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Fair Value Measurements
 9 Months Ended
Sep. 30, 2012
Fair Value Disclosures [Abstract]  
Fair Value Disclosures
Fair Value Measurements
The following table presents our assets and liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy. The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value. Level 1 refers to fair values determined based on quoted prices in active markets for identical assets. Level 2 refers to fair values estimated using significant other observable inputs and Level 3 includes fair values estimated using significant unobservable inputs. 
  
September 30, 2012
 
December 31, 2011
  
Total

 
Level 1

 
Level 2

 
Level 3

 
Total

 
Level 1

 
Level 2

 
Level 3

Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds

$2,815

 

$2,815

 

 

 

$3,104

 

$3,104

 

 

Available-for-sale investments
9

 
5

 


 

$4

 
10

 
5

 

 

$5

Derivatives
162

 

 

$162

 

 
155

 

 

$155

 

Total assets

$2,986

 

$2,820

 

$162

 

$4

 

$3,269

 

$3,109

 

$155

 

$5

Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivatives

($94
)
 

 

($94
)
 

 

($131
)
 

 

($131
)
 

Total liabilities

($94
)
 

 

($94
)
 

 

($131
)
 

 

($131
)
 


Money market funds and available-for-sale equity securities are valued using a market approach based on the quoted market prices of identical instruments. Available-for-sale debt investments are primarily valued using an income approach based on benchmark yields, reported trades and broker/dealer quotes.
Derivatives include foreign currency, commodity and interest rate contracts. Our foreign currency forward contracts are valued using an income approach based on the present value of the forward rate less the contract rate multiplied by the notional amount. Commodity derivatives are valued using an income approach based on the present value of the commodity index prices less the contract rate multiplied by the notional amount. The fair value of our interest rate swaps is derived from a discounted cash flow analysis based on the terms of the contract and the interest rate curve.
Certain assets have been measured at fair value on a nonrecurring basis using significant unobservable inputs (Level 3). The following table presents the nonrecurring losses recognized for the nine months ended September 30 and the fair value and asset classification of the related assets as of the impairment date:
  
2012
 
2011
  
Fair
Value

 
Total
Losses

 
Fair
Value

 
Total
Losses

Equipment under operating leases & Assets held for sale or re-lease

$25

 

($31
)
 

$111

 

($49
)
Property, plant and equipment
19

 
(21
)
 


 


Acquired intangible asset

 

 
8

 
(1
)
Total

$44

 

($52
)
 

$119

 

($50
)

The fair value of the impaired Operating lease equipment is derived by calculating a median collateral value from a consistent group of third party aircraft value publications. The values provided by the third party aircraft publications are derived from their knowledge of market trades and other market factors. Management reviews the publications quarterly to assess the continued appropriateness and consistency with market trends. Under certain circumstances, we adjust values based on the attributes and condition of the specific aircraft or equipment, usually when the features or use of the aircraft vary significantly from the more generic aircraft attributes covered by third party publications, or on the expected net sales price for the aircraft.
Property, plant and equipment and Acquired intangible assets were valued using an income approach based on the discounted cash flows associated with the underlying assets.
For Level 3 assets that were measured at fair value on a non-recurring basis during the nine months ended September 30, 2012, the following table presents the fair value of those assets as of the measurement date, valuation techniques and related unobservable inputs of those assets.
 
Fair
Value
 
Valuation
Technique(s)
 
Unobservable Input
 
Range
Median or Average
Equipment under operating leases & Assets held for sale or re-lease
$25
 
Market approach
 
Aircraft value publications
 
$24 - $53(1)
Median $35
 
 
Aircraft condition adjustments
 
($10) - $0(2)
Net ($10)
(1) 
The range represents the sum of the highest and lowest values for all aircraft subject to fair value measurement, according to the third party aircraft valuation publications that we use in our valuation process.
(2) 
The negative amount represents the sum for all aircraft subject to fair value measurement, of all downward adjustments based on consideration of individual aircraft attributes and condition. The positive amount represents the sum of all such upward adjustments.

Fair Value Disclosures
The fair values and related carrying values of financial instruments that are not required to be remeasured at fair value on the Condensed Consolidated Statements of Financial Position were as follows:
  
September 30, 2012
December 31, 2011
  
Carrying
Amount

Total Fair
Value

Level 1
Level 2

Level 3

Carrying
Amount

Total Fair
Value

Assets
 
 
 
 
 
 
 
Accounts receivable, net

$5,437


$5,454



$5,454



$5,793


$5,690

Notes receivable, net
650

710


710


792

836

Liabilities
 

 
 
 
 
 
Debt, excluding capital lease obligations
(10,988
)
(13,258
)

(13,189
)

($69
)
(12,136
)
(14,099
)
Accounts payable
(9,152
)
(9,148
)

(9,148
)

(8,406
)
(8,396
)
Residual value and credit guarantees
(3
)
(2
)


(2
)
(8
)
(9
)
Contingent repurchase commitments
(5
)
(7
)


(7
)
(7
)
(4
)

The fair values of Accounts receivable and Accounts payable are based on current market rates for loans of the same risk and maturities. The fair values of our variable rate notes receivable that reprice frequently approximate their carrying amounts. The fair values of fixed rate notes receivable are estimated using discounted cash flow analysis with interest rates currently offered on loans with similar terms to borrowers of similar credit quality. The fair value of our debt that is traded in the secondary market is classified as Level 2 and is based on current market yields. For our debt that is not traded in the secondary market, the fair value is classified as Level 2 and is based on our indicative borrowing cost derived from dealer quotes or discounted cash flows. The fair value of our debt classified as Level 3 is based on the median of the underlying collateral value as described above. The fair values of the residual value guarantees and contingent repurchase commitments are determined using a Black Futures Options formula and include such assumptions as the expected value of the aircraft on the settlement date, volatility of aircraft prices, time until settlement and the risk free discount rate. The fair value of the credit guarantees is estimated based on the expected cash flows of those commitments, given the creditor’s probability of default, and discounted using the risk free rate. With regard to other financial instruments with off-balance sheet risk, it is not practicable to estimate the fair value of our indemnifications because the amount and timing of those arrangements are uncertain. Items not included in the above disclosures include cash, restricted cash, time deposits and other deposits, commercial paper, money market funds and long-term payables. The carrying values of those items, as reflected in the Condensed Consolidated Statements of Financial Position, approximate their fair value at September 30, 2012 and December 31, 2011. The fair value of assets and liabilities whose carrying value approximates fair value is determined using Level 2 inputs, with the exception of cash (Level 1).