Cisco 2012 Annual Report Download - page 116

The Company’s asset-backed securities, prior to being sold, were reclassified from Level 3 to Level 2 during
fiscal 2012, as the Company observed an increase in market activity and that observable market data was
available for these financial assets.
Asset-Backed
Securities
Derivative
Assets Total
Balance at July 31, 2010 ................................ $ 149 $ 3 $152
Total gains and losses (realized and unrealized):
Included in other income, net ......................... 3 (1) 2
Purchases, sales and maturities ........................... (31) — (31)
Balance at July 30, 2011 ................................ $ 121 $ 2 $123
Losses attributable to assets still held as of July 30, 2011 ....... $ — $ (1) $ (1)
(c) Assets Measured at Fair Value on a Nonrecurring Basis
The following tables present the Company’s financial instruments and nonfinancial assets that were measured at
fair value on a nonrecurring basis during the indicated periods and the related recognized gains and losses for the
periods (in millions):
July 28, 2012 July 30, 2011 July 31, 2010
Net Carrying
Value as of
Year End
Total Gains
(Losses)
for the
Year Ended
Net Carrying
Value as of
Year End
Total Gains
(Losses)
for the
Year Ended
Net Carrying
Value as of
Year End
Total Gains
(Losses)
for the
Year Ended
Property held for sale ..................... $ 63 $(413) $ 20 $ (38) $ 25 $ (86)
Investments in privately held companies ...... $ 47 (23) $ 13 (10) $ 45 (25)
Purchased intangible assets ................ $ — (12) $ — (164) $ — (28)
Manufacturing operations held for sale ....... $— — $ 167 (61) $ — —
Gains on assets no longer held at end of fiscal
year ................................. 14 —2
Total losses for nonrecurring measurements . . . $(434) $(273) $(137)
The assets in the preceding table were measured at fair value due to events or circumstances the Company
identified as having significant impact on their fair value during the respective periods. To arrive at the valuation
of these assets, the Company considers any significant changes in the financial metrics and economic variables
and also uses third-party valuation reports to assist in the valuation as necessary. These assets were classified as
Level 3 assets because the Company used unobservable inputs to value them.
The property held for sale represents land and buildings which met the criteria to be classified as held for sale.
The fair value of property held for sale was measured with the assistance of third-party valuation models which
used comparable property values or discounted cash flow techniques as part of its analysis. The fair value
measurement was categorized as Level 3 as significant unobservable inputs were used in the valuation report.
The impairment charges as a result of the valuations, which represented the difference between the fair value less
cost to sell and the carrying amount of the assets held for sale, were included in G&A expenses.
The fair value measurement of the impaired investments was classified as Level 3 because significant
unobservable inputs were used in the valuation due to the absence of quoted market prices and inherent lack of
liquidity. Significant unobservable inputs, which included financial metrics of comparable private and public
companies, financial condition and near-term prospects of the investees, recent financing activities of the
investee, and the investee’s capital structure as well as other economic variables, reflected the assumptions
market participants would use in pricing these assets. The impairment charges, representing the difference
between the cost and the fair value as a result of the evaluation, were recorded to other income, net.
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