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

Hedging Activities – As of December 31, 2011, the notional amount of foreign currency hedge positions was approximately $1.6 billion, while commodity hedge contracts totaled approximately 94 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 December 31, 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 months ended December 31, 2011 and 2010 (in millions):


		Gain (Loss) to Earnings					Gain (Loss) to OCI
		Qtr Ended Dec 31,					Qtr Ended Dec 31,
		2010		2011			2010		2011
Deferred	Location
Foreign currency	Sales	$	2		1			4		4
Foreign currency	Cost of sales		5		(1	)		7		7
Commodity	Cost of sales		10		(11	)		32		21

Not Deferred
Foreign currency	Other deductions, net		6		7
Commodity	Cost of sales		1		-
		$	24		(4	)		43		32

Regardless of whether 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 the three month periods ended December 31, 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):


	September 30, 2011					December 31, 2011
Exposure	Assets		Liabilities			Assets		Liabilities
Foreign Currency	$	17		(48	)		16		(29	)
Commodity	$	-		(83	)		1		(51	)

At December 31, 2011, commodity contracts and foreign currency contracts were reported in accrued expenses. The Company posted $38 million of collateral with counterparties as of December 31, 2011. The maximum collateral the Company could have been required to post was $64 million. As of December 31, 2011, the fair value of long-term debt was $5,034 million, which exceeded the carrying value by $680 million.