ADP 2011 Annual Report Download - page 51

Expected maturities of available
- for - sale securities at June 30, 2011 are as follows:
In fiscal 2010, the Company concluded that it had the intent to sell certain securities for which unrealized losses of $14.4 million
previously recorded in accumulated other comprehensive income on the Consolidated Balance Sheets. As such, the Company
realized impairment losses of $14.4 million in other income, net on the Statements of Consolidated Earnings in fiscal 2010.
For the securities in an unrealized loss position of $34.6 million at June 30, 2011, the Company concluded that it did not have the
intent to sell such securities and that it was not more likely than not that the Company would be required to sell such securities
before recovery, in order to determine whether such losses were due to credit losses. The securities with unrealized losses of $34.6
million were primarily comprised of corporate bonds and U.S. Treasury and direct obligations of U.S. government agencies. The
Company evaluated such securities utilizing a variety of quantitative and qualitative factors including whether the Company expects
to collect all amounts due under the contractual terms of the security, information about current and past events of the issuer, and
the length of time and the extent to which the fair value has been less than the cost basis. At June 30, 2011, the Company concluded
that unrealized losses on available
- for - sale securities held at June 30, 2011 were not credit losses and were attributable to other
factors, including changes in interest rates. As a result, the Company concluded that the $34.6 million in unrealized losses on such
securities should be recorded in accumulated other comprehensive income on the Consolidated Balance Sheets at June 30, 2011.
NOTE 6. FAIR VALUE MEASUREMENTS
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly
transaction between market participants at the measurement date and is based upon the Company
’ s principal or most advantageous
market for a specific asset or liability.
US GAAP provides for a three
- level hierarchy of inputs to valuation techniques used to measure fair value, defined as follows:
Available
- for - sale securities included in Level 1 are valued using closing prices for identical instruments that are traded on active
exchanges. Available
- for - sale securities included in Level 2 are valued utilizing inputs obtained from an independent pricing service.
To determine the fair value of our Level 2 investments, a variety of inputs are utilized, including benchmark yields, reported trades,
non
- binding broker/dealer quotes, issuer spreads, two - sided markets, benchmark securities, bids, offers, reference data, new issue
data, and monthly payment information. Over 99% of our Level 2 investments are valued utilizing inputs obtained from a pricing
service. The Company reviews the values generated by the independent pricing service for reasonableness by comparing the
valuations received from the independent pricing service to valuations from at least one other observable source. The Company has
not adjusted the prices obtained from the independent pricing service. The Company has no available - for - sale securities included in
Level 3.
51
Maturity Dates:
Due in one year or less
$
3,096.2
Due after one year up to two years
3,231.2
Due after two years up to three years
1,762.0
Due after three years up to four years
3,165.5
Due after four years
5,672.6
Total available - for - sale securities
$
16,927.5
Level 1
Fair value is determined based upon quoted prices for identical assets or liabilities that are traded in active markets.
Level 2
Fair value is determined based upon inputs other than quoted prices included in Level 1 that are observable for the
asset or liability, either directly or indirectly, for substantially the full term of the asset or liability, including:
●quoted prices for similar assets or liabilities in active markets;
●quoted prices for identical or similar assets or liabilities in markets that are not active;
●inputs other than quoted prices that are observable for the asset or liability; or
●inputs that are derived principally from or corroborated by observable market data by correlation or other
means.
Level 3
Fair value is determined based upon inputs that are unobservable and reflect the Company ’ s own assumptions about
the assumptions that market participants would use in pricing the asset or liability based upon the best information
available in the circumstances (e.g., internally derived assumptions surrounding the timing and amount of expected
cash flows).