Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2013

Assets and liabilities measured on a recurring basis at fair value

Assets and liabilities measured on a recurring basis at fair value, primarily related to Financial Products, included in our Consolidated Statement of Financial Position as of March 31, 2013 and December 31, 2012 are summarized below:



(Millions of dollars)	March 31, 2013
	Level 1		Level 2		Level 3		Total Assets / Liabilities, at Fair Value
Assets
Available-for-sale securities
Government debt
U.S. treasury bonds	$	10	$	—	$	—	$	10
Other U.S. and non-U.S. government bonds	—		122		—		122
Corporate bonds
Corporate bonds	—		674		—		674
Asset-backed securities	—		94		—		94
Mortgage-backed debt securities
U.S. governmental agency	—		343		—		343
Residential	—		24		—		24
Commercial	—		110		—		110
Equity securities
Large capitalization value	209		—		—		209
Smaller company growth	38		—		—		38
Total available-for-sale securities	257		1,367		—		1,624
Derivative financial instruments, net	—		77		—		77
Total Assets	$	257	$	1,444	$	—	$	1,701
Liabilities
Guarantees	$	—	$	—	$	16	$	16
Total Liabilities	$	—	$	—	$	16	$	16



(Millions of dollars)	December 31, 2012
	Level 1		Level 2		Level 3		Total Assets / Liabilities, at Fair Value
Assets
Available-for-sale securities
Government debt
U.S. treasury bonds	$	10	$	—	$	—	$	10
Other U.S. and non-U.S. government bonds	—		146		—		146
Corporate bonds
Corporate bonds	—		664		—		664
Asset-backed securities	—		96		—		96
Mortgage-backed debt securities
U.S. governmental agency	—		299		—		299
Residential	—		25		—		25
Commercial	—		127		—		127
Equity securities
Large capitalization value	185		—		—		185
Smaller company growth	34		—		—		34
Total available-for-sale securities	229		1,357		—		1,586
Derivative financial instruments, net	—		154		—		154
Total Assets	$	229	$	1,511	$	—	$	1,740
Liabilities
Guarantees	$	—	$	—	$	14	$	14
Total Liabilities	$	—	$	—	$	14	$	14

Roll-forward of liabilities measured at fair value using Level 3 inputs

Below are roll-forwards of liabilities measured at fair value using Level 3 inputs for the three months ended March 31, 2013 and 2012. These instruments were valued using pricing models that, in management’s judgment, reflect the assumptions of a marketplace participant.



(Millions of dollars)	Guarantees
Balance at December 31, 2012	$	14
Issuance of guarantees	5
Expiration of guarantees	(3		)
Balance at March 31, 2013	$	16

Balance at December 31, 2011	$	7
Issuance of guarantees	—
Expiration of guarantees	—
Balance at March 31, 2012	$	7

Fair values of financial instruments

Please refer to the table below for the fair values of our financial instruments.



Fair Value of Financial Instruments
	March 31, 2013				December 31, 2012
(Millions of dollars)	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Fair Value Levels	Reference
Assets
Cash and short-term investments	$	5,982	$	5,982	$	5,490	$	5,490	1
Restricted cash and short-term investments	75		75		53		53		1
Available-for-sale securities	1,624		1,624		1,586		1,586		1 & 2	Note 8
Finance receivables – net (excluding finance leases ¹)	15,602		15,509		15,404		15,359		2	Note 16
Wholesale inventory receivables – net (excluding finance leases ¹)	1,578		1,512		1,674		1,609		2	Note 16
Interest rate swaps – net	190		190		219		219		2	Note 4
Commodity contracts – net	—		—		1		1		2	Note 4

Liabilities
Short-term borrowings	4,982		4,982		5,287		5,287		1
Long-term debt (including amounts due within one year)
Machinery and Power Systems	9,779		11,712		9,779		11,969		2
Financial Products	25,725		26,675		25,077		26,063		2
Foreign currency contracts – net	113		113		66		66		2	Note 4
Guarantees	16		16		14		14		3	Note 10


¹	Total excluded items have a net carrying value at March 31, 2013 and December 31, 2012 of $8,001 million and $7,959 million, respectively.

- Definition

Tabular disclosure of the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments, assets, and liabilities. Such certain disclosures about the financial instruments, assets, and liabilities include: (1) the fair value of the required items together with their carrying amounts (as appropriate) and (2) the methodology and assumptions used in developing such estimates of fair value.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 107

-Paragraph 14

-Subparagraph a

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 159

-Paragraph 18

-Subparagraph c(2), d, e, f

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

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-Section 50

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Reference 4: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 107

-Paragraph 15

-Subparagraph b-d

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 5: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 50

-Paragraph 11

-URI http://asc.fasb.org/extlink&oid=7491637&loc=d3e13467-108611

Reference 6: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 159

-Paragraph 19

-Subparagraph a, b, c(1), d(1)

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 7: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

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-SubTopic 10

-Section 50

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-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

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-URI http://asc.fasb.org/extlink&oid=6447952&loc=d3e13220-108610

Reference 9: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 157

-Paragraph 32

-Subparagraph a, c(1), c(2), c(3), d

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 10: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 107

-Paragraph 10

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 11: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 50

-Paragraph 12

-URI http://asc.fasb.org/extlink&oid=7491637&loc=d3e13476-108611

Reference 12: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

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-Section 50

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-Subparagraph (a)

-URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612

+ Details

- Definition

Tabular disclosure of the fair value measurement of liabilities using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets), and gains or losses recognized in other comprehensive income (loss) and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs) by class of liability.

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