HUNTSMAN PROPYLENE OXIDE LLC - S-4 filing on 2013-03-25

FAIR VALUE (Tables)

12 Months Ended

Dec. 31, 2012

The fair values of our financial instruments were as follows (dollars in millions):

	December 31,

	2012						2011
	Carrying Value			Estimated Fair Value			Carrying Value			Estimated Fair Value
Non-qualified employee benefit plan investments	$	14		$	14		$	12		$	12
Cross-currency interest rate contacts		18			18			27			27
Interest rate contracts		(18	)		(18	)		(17	)		(17	)
Long-term debt (including current portion)		(3,702	)		(3,869	)		(3,942	)		(4,061	)

Assets and liabilities are measured at fair value on a recurring basis

The following assets and liabilities are measured at fair value on a recurring basis (dollars in millions):

				Fair Value Amounts Using

Description	December 31, 2012			Quoted prices in active markets for identical assets (Level 1)(3)		Significant other observable inputs (Level 2)(3)			Significant unobservable inputs (Level 3)
Assets:
Available-for sale equity securities:
Equity mutual funds	$	14		$	14	$	—		$	—
Derivatives:
Cross-currency interest rate contracts(1)		18			—		18			—

Total assets	$	32		$	14	$	18		$	—

Liabilities:
Derivatives:
Interest rate contracts(2)	$	(18	)	$	—	$	(18	)	$	—

				Fair Value Amounts Using

Description	December 31, 2011			Quoted prices in active markets for identical assets (Level 1)(3)		Significant other observable inputs (Level 2)(3)			Significant unobservable inputs (Level 3)
Assets:
Available-for sale equity securities:
Equity mutual funds	$	12		$	12	$	—		$	—
Derivatives:
Cross-currency interest rate contracts(1)		27			—		—			27

Total assets	$	39		$	12	$	—		$	27

Liabilities:
Derivatives:
Interest rate contracts(2)	$	(17	)	$	—	$	(17	)	$	—

(1): The income approach is used to calculate the fair value of these instruments. Fair value represents the present value of estimated future cash flows, calculated using relevant interest rates, exchange rates, and yield curves at stated intervals.
(2): The income approach is used to calculate the fair value of these instruments. Fair value represents the present value of estimated future cash flows, calculated using relevant interest rates and yield curves at stated intervals.
(3): There were no transfers between Levels 1 and 2 within the fair value hierarchy for the years ended December 31, 2012 and 2011.

Reconciliation of beginning and ending balances for assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3)

The following table shows a reconciliation of beginning and ending balances for instruments measured at fair value on a recurring basis using significant unobservable inputs (Level 3) (dollars in millions):

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)	Cross-Currency Interest Rate Contracts

Beginning balance, January 1, 2012	$	27
Transfers into Level 3		—
Transfers out of Level 3(1)		(27	)
Total gains (losses):
Included in earnings		—
Included in other comprehensive income (loss)		—
Purchases, sales, issuances and settlements		—

Ending balance, December 31, 2012	$	—

The amount of total gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets still held at December 31, 2012	$	—

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)	Cross-Currency Interest Rate Contracts

Beginning balance, January 1, 2011	$	19
Transfers into or out of Level 3		—
Total gains (losses):
Included in earnings		—
Included in other comprehensive income (loss)		8
Purchases, sales, issuances and settlements		—

Ending balance, December 31, 2011	$	27

The amount of total gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets still held at December 31, 2011	$	—

(1): We are party to cross-currency interest rate contracts that are measured at fair value in our consolidated financial statements. These instruments have historically been categorized by us as Level 3 within the fair value hierarchy due to an unobservable input associated with the credit valuation adjustment, which we deemed to be a significant input to the overall measurement of fair value at inception. During 2012, this credit valuation adjustment has ceased to be a significant input to the entire fair value measurement of these instruments. The remaining inputs which are significant to the fair value measurement of these instruments represent observable market inputs that are inputs other than quoted prices (Level 2 inputs).

Schedule of gains and losses (realized and unrealized) included in earnings reported in interest expense and other comprehensive (loss) income

Gains and losses (realized and unrealized) included in earnings for instruments measured at fair value on a recurring basis using significant unobservable inputs (Level 3) are reported in interest expense and other comprehensive income (loss) as follows (dollars in millions):

	Interest expense		Other comprehensive income (loss)

*2012*
Total net gains included in earnings	$	—	$	—
Changes in unrealized gains relating to assets still held at December 31, 2012		—		—

	Interest expense		Other comprehensive income (loss)

*2011*
Total net gains included in earnings	$	—	$	—
Changes in unrealized gains relating to assets still held at December 31, 2011		—		8