Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2012

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

FAIR VALUE OF FINANCIAL INSTRUMENTS

The following table presents the fair value information for those assets and liabilities measured at fair value on a recurring basis:

	December 31, 2012							December 31, 2011
$ in millions	Carrying Value				Fair Value			Carrying Value				Fair Value
Financial Assets (Liabilities)
Marketable Securities
Trading			$ 259			$ 259				$ 219			$ 219
Available-for-sale		3			3				4			4
Held-to-maturity time deposits		—			—				250			250
Derivatives		(1		)	(1		)		7			7
Long-term debt, including current portion		(3,935		)	(4,834		)		(3,940		)	(4,675		)

There were no transfers of financial instruments between the three levels of fair value hierarchy during the years ended December 31, 2012 and 2011.

The carrying value of cash and cash equivalents approximate fair value.

Investments in Marketable Securities

The company holds a portfolio of marketable securities to partially fund long-term deferred compensation programs, consisting of equity securities that are classified as either trading or available-for-sale, which can be liquidated without restriction. These assets are recorded at fair value and are valued using Level 1 inputs (quoted market prices). In addition, the company occasionally holds short-term investments classified as held-to-maturity that are recorded at cost. As of December 31, 2012, marketable securities of $261 million were included in other non-current assets in the consolidated statements of financial position. As of December 31, 2011, marketable securities of $250 million were included in prepaid expenses and other current assets and $223 million were included in other non-current assets in the consolidated statements of financial position.

Derivative Financial Instruments and Hedging Activities

The company's derivative portfolio consists primarily of foreign currency forward contracts. Foreign currency forward contracts are used to manage foreign currency exchange rate risk related to receipts from customers and payments to suppliers denominated in foreign currencies. Derivative financial instruments are recognized as assets or liabilities in the financial statements and measured at fair value, and substantially all of these instruments are valued using Level 2 inputs. Where model-derived valuations are appropriate, the company utilizes the income approach to determine the fair value and uses the applicable London Interbank Offered Rate (LIBOR) swap rate as the discount rate.

The notional values for the company's derivative portfolio at December 31, 2012 and 2011, were $164 million and $233 million, respectively. The portion of the notional values designated as cash flow hedges at December 31, 2012 and 2011, were $110 million and $145 million, respectively.

Unrealized gains or losses on the effective portion of cash flow hedges are reclassified from other comprehensive income to earnings from continuing operations upon the settlement of the underlying transactions. The derivative fair values and related unrealized gains/losses at December 31, 2012 and 2011, were not material. Hedge contracts not designated for hedge accounting and the ineffective portion of cash flow hedges are recorded in other income.

Long-Term Debt

The fair value of long-term debt was calculated using Level 2 inputs based on interest rates available for debt with terms and maturities similar to the company’s existing debt arrangements.