Cisco 2009 Annual Report Download - page 60

Notes to Consolidated Financial Statements
Level 2 fixed income securities are priced using quoted market prices for similar instruments, nonbinding market prices that are
corroborated by observable market data, or discounted cash flow techniques. The Company’s derivative instruments are primarily
classified as Level 2, as they are not actively traded and are valued using pricing models that use observable market inputs. Level 3 assets
include asset-backed securities and certain derivative assets, whose values are determined based on discounted cash flow models using
inputs that the Company could not corroborate with market data.
Assets and liabilities measured at fair value on a recurring basis were presented on the Company’s Consolidated Balance Sheet as of
July 25, 2009 as follows (in millions):
FAIR VALUE MEASUREMENTS USING
Quoted Prices in
Active Markets for
Identical
Instruments
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
Balance
July 25, 2009
Assets:
Cash equivalents $ 4,514 $ 409 $ — $ 4,923
Investments 928 28,132 223 29,283
Prepaid expenses and other current assets — 109 4 113
Total $ 5,442 $ 28,650 $ 227 $ 34,319
Liabilities:
Other current liabilities $ — $ 66 $ — $ 66
Total $— $ 66 $— $ 66
The following table presents a reconciliation for all assets measured at fair value on a recurring basis using significant unobservable inputs
(Level 3) for the year ended July 25, 2009 (in millions):
Asset-Backed
Securities
Derivative
Instruments Total
Beginning balance $— $— $—
Transfers in to Level 3 618 6 624
Total gains and losses (realized and unrealized):
Included in other income (loss), net (28) — (28)
Included in operating expenses — (2) (2)
Included in OCI (9) — (9)
Purchases, sales, and maturities (358) — (358)
Ending balance $ 223 $ 4 $ 227
Impairment charges in other income (loss), net attributable to assets still held as of July 25, 2009 $ (13) $ — $ (13)
(c) Financial Assets Measured at Fair Value on a Nonrecurring Basis
The following table presents the Company’s financial assets that were measured at fair value on a nonrecurring basis and the
losses recorded to other income (loss), net on those assets (in millions):
FAIR VALUE MEASUREMENTS USING
Net Carrying
Value as of
July 25, 2009
Quoted Prices in
Active Markets
for Identical
Instruments
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total Losses
for the Year
Ended
July 25, 2009
Investments in privately held companies $ 69 $ — $ — $ 69 $ (78)
Losses on assets no longer held as of July 25, 2009 (9)
Total $ (87)
The assets in the preceding table were measured at fair value during the year ended July 25, 2009 due to events or circumstances the
Company identified that significantly impacted the fair value of these investments. The Company measured fair value using financial
metrics, comparison to other private and public companies, and analysis of the financial condition and near-term prospects of the issuer,
including recent financing activities and their capital structure as well as other economic variables. These investments were classified as
58 Cisco Systems, Inc.