Costco 2011 Annual Report Download - page 64

Download and view the complete annual report

Please find page 64 of the 2011 Costco annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 87

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87

Note 2—Investments
The major categories of the Company’s investments are as follows:
Money market mutual funds
The Company invests in money funds that seek to maintain a net asset value of par, while limiting
overall exposure to credit, market, and liquidity risks.
U.S. government and agency securities
These U.S. government-secured debt instruments are publically traded and valued. Losses in this
category are primarily due to market liquidity and interest rate reductions.
Corporate notes and bonds
The Company evaluates its corporate debt securities based on a variety of factors including, but not
limited to, the credit rating of the issuer. The vast majority of the Company’s corporate debt securities
are rated investment grade by the major rating agencies.
FDIC-insured corporate bonds
These bonds are guaranteed by the full faith and credit of the U.S. government under the FDIC’s
Temporary Liquidity Guarantee Program. Losses in this category are primarily due to market liquidity
and interest rate reductions.
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 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 2011 and 2010, were as follows:
2011:
Cost
Basis
Unrealized
Gains
Unrealized
Losses
Recorded
Basis
Available-for-sale:
U.S. government and agency securities ........... $1,096 $ 8 $0 $1,104
Corporate notes and bonds ..................... 6 1 0 7
FDIC-insured corporate bonds .................. 208 1 0 209
Asset and mortgage-backed securities ............ 12 0 0 12
Total available-for-sale ..................... 1,322 10 0 1,332
Held-to-maturity:
Certificates of deposit .......................... 272 0 0 272
Total investments ......................... $1,594 $10 $0 $1,604
62