Best Buy 2012 Annual Report Download - page 83

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$ in millions, except per share amounts or as otherwise noted
83
had historically provided a means by which we could rollover the investment or sell these securities at par in order to provide
us with liquidity as needed. As a result, we classify our investments in ARS as available-for-sale and carry them at fair value.
In February 2008, auctions began to fail due to insufficient buyers, as the amount of securities submitted for sale in auctions
exceeded the aggregate amount of the bids. For each failed auction, the interest rate on the security moves to a maximum rate
specified for each security, and generally resets at a level higher than specified short-term interest rate benchmarks. To date, we
have collected all interest due on our ARS and expect to continue to do so in the future. Due to persistent failed auctions, and
the uncertainty of when these investments could be liquidated at par, we have classified all of our investments in ARS as non-
current assets within Equity and Other Investments in our Consolidated Balance Sheets at March 3, 2012.
We sold $27 of ARS at par during fiscal 2012. However, at March 3, 2012, our entire remaining ARS portfolio, consisting of 17
investments in ARS having an aggregate value at par of $88, was subject to failed auctions.
Our ARS portfolio consisted of the following, at fair value:
Description Nature of collateral or guarantee March 3,
2012 February 26,
2011
Student loan bonds Student loans guaranteed 95% to 100% by the
U.S. government $ 80 $ 108
Municipal revenue bonds 100% insured by AAA/Aaa-rated bond insurers
at March 3, 2012 2 2
Total fair value plus accrued interest(1) $ 82 $ 110
(1) The par value and weighted-average interest rates (taxable equivalent) of our ARS were $88 and $115 and 0.5% and 0.8%, respectively, at March 3, 2012,
and February 26, 2011, respectively.
At March 3, 2012, our ARS portfolio was 88% AAA/Aaa-rated, 3% AA/Aa-rated and 9% A/A-rated.
The investment principal associated with failed auctions will not be accessible until successful auctions occur, a buyer is found
outside of the auction process, the issuers establish a different form of financing to replace these securities, or final payments
are due according to the contractual maturities of the debt issuances, which range from four to 30 years. We do not intend to
sell our remaining ARS until we can recover the full principal amount through one of the means described above. In addition,
we do not believe it is more likely than not that we would be required to sell our remaining ARS until we can recover the full
principal amount based on our other sources of liquidity.
We evaluated our entire ARS portfolio of $88 (par value) for impairment at March 3, 2012, based primarily on the methodology
described in Note 6, Fair Value Measurements. As a result of this review, we determined that the fair value of our ARS
portfolio at March 3, 2012, was $82. Accordingly, a $6 pre-tax unrealized loss is recognized in accumulated other
comprehensive income. This unrealized loss reflects a temporary impairment on all of our investments in ARS. The estimated
fair value of our ARS portfolio could change significantly based on future market conditions. We will continue to assess the fair
value of our ARS portfolio for substantive changes in relevant market conditions, changes in our financial condition or other
changes that may alter our estimates described above.
We may be required to record an additional unrealized holding loss or an impairment charge to earnings if we determine that
our ARS portfolio has incurred a further decline in fair value that is temporary or other-than-temporary, respectively. Factors
that we consider when assessing our ARS portfolio for other-than-temporary impairment include the duration and severity of
the impairment, the reason for the decline in value, the potential recovery period, the nature of the collateral or guarantees in
place and our intent and ability to hold an investment.
We had $(3) and $(3) unrealized loss, net of tax, recorded in accumulated other comprehensive income at March 3, 2012, and
February 26, 2011, respectively, related to our investments in debt securities.
Marketable Equity Securities
We invest in marketable equity securities and classify them as available-for-sale. Investments in marketable equity securities
are classified as non-current assets within Equity and Other Investments in our Consolidated Balance Sheets, and are reported
at fair value based on quoted market prices.