APS 2011 Annual Report Download - page 157
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PINNACLE WEST CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
132
Cash equivalents reported within Level 2 represent investments held in a short-term investment
commingled fund, valued using NAV, which invests in U.S. government fixed income securities. We
may transact in this commingled fund on a daily basis at the NAV.
Fixed income securities issued by the U.S. Treasury held directly by the nuclear
decommissioning trust are valued using quoted active market prices and are classified as Level 1.
Fixed income securities issued by corporations, municipalities, and other agencies including mortgage-
backed instruments are valued using quoted inactive market prices, quoted active market prices for
similar securities, or by utilizing calculations which incorporate observable inputs such as yield and
interest rate curves. These instruments are classified as Level 2. Whenever possible multiple market
quotes are obtained which enables a cross-check validation. A primary price source is identified based
on asset type, class, or issue of securities.
Our trustee provides valuation of our nuclear decommissioning trust assets by using pricing
services that utilize the valuation methodologies described to determine fair market value. We assess
these valuations and verify that pricing can be supported by actual recent market transactions.
Additionally, we obtain and review independent audit reports on the trustee’s operating controls and
valuation processes. See Note 23 for additional discussion about our nuclear decommissioning trust.
Fair Value Tables
The following table presents the fair value at December 31, 2011 of our assets and liabilities
that are measured at fair value on a recurring basis (dollars in millions):