such analysis includes making judgments concerning matters such as
the costs associated with environmental matters, the outcome of negotiations, the number and cost of
pending and future asbestos claims, and the impact of evidentiary requirements. Because most
contingencies are resolved over long periods of time, liabilities may change in the future due to new
developments (including new discovery of facts, changes in legislation and outcomes of similar cases
through the judicial system), changes in assumptions or changes in our settlement strategy. See
Note 19 Commitments and Contingencies of Notes to Financial Statements for a discussion of
28