FAIR VALUE MEASUREMENTS

6 Months Ended

Jun. 30, 2014

FAIR VALUE MEASUREMENTS

A summary of the Company's recurring and nonrecurring fair value measurements can be found in Note 11 to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2013. If applicable, updates have been included in the respective section below.

Fair Value Measurements on a Recurring Basis

The following tables summarize the bases used to measure certain assets and liabilities at fair value on a recurring basis:



Basis of Fair Value Measurements on a Recurring Basis at June 30, 2014 In millions	Quoted Prices in Active Markets for Identical Items (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Counterparty and Cash Collateral Netting (1)			Total
Assets at fair value:
Cash equivalents (2)	$	—	$	1,308	$	—	$	—		$	1,308
Interests in trade accounts receivable conduits (3)	—		—		1,297		—			1,297
Equity securities (4)	778		38		—		—			816
Debt securities: (4)
Government debt (5)	—		574		—		—			574
Corporate bonds	—		716		—		—			716
Derivatives relating to: (6)
Commodities	—		7		—		(2		)	5
Foreign currency	—		42		—		(10		)	32
Total assets at fair value	$	778	$	2,685	$	1,297	$	(12	)	$	4,748
Liabilities at fair value:
Long-term debt (7)	$	—	$	19,692	$	—	$	—		$	19,692
Derivatives relating to: (6)
Interest rates	—		8		—		—			8
Commodities	1		4		—		(3		)	2
Foreign currency	—		24		—		(10		)	14
Total liabilities at fair value	$	1	$	19,728	$	—	$	(13	)	$	19,716


(1)	Cash collateral amounts represent the estimated net settlement amount when applying netting and set-off rights included in master netting arrangements between the Company and its counterparties and the payable or receivable for cash collateral held or placed with the same counterparty.


(2)	Treasury Bills and money market funds included in "Cash and cash equivalents" in the consolidated balance sheets and held at amortized cost, which approximates fair value.


(3)	Included in “Accounts and notes receivable – Other” in the consolidated balance sheets. See Note 9 for additional information on transfers of financial assets.


(4)	The Company’s investments in equity and debt securities are primarily classified as available-for-sale and are included in “Other investments” in the consolidated balance sheets.


(5)	U.S. Treasury obligations, U.S. agency obligations, agency mortgage-backed securities and other municipalities’ obligations.


(6)	See Note 6 for the classification of derivatives in the consolidated balance sheets.


(7)	See Note 6 for information on fair value measurements of long-term debt.



Basis of Fair Value Measurements on a Recurring Basis at December 31, 2013 In millions	Quoted Prices in Active Markets for Identical Items (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Counterparty and Cash Collateral Netting (1)			Total
Assets at fair value:
Cash equivalents (2)	$	—	$	2,912	$	—	$	—		$	2,912
Interests in trade accounts receivable conduits (3)	—		—		1,227		—			1,227
Equity securities (4)	760		37		—		—			797
Debt securities: (4)
Government debt (5)	—		564		—		—			564
Corporate bonds	—		695		—		—			695
Derivatives relating to: (6)
Commodities	3		11		—		(3		)	11
Foreign currency	—		65		—		(20		)	45
Total assets at fair value	$	763	$	4,284	$	1,227	$	(23	)	$	6,251
Liabilities at fair value:
Long-term debt (7)	$	—	$	19,467	$	—	$	—		$	19,467
Derivatives relating to: (6)
Interest rates	—		5		—		—			5
Commodities	4		2		—		(4		)	2
Foreign currency	—		33		—		(20		)	13
Total liabilities at fair value	$	4	$	19,507	$	—	$	(24	)	$	19,487


(1)	Cash collateral amounts represent the estimated net settlement amount when applying netting and set-off rights included in master netting arrangements between the Company and its counterparties and the payable or receivable for cash collateral held or placed with the same counterparty.


(2)	Treasury Bills and money market funds included in "Cash and cash equivalents" in the consolidated balance sheets and held at amortized cost, which approximates fair value.


(3)	Included in “Accounts and notes receivable – Other” in the consolidated balance sheets. See Note 9 for additional information on transfers of financial assets.


(4)	The Company’s investments in equity and debt securities are primarily classified as available-for-sale and are included in “Other investments” in the consolidated balance sheets.


(5)	U.S. Treasury obligations, U.S. agency obligations, agency mortgage-backed securities and other municipalities’ obligations.


(6)	See Note 6 for the classification of derivatives in the consolidated balance sheets.


(7)	See Note 6 for information on fair value measurements of long-term debt.

Assets and liabilities related to forward contracts, interest rate swaps, currency swaps, options and other conditional or exchange contracts executed with the same counterparty under a master netting arrangement are netted. Collateral accounts are netted with corresponding liabilities. The Company posted cash collateral of $3 million at June 30, 2014 ($5 million at December 31, 2013).

The following table summarizes the changes in fair value measurements using Level 3 inputs for the three- and six-month periods ended June 30, 2014 and June 30, 2013:



Fair Value Measurements Using Level 3 Inputs	Three Months Ended						Six Months Ended
Interests Held in Trade Receivable Conduits (1) In millions	Jun 30, 2014			Jun 30, 2013			Jun 30, 2014			Jun 30, 2013
Balance at beginning of period	$	1,339		$	1,339		$	1,227		$	1,057
Loss included in earnings (2)	(1		)	(1		)	(2		)	(2		)
Purchases	356			343			619			672
Settlements	(397		)	(390		)	(547		)	(436		)
Balance at end of period	$	1,297		$	1,291		$	1,297		$	1,291


(1)	Included in “Accounts and notes receivable – Other” in the consolidated balance sheets.


(2)	Included in “Selling, general and administrative expenses” in the consolidated statements of income.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References+ Details