Intel 2012 Annual Report Download - page 57
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Trading Assets
Marketable debt instruments are generally designated as trading assets when the interest rate or foreign exchange rate
risk is economically hedged at inception with a related derivative instrument, or when the marketable debt instrument is
used to economically hedge foreign exchange rate risk from the remeasurement of intercompany loans. Investments
designated as trading assets are reported at fair value. The gains or losses of these investments arising from changes in
fair value due to interest rate and currency market fluctuations and credit market volatility, offset by losses or gains on the
related derivative instruments and intercompany loans, are recorded in interest and other, net. We also designate certain
floating-rate securitized financial instruments, primarily asset-backed securities, as trading assets.
Available-for-Sale Investments
We consider all liquid available-for-sale debt instruments with original maturities from the date of purchase of
approximately three months or less to be cash and cash equivalents. Available-for-sale debt instruments with original
maturities at the date of purchase greater than approximately three months and remaining maturities of less than one year
are classified as short-term investments. Available-for-sale debt instruments with remaining maturities beyond one year
are classified as other long-term investments.
Investments that we designate as available-for-sale are reported at fair value, with unrealized gains and losses, net of tax,
recorded in accumulated other comprehensive income (loss), except as noted in the “Other-Than-Temporary Impairment”
section that follows. We determine the cost of the investment sold based on an average cost basis at the individual
security level. Our available-for-sale investments include:
• Marketable debt instruments when the interest rate and foreign currency risks are not hedged at the inception of
the investment or when our criteria for designation as trading assets are not met. We generally hold these debt
instruments to generate a return commensurate with the U.S.-dollar three-month LIBOR. We record the interest
income and realized gains and losses on the sale of these instruments in interest and other, net.
• Marketable equity securities when there are barriers to mitigating equity market risk through the sale or use of
derivative instruments at the time of original classification, and when there is no plan to sell the investment at the time
of original classification. We acquire these equity investments to promote business and strategic objectives. To the
extent that these investments continue to have strategic value, we typically do not attempt to reduce or eliminate the
equity market risks through hedging activities. We record the realized gains or losses on the sale or exchange of
marketable equity securities in gains (losses) on equity investments, net.
Non-Marketable and Other Equity Investments
Our non-marketable equity and other equity investments are included in other long-term assets. We account for non-
marketable equity and other equity investments for which we do not have control over the investee as:
• Equity method investments when we have the ability to exercise significant influence, but not control, over the
investee. Equity method investments include marketable and non-marketable investments. Our proportionate share of
the income or loss is recognized on a one-quarter lag and is recorded in gains (losses) on equity investments, net.
• Non-marketable cost method investments when the equity method does not apply. We record the realized gains
or losses on the sale of non-marketable cost method investments in gains (losses) on equity investments, net.
Other-Than-Temporary Impairment
Our available-for-sale investments and non-marketable and other equity investments are subject to a periodic impairment
review. Investments are considered impaired when the fair value is below the investment’s adjusted cost basis.
Impairments affect earnings as follows:
• Marketable debt instruments when the fair value is below amortized cost and we intend to sell the instrument, or
when it is more likely than not that we will be required to sell the instrument before recovery of its amortized cost
basis, or when we do not expect to recover the entire amortized cost basis of the instrument (that is, a credit loss
exists). When we do not expect to recover the entire amortized cost basis of the instrument, we separate other-than-
temporary impairments into amounts representing credit losses, which are recognized in interest and other, net, and
amounts related to all other factors, which are recognized in other comprehensive income (loss).
• Marketable equity securities based on the specific facts and circumstances present at the time of assessment,
which include the consideration of general market conditions, the duration and extent to which the fair value is below
cost, and our ability and intent to hold the investment for a sufficient period of time to allow for recovery of value in the
foreseeable future. We also consider specific adverse conditions related to the financial health of, and the business
outlook for, the investee, which may include industry and sector performance, changes in technology, operational and
financing cash flow factors, and changes in the investee’s credit rating. We record other-than-temporary impairment