Costco 2010 Annual Report Download - page 64

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Asset and mortgage-backed securities:
The vast majority of the Company’s asset and mortgage-backed securities have investment grade
credit ratings from the major rating agencies. These investments are collateralized by residential real
estate credit, credit card receivables, commercial real estate, foreign mortgage receivables, and lease
receivables. Estimates of fair value are based upon a variety of factors including, but not limited to,
credit rating of the issuer, internal credit risk, interest rate variation, prepayment assumptions, and the
potential for default.
Certificates of deposit:
Certificate of deposits are short-term interest-bearing debt instruments issued by various financial
institutions with which the Company has an established banking relationship.
The Company’s investments at the end of 2010 and 2009, were as follows:
2010:
Cost
Basis
Unrealized
Gains
Unrealized
Losses
Recorded
Basis
Available-for-sale:
U.S. government and agency securities ........... $1,222 $7 $ 0 $1,229
Corporate notes and bonds ..................... 10 1 0 11
FDIC insured corporate bonds .................. 139 0 0 139
Asset and mortgage-backed securities ............ 23 0 0 23
Total available-for-sale ..................... 1,394 8 0 1,402
Held-to-maturity:
Certificates of deposit .......................... 133 133
Total investments ........................ $1,527 $8 $ 0 $1,535
2009:
Cost
Basis
Unrealized
Gains
Unrealized
Losses
Recorded
Basis
Available-for-sale:
Money market mutual funds .................... $ 13 $0 $0 $ 13
U.S. government and agency securities ........... 400 3 0 403
Corporate notes and bonds ..................... 49 1 (1) 49
Asset and mortgage-backed securities(1) ......... 48 1 0 49
Total available-for-sale ..................... 510 5 (1) 514
Held-to-maturity:
Certificates of deposit .......................... 59 59
Total investments ........................ $ 569 $5 $(1) $ 573
(1) At the end of 2009, $3 was recorded in other assets, reflecting the timing of the expected
distributions.
The proceeds and gross realized gains and losses from sales of available-for-sale securities during
2010, 2009, and 2008 are provided in the following table:
2010 2009 2008
Proceeds .......................................... $309 $183 $165
Realized gains ...................................... 5 5 2
Realized losses ..................................... 1 2 0
In 2008, one of the Company’s enhanced money fund investments, Columbia Strategic Cash Portfolio
Fund (Columbia), ceased accepting cash redemption requests and changed to a floating net asset
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