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Table of Contents VMware, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
As of December 31, 2011 and 2010 , VMware did not have investments in a material continuous unrealized loss position for twelve months
or greater. Unrealized losses on investments as of December 31, 2011 and 2010 that have been in a net loss position for less than twelve months
were classified by investment category as follows (table in thousands):
VMware evaluated its investments as of December 31, 2011 and 2010 and determined that there were no unrealized losses that indicated an
other-than-temporary impairment.
Contractual Maturities
The contractual maturities of investments held at December 31, 2011 consisted of the following (table in thousands):
D. Fair Value Measurements
Generally accepted accounting principles provide that fair value is an exit price, representing the amount that would be received upon the
sale of an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based
measurement that is determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for
considering such assumptions, generally accepted accounting principles established a three-
tier value hierarchy, which prioritizes the inputs used
in measuring fair value as follows: (Level 1) inputs are quoted prices in active markets for identical assets or liabilities; (Level 2) inputs other
than the quoted prices included within Level 1 that are observable for the assets or liabilities, either directly or indirectly; and (Level 3)
VMware’s Level 1 classification of the fair value hierarchy includes money market funds, available-for-sale equity securities and certain
available-for-sale fixed income securities because these securities are valued using quoted prices in active markets for identical assets.
VMware’s Level 2 classification includes the remainder of the available-for-sale fixed income securities because these securities are priced
using quoted market prices for similar instruments and non-binding market prices that are corroborated by observable market data. VMware
obtains the fair values of its Level 2 financial instruments based upon fair values obtained from its custody bank. In addition, VMware obtains
fair values of its Level 2 financial instruments from the asset manager of each of its portfolios. VMware validates the fair value provided by its
custody bank by comparing it against the independent pricing information obtained from the asset managers. Independently, the custody bank
and the asset managers use professional pricing services to gather pricing data which may include quoted market prices for identical or
comparable instruments, or inputs other than quoted prices that are observable either directly or indirectly. VMware is ultimately responsible for
the financial statements and underlying estimates.
Additionally, VMware's Level 2 classification includes foreign currency forward contracts as the valuation inputs for these are based upon
quoted prices and quoted pricing intervals from public data sources. These contracts were not material for any period presented. VMware does
not have any material assets or liabilities that fall into Level 3 of the fair value hierarchy.
72
December 31, 2011
December 31, 2010
Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
U.S. government and agency obligations
$
50,604
$
(23
)
$
109,932
$
(310
)
U.S. and foreign corporate debt securities
539,228
(2,036
)
149,831
(286
)
Foreign governments and multi-national agency obligations
43,026
(87
)
26,415
(13
)
Municipal obligations
298,187
(406
)
412,882
(762
)
Asset-backed securities
20,025
(23
)
—
—
Mortgage-backed securities
32,817
(172
)
—
—
Total investments
$
983,887
$
(2,747
)
$
699,060
$
(1,371
)
Amortized
Cost Basis
Aggregate
Fair Value
Due within one year
$
1,262,148
$
1,262,370
Due after 1 year through 5 years
1,249,181
1,250,987
Due after 5 years
43,097
43,093
Total
$
2,554,426
$
2,556,450