First Data 2012 Annual Report Download - page 79

FIRST DATA CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Concentration of credit risk
The Company’ s investment securities are diversified across multiple issuers within its investment portfolio (investment
securities plus cash and cash equivalents). In addition to investment securities, the Company maintains other financial instruments
with various financial institutions. The Company’ s largest single issuer represents less than 15% of the total carrying value of the
investment portfolio and the Company limits its derivative financial instruments credit risk by maintaining contracts with
counterparties having a credit rating of “A” or higher. The Company periodically reviews the credit standings of these institutions.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
Fair value is defined by accounting guidance as the price that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date. The Company uses the hierarchy prescribed in the
accounting guidance for fair value measurements, based upon the available inputs to the valuation and the degree to which they are
observable or not observable in the market. The three levels in the hierarchy are as follows:
• Level 1 Inputs—Quoted prices (unadjusted) for identical assets or liabilities in active markets that are accessible as of the
measurement date.
• Level 2 Inputs—Inputs other than quoted prices within Level 1 that are observable either directly or indirectly, including
but not limited to quoted prices in markets that are not active, quoted prices in active markets for similar assets or
liabilities and observable inputs other than quoted prices such as interest rates or yield curves.
• Level 3 Inputs—Unobservable inputs reflecting the Company’ s own assumptions about the assumptions that market
participants would use in pricing the asset or liability, including assumptions about risk.
The Company maximizes the use of relevant observable inputs and minimizes the use of unobservable inputs.
Financial instruments carried and measured at fair value on a recurring basis are classified in the table below according to the
fair value hierarchy described above:
79
As of December 31, 2012
Fair Value Measurement Using
(in millions)
Quoted prices in
active markets
for identical assets
(Level 1)
Significant other
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3) Total
Assets:
Settlement assets:
Student loan auction rate securities $
—
$
—
$ 38.8 $38.8
Corporate bonds
—
6.6
—
6.6
State and municipal obligations
—
133.9
—
133.9
Preferred stock 0.6
—
—
0.6
Total settlement assets 0.6 140.5 38.8 179.9
Other current assets:
Interest rate swap contracts
—
1.0
—
1.0
Foreign currency derivative contracts
—
10.1 10.1
Other long-term assets:
Available-fo
r
-sale securities
—
0.5
—
0.5
Interest rate swap contracts
—
89.8
—
89.8
Total assets at fair value
$0.6 $241.9
$ 38.8
$281.3
Liabilities:
Other current liabilities:
Interest rate swap contracts $
—
$0.3 $
—
$0.3
Other long-term liabilities:
Foreign currency derivative contracts
—
34.4
—
34.4
Interest rate swap contracts
—
137.4
—
137.4
Contingent consideration
—
—
20.0 20.0
Total liabilities at fair value
$
—
$172.1
$ 20.0
$192.1