AT&T Wireless 2012 Annual Report Download - page 85

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AT&T Inc. | 83
such external pricing services is deemed inaccurate, the
managers will then solicit broker/dealer quotes (spreads or
prices). In cases where such quotes are available, fair value
will be determined based solely upon such quotes provided.
Managers will typically use a pricing matrix for determining
fair value in cases where an approved pricing service or a
broker/dealer is unable to provide a fair valuation for specific
fixed-rate securities such as many private placements.
New fixed-rate securities will be initially valued at cost at
the time of purchase. Thereafter, each bond will be assigned
a spread from a pricing matrix that will be added to current
Treasury rates. The pricing matrix derives spreads for each
bond based on external market data, including the current
credit rating for the bonds, credit spreads to Treasuries for
each credit rating, sector add-ons or credits, issue specific
add-ons or credits as well as call or other options.
Purchases and sales of securities are recorded as of the trade
date. Realized gains and losses on sales of securities are
determined on the basis of average cost. Interest income is
recognized on the accrual basis. Dividend income is
recognized on the ex-dividend date.
Non-interest bearing cash and overdrafts are valued at cost,
which approximates fair value.
Fair Value Measurements
See Note 9 “Fair Value Measurements and Disclosure” for a
discussion of fair value hierarchy that prioritizes the inputs
to valuation techniques used to measure fair value.
values that would have been used had a ready market for
these investments existed, and such differences could be
material. Alternative investments not having an established
market are valued at fair value as determined by the
investment managers. Private equity, mezzanine and
distressed investments are often valued initially by the
investment managers based upon cost. Thereafter, investment
managers may use available market data to determine
adjustments to carrying value based upon observations
of the trading multiples of public companies considered
comparable to the private companies being valued.
Such market data used to determine adjustments to
accounts for cash flows and company-specified issues
include current operating performance and future
expectations of the investments, changes in market outlook,
and the third-party financing environment. Private equity
partnership holdings may also include publicly held equity
investments in liquid markets that are marked-to-market
at quoted public values, subject to adjustments for large
positions held. Real estate and natural resource direct
investments are valued either at amounts based upon
appraisal reports prepared by independent third-party
appraisers or at amounts as determined by internal appraisals
performed by the investment manager, which have been
agreed to by an external valuation consultant. Fixed income
securities valuation is based upon pricing provided by an
external pricing service when such pricing is available. In the
event a security is too thinly traded or narrowly held to be
priced by such a pricing service, or the price furnished by