Fair Value of Financial Instruments (Unaudited)

9 Months Ended

Sep. 30, 2011

FAIR VALUE OF FINANCIAL INSTRUMENTS [Abstract]

09. FAIR VALUE OF FINANCIAL INSTRUMENTS

9.    FAIR VALUE OF FINANCIAL INSTRUMENTS

The following table presents fair value information for those assets and liabilities measured at fair value on a recurring basis as of September 30, 2011, and December 31, 2010:

$ in millions	September 30, 2011						December 31, 2010
Financial Assets (Liabilities)	Carrying Value			Fair Value			Carrying Value			Fair Value
Marketable Securities (1)
Trading		$     215			$     215			$     320			$     320
Available-for-Sale		6			6			10			10
Derivatives		9			9			11			11
Long-term debt, including current portion		$(3,975	)		$(4,760	)		$(4,724	)		$(5,100	)

(1) Includes $1 million and $68 million in prepaid and other current assets and $220 million and $262 million in miscellaneous other assets at September 30, 2011, and December 31, 2010, respectively.

There were no material transfers of financial instruments between the three levels of fair value hierarchy during the nine months ended September 30, 2011, and the year ended December 31, 2010.

The carrying amounts of all other financial instruments not shown above approximate fair value due to their short term nature.

Investments in Marketable Securities – The company holds a portfolio of marketable securities, primarily consisting of equity securities that are classified as either trading or available-for-sale and can be liquidated without restriction. These assets are recorded at fair value and are valued using Level 1 inputs. In June 2011, the company sold marketable securities classified as trading securities for $69 million, resulting in a $3 million realized gain recorded in other, net in the condensed consolidated statements of operations.

Derivative Financial Instruments and Hedging Activities – The company utilizes derivative financial instruments to manage exposure to interest rate risk and foreign currency exchange rate risk. The company does not use derivative financial instruments for trading or speculative purposes, nor does it use leveraged financial instruments. 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.

The table below summarizes the notional values of our derivative portfolio as of September 30, 2011, and December 31, 2010:

$ in millions	2011		2010
Designated as cash flow hedges:
Foreign currency buy	$	39	$	40
Foreign currency sell		116		86
Interest rate swaps				200
Not designated as cash flow hedges:
Foreign currency buy		2		8
Foreign currency sell		77		75
Total notional value	$	234	$	409

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 fair value and uses the applicable London Interbank Offered Rate (LIBOR) swap rate as the discount rate. While all other changes in the fair value of derivative financial instruments are recorded in earnings from continuing operations, the effective portion of the changes in the fair value of derivative financial instruments that qualify and are designated as effective cash flow hedges are recorded in other comprehensive income. Credit risk related to derivative financial instruments is considered minimal and is managed by requiring high credit standards for counterparties and through periodic settlements of positions.

For derivative financial instruments not designated as hedging instruments, as well as the ineffective portion of cash flow hedges, the gains or losses resulting from changes in the fair value are reported in Other, net in the condensed consolidated statements of operations. Unrealized gains or losses on the effective 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 and losses at September 30, 2011, and December 31, 2010, were not material.

Long-Term Debt – The fair value of long-term debt is calculated using Level 2 inputs based on interest rates available for debt with terms and maturities similar to the company’s existing debt arrangements. In February 2011, the company repaid notes with a face value of $750 million and an interest rate of 7.125% upon their maturity.