ABB Annual Report 2012 PDF - ABB Group Annual Report 2012

In the table above, the long-term debt obligations reflect thecash amounts to be repaid upon maturity of those debt obligations.As we have designated interest rate swaps as fairvalue hedges of certain debt obligations, the cash obligationsabove will differ from the long-term debt balance reflectedin “Note 12 Debt” to our Consolidated Financial Statements.We have determined the interest payments related tolong-term debt obligations by reference to the paymentsdue under the terms of our debt obligations at the time suchobligations were incurred. However, we use interest rateswaps to modify the interest characteristics of certain of ourdebt obligations. The net effect of these swaps may be toincrease or decrease the actual amount of our cash interestpayment obligations, which may differ from those statedin the above table. For further details on our debt obligationsand the related hedges, see “Note 12 Debt” to our ConsolidatedFinancial Statements.Of the total of $774 million unrecognized tax benefits (netof deferred tax assets) at December 31, 2012, it is expectedthat $41 million will be paid within less than a year. However,we cannot make a reasonably reliable estimate as to therelated future payments for the remaining amount.Off balance sheetarrangementsCommercial commitmentsWe disclose the maximum potential exposure of certainguarantees, as well as possible recourse provisions that mayallow us to recover from third parties amounts paid out undersuch guarantees. The maximum potential exposure doesnot allow any discounting of our assessment of actual exposureunder the guarantees. The information below reflects ourmaximum potential exposure under the guarantees, which ishigher than our assessment of the expected exposure.The carrying amounts of liabilities recorded in the ConsolidatedBalance Sheets in respect of the above guaranteeswere not significant at December 31, 2012 and 2011, andreflect our best estimate of future payments, which we mayincur as part of fulfilling our guarantee obligations.For additional descriptions of our performance, financialand indemnification guarantees see “Note 15 Commitmentsand contingencies” to our Consolidated Financial Statements.Related party transactionsAffiliates and associatesIn the normal course of our business, we purchase productsfrom, sell products to and engage in other transactions withentities in which we hold an equity interest. The amountsinvolved in these transactions are not material to ABB Ltd.Also, in the normal course of our business, we engage intransactions with businesses that we have divested. We believethat the terms of the transactions we conduct withthese companies are negotiated on an arm’s length basis.Key management personnelDetails of important business relationships between ABB andits Board and Executive Committee members, or companiesand organizations represented by them, are described insection “7. Business relationships” of the Corporate governancereport contained in this Annual Report.GuaranteesThe following table provides quantitative data regardingour third-party guarantees. The maximum potential paymentsrepresent a worst-case scenario, and do not reflect ourexpected results.Maximum potentialpaymentsDecember 31, ($ in millions) 2012 2011Performance guarantees 149 148Financial guarantees 83 85Indemnification guarantees 190 194Total 422 427ABB Annual Report 2012 | Financial review 77