AT&T Wireless 2013 Annual Report Download - page 65

AT&T Inc. | 63
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 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 10 for a discussion of fair value hierarchy that
prioritizes the inputs to valuation techniques used to
measure fair value.
Common/collective trust funds, pooled separate accounts
and other commingled (103-12) investment entities are
valued at quoted redemption values that represent the net
asset values of units held at year-end which management
has determined approximates fair value.
Alternative investments, including investments in private
equity, real estate, natural resources (included in real
assets), mezzanine and distressed debt (included in
partnerships/joint ventures), limited partnership interest,
fixed income securities and hedge funds do not have
readily available market values. These estimated fair values
may differ significantly from the 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