Cisco 2011 Annual Report Download - page 113

(a) Fair Value Hierarchy
The accounting guidance for fair value measurement requires an entity to maximize the use of observable inputs
and minimize the use of unobservable inputs when measuring fair value. The standard establishes a fair value
hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair
value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of
input that is significant to the fair value measurement. The fair value hierarchy is as follows:
Level 1 Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical
assets or liabilities.
Level 2 Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are
observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted
prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active
markets); or model-derived valuations in which significant inputs are observable or can be derived principally
from, or corroborated by, observable market data.
Level 3 Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation
methodology that are significant to the measurement of the fair value of the assets or liabilities.
(b) Assets and Liabilities Measured at Fair Value on a Recurring Basis
Assets and liabilities measured at fair value on a recurring basis as of July 30, 2011 and July 31, 2010 were as
follows (in millions):
JULY 30, 2011
FAIR VALUE MEASUREMENTS
JULY 31, 2010
FAIR VALUE MEASUREMENTS
Level 1 Level 2 Level 3
Total
Balance Level 1 Level 2 Level 3
Total
Balance
Assets
Cash equivalents:
Money market funds ................$5,852 $ — $ — $ 5,852 $2,521 $ — $ — $ 2,521
U.S. government securities ........... ———— — 235 — 235
U.S. government agency securities (1) ... —1—1—40—40
Corporate debt securities ............ ———— —1—1
Available-for-sale investments:
U.S. government securities ........... — 19,139 — 19,139 — 16,612 — 16,612
U.S. government agency securities (1) ... — 8,776 — 8,776 — 13,579 — 13,579
Non-U.S. government and agency
securities(2) ........................ — 3,132 — 3,132 — 1,467 — 1,467
Corporate debt securities ............ — 4,394 — 4,394 — 2,222 — 2,222
Asset-backed securities .............. — — 121 121 — — 149 149
Publicly traded equity securities ....... 1,361 — — 1,361 1,251 — — 1,251
Derivative assets ....................... — 220 2 222 — 160 3 163
Total ........................$7,213 $35,662 $ 123 $42,998 $3,772 $34,316 $ 152 $38,240
Liabilities:
Derivative liabilities ................$—$ 24$— $ 24 $—$ 19$— $ 19
Total ........................$—$ 24$— $ 24 $—$ 19$—$ 19
(1) Includes corporate securities that are guaranteed by the FDIC.
(2) Includes agency and corporate securities that are guaranteed by non-U.S. governments.
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