APS 2013 Annual Report Download - page 138

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Table of Contents
PINNACLE WEST CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
shares are offered to a limited group of investors, they are not considered to be traded in an active market.
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 curves and spreads relative to such yield 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 have internal control procedures designed to ensure this information is consistent with fair value accounting
guidance. These procedures include assessing valuations using an independent pricing source, verifying that pricing can be supported by actual recent market
transactions, assessing hierarchy classifications, comparing investment returns with benchmarks, and obtaining and reviewing independent audit reports on
the trustee’s internal operating controls and valuation processes. See Note 20 for additional discussion about our nuclear decommissioning trust.
Fair Value Tables
The following table presents the fair value at December 31, 2013 of our assets and liabilities that are measured at fair value on a recurring basis
(dollars in millions):
134