Raytheon 2012 Annual Report Download - page 105

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
97
Note 9: Fair Value Measurements
The estimated fair value of certain financial instruments, including cash and cash equivalents and short-term investments,
approximates the carrying value due to their short maturities. The estimated fair value of notes receivable approximates the
carrying value based principally on their underlying interest rates and terms, maturities, collateral and credit status of the
receivables. The carrying value of long-term debt of $4,731 million and $4,605 million at December 31, 2012 and December 31,
2011, respectively, was recorded at amortized cost. The estimated fair value of long-term debt of approximately $5,483 million
and $5,121 million at December 31, 2012 and December 31, 2011, respectively, was determined based on quoted prices in
inactive markets, which falls within Level 2 of the fair value measurement hierarchy.
At December 31, 2012, we had short-term investments of $856 million consisting of highly rated bank certificates of deposit
with a minimum long-term debt rating of A or A2 and a minimum short-term debt rating of A-1 or P-1.
We did not have any significant nonfinancial assets or nonfinancial liabilities that would be recognized or disclosed at fair
value on a recurring basis as of December 31, 2012 and December 31, 2011.
We did not have any transfers of assets and liabilities between Level 1 and Level 2 of the fair value measurement hierarchy
during the year ended December 31, 2012 and December 31, 2011.
The following tables set forth the financial assets and liabilities that we measured at fair value on a recurring basis by level
within the fair value hierarchy. We classify assets and liabilities measured at fair value in their entirety based on the lowest
level of input that is significant to their fair value measurement.
Assets and liabilities measured at fair value on a recurring basis consisted of the following at December 31:
2012 (in millions) Level 1 Level 2 (A) Level 3 Total
Assets
Marketable securities held in trust $ 407 $ — $ — $ 407
Short-term investments — 856 — 856
Foreign currency forward contracts 17 — — 17
Liabilities
Deferred compensation 251 — — 251
Foreign currency forward contracts 14 — — 14
2011 (in millions) Level 1 Level 2 (A) Level 3 Total
Assets
Marketable securities held in trust $ 363 $ — $ — $ 363
Foreign currency forward contracts 12 — — 12
Liabilities
Deferred compensation 223 — — 223
Foreign currency forward contracts 22 ——22
(A) Fair value of Level 2 assets is determined under a market approach using valuation models that utilize observable inputs, including maturity date, issue
date, settlement date, current commercial paper rate, current certificate of deposit rates and coupon rates.