Seagate 2010 Annual Report Download - page 105

Table of Contents
SEAGATE TECHNOLOGY PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The Company classifies items in Level 2 if the financial asset or liability is valued using observable inputs. The Company uses observable
inputs including quoted prices in active markets for similar assets or liabilities. Level 2 assets include: agency bonds, corporate bonds,
commercial paper, municipal bonds, and U.S. Treasuries. These debt investments are priced using observable inputs and valuation models which
vary by asset class. The Company uses a pricing service to assist in determining the fair values of all of its cash equivalents and short-term
investments. For the cash equivalents and short-term investments in the Company's portfolio, multiple pricing sources are generally available.
The pricing service uses inputs from multiple industry standard data providers or other third party sources and various methodologies, such as
weighting and models, to determine the appropriate price at the measurement date. The Company corroborates the prices obtained from the
pricing service against other independent sources and, as of July 1, 2011, has not found it necessary to make any adjustments to the prices
obtained. The Company's derivative financial instruments are also classified within Level 2. The Company's derivative financial instruments
consist of foreign currency forward exchange contracts and the TRS. The Company recognizes derivative financial instruments in its
consolidated financial statements at fair value. The Company determines the fair value of these instruments by considering the estimated amount
it would pay or receive to terminate these agreements at the reporting date.
The Company's Level 3 assets consist of auction rate securities with a par value of approximately $18 million, all of which are
collateralized by student loans guaranteed by the Federal Family Education Loan Program. Beginning in fiscal year 2008, these securities failed
to settle at auction and have continued to fail through July 1, 2011. Since there is no active market for these securities, the Company valued them
using a discounted cash flow model. The valuation model is based on the income approach and reflects both observable and significant
unobservable inputs.
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