Costco 2009 Annual Report Download - page 69

During the third quarter of 2009, the Company considered continuing indicators of significant
unobservable inputs, such as the lengthening of maturities, later-than-scheduled payments, and any
securities that have defaulted, as Level 3 inputs for valuation. This resulted in a transfer of $37 into
Level 3 from Level 2. Transfers into and out of Level 3 from Level 2, where applicable, are reported
using the fair value of the individual securities as of the beginning of the reporting period in which the
transfer occurred. During the fourth quarter of 2009, the Company expanded its description of Level 3
input evaluation to address pricing elements of adopting FSP 157-4. This updated description did not
change the current period’s price evaluation as the pricing modeling used by the Company’s primary
pricing vendor during the previous quarter accounted for inputs in accordance with the newly adopted
standard. At August 30, 2009, all of the Company’s Level 3 investments of $26, were comprised of
individual securities in the Columbia fund and represent the majority of the balance of the fund at
August 30, 2009.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following table presents information about the Company’s financial assets and financial liabilities
that are measured at fair value on a recurring basis as of August 30, 2009, and indicates the fair value
hierarchy of the valuation techniques utilized to determine such fair value:
Level 1 Level 2 Level 3
Assets / (liabilities):
Money market mutual funds .................................. $1,597 $ — $ —
Investment in U.S. government and agency securities ............. — 403 —
Investment in corporate notes and bonds ....................... — 35 14
Investment in asset and mortgage-backed securities .............. — 37 12
Forward foreign exchange contracts, in asset position(1) .......... — 2 —
Forward foreign exchange contracts, in liability position(1) ......... — (4) —
Total ................................................. $1,597 $473 $26
(1) See Note 1 for additional information on derivative instruments.
The table below provides a summary of the changes in fair value, including net transfers, of all financial
assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for
the year ended August 30, 2009:
Investment
in corporate
notes and
bonds
Investment
in asset and
mortgage-
backed
securities Total
Balance, beginning of period ................................. $12 $ 6 $18
Total realized and unrealized gains (losses):
Included in other comprehensive income ................... — 3 3
Included in interest income and other ...................... (4) (6) (10)
Purchases, issuances, and (settlements) ....................... (17) (23) (40)
Net transfers in ............................................ 23 32 55
Balance, end of period ...................................... $14 12 26
Change in unrealized gains (losses) included in interest income and
other related to assets held as of August 30, 2009 .............. $ (4) (4) (8)
67