First Data 2012 Annual Report Download - page 80

FIRST DATA CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Settlement assets - student loan auction rate securities. Due to the lack of observable market activity for the SLARS held by
the Company as of December 31, 2012, the Company, with the assistance of a third-party valuation firm upon which the Company in
part relied, made certain assumptions, primarily relating to estimating both the weighted-average life for the securities held by the
Company and the impact on the fair value of the current inability to redeem the securities at par value. All key assumptions and
valuations were determined by and are the responsibility of management. The securities were valued using an income approach based
on a probability-weighted discounted cash flow analysis. The Company considered each security’ s key terms including date of
issuance, date of maturity, auction intervals, scheduled auction dates, maximum auction rates, as well as underlying collateral, ratings,
and guarantees or insurance. The impact of the Company’ s judgment in the valuation was significant and, accordingly, the resulting
fair value was classified as Level 3 within the fair value hierarchy. A 50 basis point change in liquidity risk premium, as well as slight
changes in other unobservable inputs including default probability and default recovery rate assumptions and the probability of an
issuer call prior to maturity, would impact the value of the SLARS by approximately $1 million. For additional information regarding
sales, settlements and impairments of the SLARS, refer to Note 5 of these Consolidated Financial Statements.
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As of December 31, 2011
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 $
—
$
—
$ 170.5 $170.5
Corporate bonds
—
10.2
—
10.2
State and municipal obligations
—
95.5
—
95.5
U.S. Government guaranteed agency securities
—
10.0
—
10.0
Preferred stock 0.5
—
—
0.5
Total settlement assets 0.5 115.7 170.5 286.7
Other long-term assets:
Available-fo
r
-sale securities
—
0.5
—
0.5
Interest rate swap contracts
—
65.4
—
65.4
Foreign currency derivative contracts
—
10.9
—
10.9
Total other long-term assets
—
76.8
—
76.8
Total assets at fair value
$0.5 $192.5
$ 170.5
$363.5
Liabilities:
Other current liabilities:
Interest rate swap contracts $
—
$156.7 $
—
$156.7
Other long-term liabilities:
Foreign currency derivative contracts
—
27.8
—
27.8
Forward-starting interest rate contracts
—
11.9
—
11.9
Total liabilities at fair value
$
—
$196.4
$
—
$196.4