MasterCard 2010 Annual Report Download - page 108

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MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—continued
likely than not that the Company will hold and not be required to sell its ARS investments until recovery of their
cost bases which may be at maturity or earlier if called. Therefore MasterCard does not consider the unrealized
losses to be other-than-temporary. The Company estimated 10% and 15% price discounts to the par value of the
ARS portfolio at December 31, 2010 and 2009, respectively. The pre-tax impairment included in accumulated
other comprehensive income related to the Company’s ARS was $12 million and $32 million as of December 31,
2010 and 2009, respectively. A hypothetical increase of 100 basis points in the discount rate used in the
discounted cash flow analysis would have increased the impairment by $2 million and $23 million as of
December 31, 2010 and 2009, respectively.
Carrying and Fair Values—Held-to-Maturity Investment Securities:
As of December 31, 2010, the Company also owned held-to-maturity investment securities, which consisted
of U.S. Treasury notes and a municipal bond yielding interest at 5.0% per annum. The municipal bond relates to
the Company’s back-up processing center in Kansas City, Missouri. The Company cancelled $154 million of
short-term municipal bonds related to its global technology and operations center located in O’Fallon, Missouri,
called Winghaven, on March 1, 2009, as further discussed in Note 16 (Consolidation of Variable Interest Entity).
The carrying value, gross unrecorded gains and fair value of held-to-maturity investment securities were as
follows at December 31:
2010 2009
(in millions)
Carrying value $336 $338
Gross unrecorded gains 2 2
Fair value $338 $340
Investment Maturities:
The maturity distribution based on the contractual terms of the Company’s investment securities at
December 31, 2010 was as follows:
Available-For-Sale Held-To-Maturity
Amortized
Cost
Fair
Value
Carrying
Value
Fair
Value
(in millions)
Due within 1 year $ 8 $ 8 $300 $300
Due after 1 year through 5 years 242 251 36 38
Due after 5 years through 10 years 59 60 — —
Due after 10 years 114 102 — —
No contractual maturity 511 516 — —
Total $934 $937 $336 $338
All securities due after ten years are ARS. Taxable short-term bond funds have been included in the table
above in the no contractual maturity category, as these investments do not have a stated maturity date; however,
the short-term bond funds have daily liquidity.
98