Pfizer 2010 Annual Report Download - page 78

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Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
The following methods and assumptions were used to estimate the fair value of our financial assets and liabilities:
•Trading equity securities—quoted market prices.
•Trading debt securities—observable market interest rates.
•Available-for-sale debt securities—third-party matrix-pricing model that uses significant inputs derived from or corroborated by
observable market data and credit-adjusted interest rate yield curves.
•Available-for-sale money market funds—observable Net Asset Value prices.
•Available-for-sale equity securities, excluding money market funds—third-party pricing services that principally use a composite of
observable prices.
•Derivative financial instruments (assets and liabilities)—third-party matrix-pricing model that uses significant inputs derived from or
corroborated by observable market data. Where applicable, these models discount future cash flow amounts using market-based
observable inputs, including interest rate yield curves, and forward and spot prices for currencies. The credit risk impact to our
derivative financial instruments was not significant.
•Held-to-maturity debt securities—third-party matrix-pricing model that uses significant inputs derived from or corroborated by
observable market data and credit-adjusted interest rate yield curves.
•Private equity securities, excluding equity-method investments—application of the implied volatility associated with an observable
biotech index to the carrying amount of our portfolio and, to a lesser extent, performance multiples of comparable securities adjusted for
company-specific information.
•Short-term and long-term loans—third-party model that discounts future cash flows using current interest rates at which similar loans
would be made to borrowers with similar credit ratings and for the same remaining maturities.
•Short-term borrowings and long-term debt—third-party matrix-pricing model that uses significant inputs derived from or corroborated by
observable market data and our own credit rating.
In addition, we have long-term receivables where the determination of fair value employs discounted future cash flows, using current
interest rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.
A single estimate of fair value for these financial instruments relies heavily on estimates and assumptions (see Note 1C. Significant
Accounting Polices: Estimates and Assumptions).
These selected financial assets and liabilities are presented in our Consolidated Balance Sheets as follows:
AS OF DECEMBER 31,
(MILLIONS OF DOLLARS) 2010 2009
Assets
Cash and cash equivalents $ 906 $ 666
Short-term investments 26,277 23,991
Short-term loans 467 1,195
Long-term investments and loans 9,748 13,122
Taxes and other current assets(a) 515 526
Taxes and other noncurrent assets(b) 710 1,050
Total $38,623 $40,550
Liabilities
Short-term borrowings, including current portion of long-term debt $ 5,623 $ 5,469
Other current liabilities(c) 339 369
Long-term debt 38,410 43,193
Other noncurrent liabilities(d) 545 421
Total $44,917 $49,452
(a) As of December 31, 2010, derivative instruments at fair value include foreign currency forward-exchange contracts ($494 million) and foreign
currency swaps ($21 million) and, as of December 31, 2009, include foreign currency forward-exchange contracts ($503 million) and foreign
currency swaps ($23 million).
(b) As of December 31, 2010, derivative instruments at fair value include interest rate swaps ($603 million) and foreign currency swaps ($107 million)
and, as of December 31, 2009, include foreign currency swaps ($774 million) and interest rate swaps ($276 million).
(c) At December 31, 2010, derivative instruments at fair value include foreign currency forward-exchange contracts ($257 million), foreign currency
swaps ($79 million) and interest rate swaps ($3 million) and, as of December 31, 2009, include foreign currency forward-exchange contracts ($237
million) and foreign currency swaps ($132 million).
(d) At December 31, 2010, derivative instruments at fair value include foreign currency swaps ($544 million) and interest rate swaps ($1 million) and, as
of December 31, 2009, include foreign currency swaps ($396 million) and interest rate swaps ($25 million).
There were no significant impairments of financial assets recognized in 2010, 2009 or 2008.
76 2010 Financial Report