Johnson Controls 2015 Annual Report Download - page 82

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82
Fair Value Measurements Using:
Total as of
September 30, 2014
Quoted Prices
in Active
Markets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Other current assets
Foreign currency exchange derivatives $ 34 $ — $ 34 $ —
Cross-currency interest rate swaps 15 — 15 —
Other noncurrent assets
Interest rate swaps 2 — 2 —
Investments in marketable common stock 4 4 — —
Equity swap 192 192 — —
Total assets $ 247 $ 196 $ 51 $ —
Other current liabilities
Foreign currency exchange derivatives $ 33 $ — $ 33 $ —
Commodity derivatives 3 — 3 —
Current portion of long-term debt
Fixed rate debt swapped to floating 125 — 125 —
Long-term debt
Fixed rate debt swapped to floating 1,649 — 1,649 —
Other noncurrent liabilities
Interest rate swaps 3 — 3 —
Total liabilities $ 1,813 $ — $ 1,813 $ —
Valuation Methods
Foreign currency exchange derivatives - The Company selectively hedges anticipated transactions that are subject to foreign
exchange rate risk primarily using foreign currency exchange hedge contracts. The foreign currency exchange derivatives are
valued under a market approach using publicized spot and forward prices. As cash flow hedges under ASC 815, "Derivatives and
Hedging," the effective portion of the hedge gains or losses due to changes in fair value are initially recorded as a component of
AOCI and are subsequently reclassified into earnings when the hedged transactions occur and affect earnings. Any ineffective
portion of the hedge is reflected in the consolidated statements of income. These contracts were highly effective in hedging the
variability in future cash flows attributable to changes in currency exchange rates at September 30, 2015 and 2014. The fair value
of foreign currency exchange derivatives not designated as hedging instruments under ASC 815 are recorded in the consolidated
statements of income.
Commodity derivatives - The Company selectively hedges anticipated transactions that are subject to commodity price risk,
primarily using commodity hedge contracts, to minimize overall price risk associated with the Company’s purchases of lead,
copper, tin and aluminum. The commodity derivatives are valued under a market approach using publicized prices, where available,
or dealer quotes. As cash flow hedges, the effective portion of the hedge gains or losses due to changes in fair value are initially
recorded as a component of AOCI and are subsequently reclassified into earnings when the hedged transactions, typically sales,
occur and affect earnings. Any ineffective portion of the hedge is reflected in the consolidated statements of income. These contracts
were highly effective in hedging the variability in future cash flows attributable to changes in commodity prices at September 30,
2015 and 2014.
Interest rate swaps and related debt - The Company selectively uses interest rate swaps to reduce market risk associated with
changes in interest rates for its fixed-rate notes. As fair value hedges, the interest rate swaps and related debt balances are valued
under a market approach using publicized swap curves. Changes in the fair value of the swap and hedged portion of the debt are
recorded in the consolidated statements of income. In the second quarter of fiscal 2011, the Company entered into one fixed to
floating interest rate swap totaling $100 million to hedge the coupon of its 5.8% notes that matured November 2012, two fixed to
floating interest rate swaps totaling $300 million to hedge the coupon of its 4.875% notes that matured in September 2013 and
five fixed to floating interest rate swaps totaling $450 million to hedge the coupon of its 1.75% notes that matured in March 2014.
In the fourth quarter of fiscal 2013, the Company entered into one fixed to floating interest rate swap totaling approximately $125