Computer Associates 2009 Annual Report Download - page 90

During fiscal year 2009, the Company entered into interest rate swaps with a total notional value of $250 million to
hedge a portion of its variable interest rate payments. These derivatives are designated as cash flow hedges under
SFAS No. 133. The effective portion of these cash flow hedges are recorded as “Accumulated other comprehensive loss”
in the Company’s Consolidated Balance Sheet and reclassified into “Interest expense, net,” in the Company’s
Consolidated Statements of Operations in the same period during which the hedged transaction affects earnings. Any
ineffective portion of the cash flow hedges would be recorded immediately to “Interest expense, net;” however, no
ineffectiveness existed in the fiscal year ended March 31, 2009.
As described in Note 1, the Company adopted the provisions of SFAS No. 157 as amended by FSP FAS 157-1 and FSP
FAS 157-2 on April 1, 2008. Pursuant to the provisions of FSP FAS 157-2, the Company will not apply the provisions of
SFAS No. 157 to any nonfinancial assets and nonfinancial liabilities until April 1, 2009. The Company recorded no
change to its opening balance of retained earnings as of April 1, 2008 as it did not have any financial instruments
requiring retrospective application under the provisions of SFAS No. 157.
Fair Value Hierarchy
SFAS No. 157 specifies a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques
reflect assumptions other market participants would use based upon market data obtained from independent sources
(observable inputs) or reflect the company’s own assumptions of market participant valuation (unobservable inputs). In
accordance with SFAS No. 157, these two types of inputs have created the following fair value hierarchy:
•Level 1 — Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical,
unrestricted assets or liabilities;
•Level 2 — Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar
assets and liabilities in active markets or financial instruments for which significant inputs are observable, either
directly or indirectly;
•Level 3 — Prices or valuations that require inputs that are both significant to the fair value measurement and
unobservable.
SFAS No. 157 requires the use of observable market data if such data is available without undue cost and effort.
Items Measured at Fair Value on a Recurring Basis
The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis at
March 31, 2009 consistent with the fair value hierarchy provisions of SFAS No. 157.
Fair Value Measurement at Reporting Date Using
(IN MILLIONS)
ESTIMATED
FAIR VALUE
AS OF
MARCH 31, 2009
QUOTED PRICES IN
ACTIVE MARKETS FOR
IDENTICAL ASSETS
(LEVEL 1)
SIGNIFICANT OTHER
OBSERVABLE INPUTS
(LEVEL 2)
Assets:
Money market funds $ 1,617 $ 1,617 $ —
Government securities 405 405 —
Total Assets $ 2,022 $ 2,022 $ —
Liabilities:
Interest Rate Derivatives
1
7—7
Total Liabilities $7 $— $7
1 Interest rate derivatives are designated as cash flow hedges under SFAS No. 133
As of March 31, 2009, the Company had approximately $1,567 million and $50 million of investments in money market
funds classified as “Cash, cash equivalents and marketable securities” and “Other noncurrent assets, net” for restricted
cash amounts, respectively, in its Consolidated Balance Sheet. The Company also had approximately $405 million in
government securities, comprised of treasury bills, classified as “Cash, cash equivalents and marketable securities” in its
Consolidated Balance Sheet at March 31, 2009.
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