Texas Instruments 2010 Annual Report Download - page 19

Download and view the complete annual report

Please find page 19 of the 2010 Texas Instruments annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 52

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52

TEXAS INSTRUMENTS 2010 ANNUAL REPORT
17
| |
7. Valuation of debt and equity investments and certain liabilities
Debt and equity investments
We classify our investments as available-for-sale, trading, equity method or cost method. Most of our investments are classified as
available-for-sale.
Available-for-sale securities consist primarily of money market funds and debt securities. Available-for-sale securities are stated
at fair value, which is generally based on market prices, broker quotes or, when necessary, financial models (see fair value discussion
below). We record other-than-temporary losses (impairments) on these securities in OI&E in our statements of income, and all other
unrealized gains and losses as an increase or decrease, net of taxes, in AOCI on our balance sheet.
Trading securities are stated at fair value based on market prices. Our trading securities consist exclusively of mutual funds that
hold a variety of debt and equity investments intended to generate returns that offset changes in certain deferred compensation
liabilities. We record changes in the fair value of our trading securities and the related deferred compensation liabilities in selling,
general and administrative (SG&A) expense in our statements of income.
Our other investments are not measured at fair value but are accounted for using either the equity method or cost method. These
investments consist of interests in venture capital funds and other non-marketable equity securities. Gains or losses from equity
method investments are reflected in OI&E based on our ownership share of the investee’s financial results. Gains and losses on cost
method investments are recorded in OI&E when realized or when an impairment of the investment’s value is warranted based on our
assessment of the recoverability of each investment.
Details of our investments and related unrealized gains and losses included in AOCI are as follows:
December฀31,฀2010 December฀31,฀2009
Cash฀and฀Cash฀
Equivalents
Short-term฀
Investments
Long-term฀
Investments
Cash฀and฀Cash฀
Equivalents
Short-term฀
Investments
Long-term฀
Investments
Measured฀at฀fair฀value:
Available-for-sale฀securities
Money market funds . . . . . . . . . . . . . . . . . $ 167 $ — $ — $ 563 $ — $ —
Corporate obligations . . . . . . . . . . . . . . . . . 44 649 — 100 438 —
U.S. Government agency and Treasury securities . . 855 1,081 — 360 1,305 —
Auction-rate securities . . . . . . . . . . . . . . . . — 23 257 — — 458
Trading฀securities
Mutual funds . . . . . . . . . . . . . . . . . . . . . — — 139 — — 123
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,066 1,753 396 1,023 1,743 581
Other฀measurement฀basis:
Equity method investments . . . . . . . . . . . . . . — — 36 — — 33
Cost method investments . . . . . . . . . . . . . . — — 21 — — 23
Cash on hand . . . . . . . . . . . . . . . . . . . . 253 — — 159 — —
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,319 $1,753 $453 $1,182 $ 1,743 $637
Amounts฀included฀in฀AOCI฀from฀
available-for-sale฀securities:
Unrealized gains (pre-tax) . . . . . . . . . . . . . . . . $ — $ 1 $ — $ — $ 1 $ —
Unrealized losses (pre-tax) . . . . . . . . . . . . . . . . $ — $ 1 $ 22 $ — $ — $ 32
As of December 31, 2010, about 60 percent of our investments in the corporate obligations shown above were insured by either the
Federal Deposit Insurance Corporation (FDIC) or the United Kingdom government.
In the year ending December 31, 2010, $188 million of auction-rate securities were redeemed and we received notification in the
fourth quarter of 2010 that an additional $23 million of auction-rate securities would be redeemed during 2011. These securities were
subsequently฀redeemed฀in฀January฀of฀2011฀and฀were฀reclassified฀from฀long-term฀to฀short-term฀investments฀on฀the฀balance฀sheet฀as฀of฀
December 31, 2010.
As of December 31, 2010 and 2009, unrealized losses included in AOCI were associated with auction-rate securities, and as of
December 31, 2010, we have determined that these unrealized losses are not other-than-temporarily impaired. We expect to recover
the entire cost basis of these securities. We do not intend to sell these investments, nor do we expect to be required to sell these
investments before a recovery of the cost basis. For the year ended December 31, 2010, we did not recognize in earnings any credit
losses related to these investments.