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Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
78
2012 Financial Report
Note 7. Financial Instruments
A. Selected Financial Assets and Liabilities
The following table provides additional information about certain of our financial assets and liabilities:
As of December 31,
(MILLIONS OF DOLLARS) 2012 2011
Selected financial assets measured at fair value on a recurring basis(a)
Trading securities(b) $142 $154
Available-for-sale debt securities(c) 32,584 29,179
Available-for-sale money market funds(d) 1,727 1,727
Available-for-sale equity securities, excluding money market funds(c) 263 317
Derivative financial instruments in receivable positions:(e)
Interest rate swaps 1,036 1,033
Foreign currency forward-exchange contracts 152 349
Foreign currency swaps 194 17
36,098 32,776
Other selected financial assets
Held-to-maturity debt securities, carried at amortized cost(c), (f) 1,513 1,587
Private equity securities, carried at equity method or at cost(f), (g) 1,239 1,020
2,752 2,607
Total selected financial assets $38,850 $35,383
Financial liabilities measured at fair value on a recurring basis(a)
Derivative financial instruments in a liability position:(h)
Foreign currency swaps $428 $1,396
Foreign currency forward-exchange contracts 243 355
Interest rate swaps 33 14
704 1,765
Other financial liabilities(i)
Short-term borrowings, carried at historical proceeds, as adjusted(f) 6,424 4,016
Long-term debt, carried at historical proceeds, as adjusted(j), (k) 31,036 34,926
37,460 38,942
Total selected financial liabilities $38,164 $40,707
(a) We use a market approach in valuing financial instruments on a recurring basis. See also Note 1E. Basis of Presentation and Significant Accounting Policies:
Fair Value. All of our financial assets and liabilities measured at fair value on a recurring basis use Level 2 inputs in the calculation of fair value, except less than
1% that use Level 1 or Level 3 inputs.
(b) Trading securities are held in trust for legacy business acquisition severance benefits.
(c) Gross unrealized gains and losses are not significant.
(d) Includes $408 million as of December 31, 2012 and $357 million as of December 31, 2011 of money market funds held in trust in connection with the asbestos
litigation involving Quigley Company, Inc., a wholly owned subsidiary. As of December 31, 2011, this amount includes approximately $625 million of money
market funds that were held in escrow to secure certain of Wyeth’s payment obligations under its 1999 Nationwide Class Action Settlement Agreement, which
relates to litigation against Wyeth concerning its former weight-loss products, Redux and Pondimin. The amounts held in escrow at December 31, 2011 were
released from restriction during 2012 and classified as part of Short-term investments.
(e) Designated as hedging instruments, except for certain contracts used as offsets; namely, foreign currency forward-exchange contracts with fair values of $102
million as of December 31, 2012; and foreign currency forward-exchange contracts with fair values of $169 million and interest rate swaps with fair values of $8
million as of December 31, 2011.
(f) The differences between the estimated fair values and carrying values of held to maturity debt securities, private equity securities at cost and short-term
borrowings not measured at fair value on a recurring basis were not significant as of December 31, 2012 or December 31, 2011. The fair value measurements
of our held-to-maturity debt securities and our short-term borrowings are based on Level 2 inputs, using a market approach. The fair value measurements of our
private equity securities at cost are based on Level 3 inputs, using a market approach.
(g) Our private equity securities represent investments in the life sciences sector.
(h) Designated as hedging instruments, except for certain contracts used as offsets; namely, foreign currency forward-exchange contracts with fair values of $141
million and foreign currency swaps with fair values of $129 million as of December 31, 2012; and foreign currency forward-exchange contracts with fair values
of $141 million and foreign currency swaps with fair values of $123 million as of December 31, 2011.
(i) Some carrying amounts may include adjustments for discount or premium amortization or for the effect of interest rate swaps designated as hedges.
(j) Includes foreign currency debt with fair values of $809 million as of December 31, 2012 and $919 million as of December 31, 2011, which are used as hedging
instruments.