DTE Energy 2009 Annual Report Download - page 18

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16
or indirectly observable through corroboration with observable market data.
•
Level 3 — Consists of unobservable inputs for assets or liabilities whose fair value is estimated based on internally developed
models or methodologies using inputs that are generally less readily observable and supported by little, if any, market activity at
the measurement date. Unobservable inputs are developed based on the best available information and subject to cost-benefit
constraints.
The following table presents assets and liabilities measured and recorded at fair value on a recurring basis as of December 31, 2009:
(in Millions)
Level 1
Level 2
Level 3
Balance at
December 31, 2009
Assets:
Other investments (1)
$ 6
$ —
$ —
$ 6
Net Assets at December
31, 2009
$ 6
$ —
$ —
$ 6
___________
(1) Excludes cash surrender value of life insurance investments.
The following table presents the fair value reconciliation of Level 3 assets and liabilities measured at fair value on a recurring basis for
the years ended December 31, 2009 and 2008:
Year Ended
December 31
2009
2008
Liability balance as of beginning of the period ........................
$ —
$ —
Changes in fair value recorded in income ................................
—
5
Purchases, issuances and settlements .......................................
—
(5)
Liability balance as of December 31 ........................................
$ —
$ —
The amount of total gains (losses) included in net income
attributed to the change in unrealized gains (losses)
related to assets and liabilities held at December 31, 2009
and 2008................................................................................
$ —
$ —
Other investments hold money market debt securities through a publicly traded institutional mutual fund, valued using quoted prices
in actively traded exchange markets. The trustee monitors prices supplied by pricing services and may use a supplemental price source
or change the primary price source of a given security if the trustee challenges an assigned price and determines that another price
source is considered to be preferable. MichCon has obtained an understanding of how these prices are derived, including the nature
and observability of the inputs used in deriving such prices. Additionally, MichCon selectively corroborates the fair values of
securities by comparison of market-based price sources.
Fair Value of Financial Instruments
The fair value of long-term debt is determined by using quoted market prices when available and a discounted cash flow analysis
based upon estimated current borrowing rates when quoted market prices are not available. The table below shows the fair value
relative to the carrying value for long-term debt securities. Certain other financial instruments, such as notes payable, customer
deposits and notes receivable are not shown as carrying value approximates fair value.
December 31, 2009
December 31, 2008
Fair Value
Carrying Value
Fair Value
Carrying Value
Long-Term Debt
$942 million
$889 million
$865 million
$889 million