American Airlines 2010 Annual Report Download - page 66

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63
3. Investments and Fair Value Measurements
Short-term investments consisted of (in millions):
December 31,
2010
2009
Overnight investments, time deposits and Repurchase agreements
$ 844
$ 1,415
Corporate and bank notes
2,685
2,527
U. S. government agency mortgages
605
-
U.S. government agency notes
-
300
Commingled funds
190
-
Other
4
4
$ 4,328
$ 4,246
Short-term investments at December 31, 2010, by contractual maturity included (in millions):
Due in one year or less
$ 2,609
Due between one year and three years
1,114
Due after three years
605
$ 4,328
All short-term investments are classified as available-for-sale and stated at fair value. Unrealized gains and
losses are reflected as a component of Accumulated other comprehensive income (loss).
The Company utilizes the market approach to measure fair value for its financial assets and liabilities. The
market approach uses prices and other relevant information generated by market transactions involving identical
or comparable assets or liabilities. The Company’s short-term investments classified as Level 2 primarily utilize
broker quotes in a non-active market for valuation of these securities. The Company’s fuel derivative contracts,
which consist of commodity collars and calls, are valued using energy and commodity market data which is
derived by combining raw inputs with quantitative models and processes to generate forward curves and
volatilities. No changes in valuation techniques or inputs occurred during the year ended December 31, 2010.
Assets and liabilities measured at fair value on a recurring basis are summarized below (in millions):
Description Total
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Short-term investments 1, 2
Money market funds 198$ 198$ -$ -$
Government agency investments 605
- 605 -
Repurchase investments 831
- 831 -
Short-term obligations 1,580
- 1,580 -
Corporate obligations 647
- 647 -
Bank notes / Certificates of deposit / Time deposits 467
- 467 -
4,328 198 4,130
-
Restricted cash and short-term investments 1
Money market funds 450 450 - -
Fuel derivative contracts 1 269 - 269 -
Total 5,047$ 648$ 4,399$ -$
Fair Value Measurements at December 31, 2010
1 Unrealized gains or losses on short-term investments, restricted cash and short-term investments and
derivatives qualifying for hedge accounting are recorded in Accumulated other comprehensive income (loss)
(OCI) at each measurement date.