VMware 2012 Annual Report Download - page 87

Table of Contents VMware, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
As of December 31, 2012 and 2011 , VMware did not have investments in a material continuous unrealized loss position for twelve months
or greater. Unrealized losses on investments as of December 31, 2012 and 2011 , which have been in a net loss position for less than twelve
months, were classified by investment category as follows (table in thousands):
Contractual Maturities
The contractual maturities of investments held at December 31, 2012 consisted of the following (table in thousands):
E. Fair Value Measurements
Generally accepted accounting principles provide that fair value is an exit price, representing the amount that would be received upon the
sale of an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based
measurement that is determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for
considering such assumptions, generally accepted accounting principles established a three-
tier value hierarchy, which prioritizes the inputs used
in measuring fair value as follows: (Level 1) inputs are quoted prices in active markets for identical assets or liabilities; (Level 2) inputs other
than the quoted prices included within Level 1 that are observable for the assets or liabilities, either directly or indirectly; and (Level 3)
unobservable inputs for the assets or liabilities in which there is little or no market data, which requires VMware to develop its own assumptions.
VMware’s Level 1 classification of the fair value hierarchy includes money market funds and certain available-for-sale fixed income
securities because these securities are valued using quoted prices in active markets for identical assets.
VMware’s Level 2 classification includes the remainder of the available-for-sale fixed income securities because these securities are priced
using quoted market prices for similar instruments and non-binding market prices that are corroborated by observable market data. VMware
obtains the fair values of its Level 2 financial instruments based upon fair values obtained from its custody bank. In addition, VMware obtains
fair values of its Level 2 financial instruments from the asset manager of each of its portfolios. VMware validates the fair value provided by its
custody bank by comparing it against the independent pricing information obtained from the asset managers. Independently, the custody bank
and the asset managers use professional pricing services to gather pricing data which may include quoted market prices for identical or
comparable instruments, or inputs other than quoted prices that are observable either directly or indirectly. VMware is ultimately responsible for
the financial statements and underlying estimates.
Additionally, VMware’s Level 2 classification includes foreign currency forward contracts as the valuation inputs for these are based upon
quoted prices and quoted pricing intervals from public data sources. The fair value of these contracts was not material for any period presented.
VMware does not have any material assets or liabilities that fall into Level 3 of the fair value hierarchy as of December 31, 2012 and 2011 .
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December 31, 2012
December 31, 2011
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
U.S. Government and agency obligations
$
34,852
$
(11
)
$
50,604
$
(23
)
U.S. and foreign corporate debt securities
315,609
(537
)
539,228
(2,036
)
Foreign governments and multi-national agency obligations
5,493
(5
)
43,026
(87
)
Municipal obligations
259,402
(501
)
298,187
(406
)
Asset-backed securities —
—
20,025
(23
)
Mortgage-backed securities
27,425
(82
)
32,817
(172
)
Total
$
642,781
$
(1,136
)
$
983,887
$
(2,747
)
Amortized
Cost Basis
Aggregate
Fair Value
Due within one year
$
881,318
$
882,216
Due after 1 year through 5 years
2,056,135
2,064,086
Due after 5 years
74,942
75,210
Total investments
$
3,012,395
$
3,021,512