NOTE 16 – FAIr vAluE Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between  market participants at the measurement date (exit price). The FASB provides accounting rules that classify the inputs used to measure  fair value into the following hierarchy: The following tables present the fair value hierarchy for those assets and liabilities on the Consolidated Balance Sheets measured at fair  value on a recurring basis as of December 31, 2011 and 2010: Cash and cash equivalents are highly liquid investments with maturities of three month or less when purchased and are valued at  redemption value. Short-term investments are investments with maturities between four months and one year and are valued at  amortized cost, which approximates fair value. The Company uses publicly available foreign currency forward and spot rates to measure  the fair value of its foreign currency forward contracts. The Company does not believe it has significant concentrations of risk associated with the counterparts to its financial instruments. FINANCIAls ANd FOOTNOTEs 81 THE TIMKEN COMPANY Fair Value at December 31, 2010 Total Level 1 Level 2 Level 3 Assets: Cash and cash equivalents $ 877.1 $ 877.1 $  – $  – Short-term investments  15.0   15.0  – – Foreign currency hedges  1.0  –  1.0  – Total Assets $ 893.1 $ 892.1 $ 1.0 $  – Liabilities: Foreign currency hedges $ 3.2 $  – $ 3.2 $  – Total Liabilities $ 3.2 $  – $ 3.2 $ – Fair Value at December 31, 2011 Total level 1 level 2 level 3 Assets: Cash and cash equivalents $ 464.8 $ 464.8 $  – $  – Short-term investments  46.6   46.6  – – Foreign currency hedges  1.2  –  1.2  – Total Assets $ 512.6 $ 511.4 $ 1.2 $  – Liabilities: Foreign currency hedges $ 8.8 $  – $ 8.8 $  – Total Liabilities $ 8.8 $  – $ 8.8 $ – Level 2  – Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical  or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable  for the asset or liability. Level 1  – Unadjusted quoted prices in active markets for identical assets or liabilities. Level 3  – Unobservable inputs for the asset or liability.