Avon 2009 Annual Report Download - page 82

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
we believe that the risk of incurring credit risk losses is remote
and that such losses, if any, would not be material.
Non-performance of the counterparties on the balance of all the
foreign exchange and interest rate agreements would result in a
write-off of $60 at December 31, 2009. In addition, in the event
of non-performance by such counterparties, we would be
exposed to market risk on the underlying items being hedged as
aresult of changes in foreign exchange and interest rates.
NOTE 8. Fair Value
Assets and Liabilities Measured at Fair
Value
We adopted the fair value measurement provisions required by
the Fair Value Measurements and Disclosures Topic of the Codi-
fication as of January 1, 2008, with the exception of the applica-
tion to nonfinancial assets and liabilities measured at fair value
on anon-recurring basis, which was adopted as of January 1,
2009, with no impact to our Consolidated Financial Statements.
The adoption of the fair value measurement provisions did not
have amaterial impact on our fair value measurements. The fair
value measurement provisions define fair value as the price that
would be received to sell an asset or paid to transfer aliability
in the principal or most advantageous market for the asset or
liability in an orderly transaction between market participants at
the measurement date. In addition, the fair value measurement
provisions establish afair value hierarchy, which prioritizes
the inputs used in measuring fair value into three broad levels
as follows:
•Level 1-Quoted prices in active markets for identical assets or
liabilities.
•Level 2-Inputs, other than the quoted prices in active mar-
kets, that are observable either directly or indirectly.
•Level 3-Unobservable inputs based on our own assumptions.
The following table presents the fair value hierarchy for those
assets and liabilities measured at fair value on arecurring basis as
of December 31, 2009:
Level 1Level 2Total
Assets:
Available-for-sale securities $1.9 $–$1.9
Interest-rate swap agreements –54.9 54.9
Foreign exchange forward
contracts –5.1 5.1
Total $1.9 $60.0 $61.9
Liabilities:
Interest-rate swap agreements $– $11.0 $11.0
Foreign exchange forward
contracts –8.0 8.0
Total $– $19.0 $19.0
The table above excludes our pension and postretirement plan
assets. Refer to Note 11, Employee Benefit Plans, forthe fair value
hierarchy for our plan assets. The available-for-sale securities
include securities held in atrust in order to fund future benefit
payments for non-qualified retirement plans (see Note 11,
Employee Benefit Plans). The foreign exchange forward contracts
and interest-rate swap agreements are hedges of either recorded
assets or liabilities or anticipated transactions. The underlying
hedged assets and liabilities or anticipated transactions are not
reflected in the table above.
Fair Value of Financial Instruments
The net asset (liability) amounts recorded in the balance sheet
(carrying amount) and the estimated fair values of financial
instruments at December 31 consisted of the following:
2009 2008
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Cash and cash
equivalents $1,311.6$1,311.6$1,104.7$1,104.7
Available-for-sale
securities 1.9 1.9 2.3 2.3
Grantor trust cash and
cash equivalents 7.6 7.6 20.1 20.1
Short term
investments 26.8 26.8 40.1 40.1
Debt maturing within
one year 138.1 138.1 1,031.4 1,038.6
Long-term debt, net
of related discount
or premium 2,307.8 2,441.0 1,456.2 1,346.1
Foreign exchange
forward contracts (2.9) (2.9) (10.7) (10.7)
Interest-rate swap
agreements 43.9 43.9 87.6 87.6