Financial Instruments

9 Months Ended

Jun. 30, 2011

9.	Following is a discussion regarding the Company's use of financial instruments:

Hedging Activities – The notional value of foreign currency hedge positions was approximately $1.3 billion as of June 30, 2011. Commodity hedges outstanding at June 30, 2011 included a total of approximately 70 million pounds of copper and aluminum. All derivatives receiving deferral accounting are cash flow hedges. The majority of hedging gains and losses deferred as of June 30, 2011 are expected to be recognized over the next 12 months as the underlying forecasted transactions occur. The following amounts are included in earnings and Other Comprehensive Income for the three and nine months ended June 30, 2011 and 2010 (in millions):


		Gain/(Loss) to Earnings												Gain/(Loss) to OCI
		3rd Quarter						Nine Months						3rd Quarter						Nine Months
		2010			2011			2010			2011			2010			2011			2010		2011
Deferred	Location
Foreign currency	Sales	$	(2	)		2			(6	)		8			6			-			5		6
Foreign currency	Cost of sales		3			6			2			16			8			5			37		15
Commodity	Cost of sales		17			19			38			48			(33	)		(2	)		8		27
															(19	)		3			50		48
Not deferred
Foreign currency	Other deductions, net		50			8			122			14
Commodity	Cost of sales		(2	)		(1	)		(1	)		(1	)
		$	66			34			155			85

Regardless of whether or not derivatives receive deferral accounting, the Company expects hedging gains or losses to be essentially offset by losses or gains on the related underlying exposures. The amounts ultimately recognized will differ from those presented above for open positions which remain subject to ongoing market price fluctuations until settlement. Derivatives receiving deferral accounting are highly effective, no amounts were excluded from the assessment of hedge effectiveness, and hedge ineffectiveness was immaterial for both the three and nine month periods ended June 30, 2011 and 2010, including gains or losses on derivatives that were discontinued because forecasted transactions were no longer expected to occur.

Fair Value Measurements – Valuations for all of Emerson's derivatives fall within Level 2 of the GAAP valuation hierarchy and are summarized below (in millions):


	Sept 30, 2010					June 30, 2011
Exposure	Assets		Liabilities			Assets		Liabilities
Foreign Currency	$	67		(50	)		33		(15	)
Commodity	$	31		(3	)		12		(4	)

At June 30, 2011, commodity contracts and foreign currency contracts were reported in current assets. The Company neither posted nor held collateral with counterparties as of June 30, 2011. The maximum collateral the Company could have been required to post as of June 30, 2011 was $3 million. As of June 30, 2011, the fair value of long-term debt was $5,057 million, which exceeded the carrying value by $453 million.