Pfizer 2010 Annual Report Download - page 77

Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
9. Financial Instruments
A. Selected Financial Assets and Liabilities
Information about certain of our financial assets and liabilities follows:
AS OF DECEMBER 31,
(MILLIONS OF DOLLARS) 2010 2009
Selected financial assets measured at fair value on a recurring basis(a):
Trading securities(b) $ 173 $ 184
Available-for-sale debt securities(c) 32,699 32,338
Available-for-sale money market funds(d) 1,217 2,569
Available-for-sale equity securities, excluding money market funds(c) 230 281
Derivative financial instruments in receivable positions(e):
Interest rate swaps 603 276
Foreign currency forward-exchange contracts 494 502
Foreign currency swaps 128 798
Total 35,544 36,948
Other selected financial assets(f):
Held-to-maturity debt securities, carried at amortized cost(c) 1,178 812
Private equity securities, carried at cost or equity method(g) 1,135 811
Short-term loans, carried at cost(h) 467 1,195
Long-term loans, carried at cost(h) 299 784
Total 3,079 3,602
Total selected financial assets(i) $38,623 $40,550
Financial liabilities measured at fair value on a recurring basis(a):
Derivative financial instruments in a liability position(j):
Foreign currency swaps $ 623 $ 528
Foreign currency forward-exchange contracts 257 237
Interest rate swaps 425
Total 884 790
Other financial liabilities(k):
Short-term borrowings, carried at historical proceeds, as adjusted(f), (l) 5,623 5,469
Long-term debt, carried at historical proceeds, as adjusted(m), (n) 38,410 43,193
Total 44,033 48,662
Total selected financial liabilities $44,917 $49,452
(a) Fair values are determined based on valuation techniques categorized as follows: Level 1 means the use of quoted prices for identical instruments
in active markets; Level 2 means the use of quoted prices for similar instruments in active markets or quoted prices for identical or similar
instruments in markets that are not active or are directly or indirectly observable; Level 3 means the use of unobservable inputs. All of our financial
assets and liabilities measured at fair value on a recurring basis use Level 2 inputs in the calculation of fair value, except that included in
available-for-sale equity securities, excluding money market funds, are $105 million as of December 31, 2010 and $77 million as of December 31,
2009 of investments that use Level 1 inputs in the calculation of fair value. None of our financial assets and liabilities measured at fair value on a
recurring basis are valued using Level 3 inputs at December 31, 2010 or 2009.
(b) Trading securities are held in trust for legacy business acquisition severance benefits.
(c) Gross unrealized gains and losses are not significant.
(d) Includes approximately $625 million as of December 31, 2010 and approximately $1.2 billion as of December 31, 2009 of money market funds held
in escrow to secure certain of Wyeth’s payment obligations under its 1999 Nationwide Class Action Settlement Agreement, which relates to litigation
against Wyeth concerning its former weight-loss products, Redux and Pondimin (see Note 9G. Financial Instruments: Guarantee).
(e) Designated as hedging instruments, except for certain foreign currency contracts used as offsets; namely, foreign currency forward-exchange
contracts with fair values of $326 million and foreign currency swaps with fair values of $17 million at December 31, 2010; and foreign currency
swaps with fair values of $106 million and foreign currency forward-exchange contracts with fair values of $100 million at December 31, 2009.
(f) The differences between the estimated fair values and carrying values of our financial assets and liabilities not measured at fair value on a recurring
basis were not significant as of December 31, 2010 or December 31, 2009.
(g) Our private equity securities represent investments in the life sciences sector.
(h) Our short-term and long-term loans are due from companies with highly rated securities (Standard & Poor’s (S&P) ratings of mostly AA or better).
(i) The decrease in selected financial assets is primarily due to the use of proceeds of short-term investments for repayment of short-term borrowings
and for tax payments made in the first quarter of 2010, primarily associated with certain business decisions executed to finance the Wyeth
acquisition, partially offset by cash flows from operations.
(j) Designated as hedging instruments, except for certain foreign currency contracts used as offsets; namely, foreign currency forward-exchange
contracts with fair values of $186 million and foreign currency swaps with fair values of $93 million at December 31, 2010; and foreign currency
forward-exchange contracts with fair values of $122 million and foreign currency swaps with fair values of $3 million at December 31, 2009.
(k) The carrying amounts may include adjustments for discount or premium amortization or for the effect of interest rate swaps designated as hedges.
(l) Includes foreign currency borrowings with fair values of $2.0 billion at December 31, 2010 and $1.1 billion at December 31, 2009, which are used as
hedging instruments.
(m) Includes foreign currency debt with fair values of $880 million at December 31, 2010 and $2.1 billion at December 31, 2009, which are used as
hedging instruments.
(n) The fair value of our long-term debt is $42.3 billion at December 31, 2010 and $46.2 billion at December 31, 2009.
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