The carrying value of cash and cash equivalents, accounts receivable, accounts payable, short-term debt and other current financial assets and liabilities approximate their fair value because of the short-term maturity of these instruments.

The Company uses derivative financial instruments (“derivatives”) as part of its debt management to mitigate the market risk that occurs from its exposure to changes in interest rates and foreign exchange rates. The Company does not enter into derivatives for trading or other speculative purposes. The Company’s use of derivatives is in accordance with the strategies contained in the Company’s overall financial policy. All derivatives are recognized in the consolidated financial statements at fair value. For certain derivatives, hedge accounting is not applied either because non-hedge accounting treatment creates the same accounting result or the hedge does not meet the hedge accounting requirements, although each hedge is entered into applying the same rationale concerning mitigating market risk that occurs from changes in interest rates and foreign exchange rates.

The degree of judgment utilized in measuring the fair value of the instruments generally correlates to the level of pricing observability. Pricing observability is impacted by several factors, including the type of asset or liability, whether the asset or liability has an established market and the characteristics specific to the transaction. Instruments with readily active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of pricing observability and a lesser degree of judgment utilized in measuring fair value. Conversely, assets rarely traded or not quoted will generally have less, or no, pricing observability and a higher degree of judgment utilized in measuring fair value.

All the Company’s derivatives are classified as Level 2 financial instruments in the fair value hierarchy. Level 2 pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reported date. The nature of these assets and liabilities include items for which quoted prices are available but traded less frequently, and items that are fair valued using other financial instruments, the parameters of which can be directly observed.

The carrying value is the same as the fair value as these instruments are recognized in the consolidated financial statements at fair value. Although the Company is party to close-out netting agreements ("ISDA agreements") with all derivative counterparties, the fair values in the tables below and in the Condensed Consolidated Balance Sheets at June 30, 2021 and December 31, 2020 have been presented on a gross basis. According to the ISDA agreements, transaction amounts payable to a counterparty on the same date and in the same currency can be netted. The amounts subject to netting agreements that the Company chose not to offset are presented below.

There were no derivatives designated as hedging instruments as of June 30, 2021 and December 31, 2020 related to the operations.

Derivatives not designated as hedging instruments relate to economic hedges and are marked to market with all amounts recognized in the Consolidated Statements of Income. The derivatives not designated as hedging instruments outstanding at June 30, 2021 and December 31, 2020 were foreign exchange swaps.

For the three month periods ended June 30, 2021 and June 30, 2020, the gains and losses recognized in other non-operating items, net were a gain of $20 million and a gain of $7 million, respectively, for derivative instruments not designated as hedging instruments. For the six month periods ended June 30, 2021 and June 30, 2020, the gains and losses recognized in other non-operating items, net were a loss of $38 million and a loss of $2 million, respectively, for derivative instruments not designated as hedging instruments. The realized part of the gains and losses referred to above are reported under financing activities in the statement of cash flows.

For the three and six month periods ended June 30, 2021 and June 30, 2020, the gains and losses recognized as interest expense were immaterial.

The tables below present information about the Company’s derivative financial assets and liabilities measured at fair value on a recurring basis (dollars in millions).


	June 30, 2021									December 31, 2020
				Fair Value Measurements									Fair Value Measurements
Description	Nominal volume			Derivative asset (Other current assets)			Derivative liability (Other current liabilities)			Nominal volume			Derivative asset (Other current assets)			Derivative liability (Other current liabilities)
Derivatives not designated as hedging instruments
Foreign exchange swaps, less than 6 months	$	1,300	1)	$	1	2)	$	16	3)	$	1,463	4)	$	25	5)	$	3	6)
Total derivatives not designated as hedging instruments	$	1,300		$	1		$	16		$	1,463		$	25		$	3

1) Net nominal amount after deducting for offsetting swaps under ISDA agreements is $1,300 million.

2) Net amount after deducting for offsetting swaps under ISDA agreements is $1 million.

3) Net amount after deducting for offsetting swaps under ISDA agreements is $16 million.

4) Net nominal amount after deducting for offsetting swaps under ISDA agreements is $1,463 million.

5) Net amount after deducting for offsetting swaps under ISDA agreements is $25 million.

6) Net amount after deducting for offsetting swaps under ISDA agreements is $3 million.

The fair value of long-term debt is determined either from quoted market prices as provided by participants in the secondary market or for long-term debt without quoted market prices, estimated using a discounted cash flow method based on the Company’s current borrowing rates for similar types of financing. The Company has determined that each of these fair value measurements of debt reside within Level 2 of the fair value hierarchy.

The fair value and carrying value of debt is summarized in the table below (dollars in millions).


	June 30, 2021				December 31, 2020
	Carrying value1)		Fair value		Carrying value1)		Fair value
Long-term debt
Bonds	$	1,359	$	1,453	$	1,377	$	1,483
Loans		352		367		732		753
Other long-term debt		1		1		1		1
Total long-term debt		1,712		1,821		2,110		2,237

Short-term debt
Short-term portion of long-term debt		353		356		275		278
Overdrafts and other short-term debt		10		10		27		27
Total short-term debt	$	363	$	366	$	302	$	305

1) Debt as reported in balance sheet.

In addition to assets and liabilities that are measured at fair value on a recurring basis, the Company also has assets and liabilities in its balance sheet that are measured at fair value on a nonrecurring basis, including certain long-lived assets, including equity method investments, goodwill and other intangible assets, typically as it relates to impairment.

The Company has determined that the fair value measurements included in each of these assets and liabilities rely primarily on Company-specific inputs and the Company’s assumptions about the use of the assets and settlements of liabilities, as observable inputs are not available. The Company has determined that each of these fair value measurements reside within Level 3 of the fair value hierarchy. To determine the fair value of long-lived assets, the Company utilizes the projected cash flows expected to be generated by the long-lived assets, then discounts the future cash flows over the expected life of the long-lived assets.

For the three and six month periods ended June 30, 2021 and June 30, 2020, the Company did not record any material impairment charges on its long-lived assets for its operations.