Interpreting Footnotes on Security Investments
Cisco Systems Inc. reports the following information derived from its 2016 10-K report. (Note: Cisco’s 2016 disclosures are consistent with the former accounting rules for marketable equity securities. See the Accounting Insight box on page 9-6 in the textbook.)
| Accumulated | |||||||
| Common Stock | Other | Total Cisco’s | |||||
| Shares of | and Additional | Retained | Comprehe
nsive |
Shareh
olders’ |
Non
con trolling |
||
| $ millions | Common Stock | Paid in Capital | Earni
ngs |
Income (Loss) | Equity | Intere
sts |
Total Equity |
| Balance at
July 25, 2015 |
5,085 | $43,592 | $16,045 | $61 | $59,698 | $9 | $59,707 |
| Net income | 11,072 | 11,072 | 11,072 | ||||
| Change in: | |||||||
| Unrealized gains and (losses) on investments, net | 116 | 116 | (10) | 106 | |||
| Derivative instruments | (43) | (43) | (43) | ||||
| Cumulative translation adjustment and other | (513) | (513) | (513) | ||||
| Other comprehensive income (loss) | (440) | (440) | (10) | (450) | |||
| Issuance of common stock | 113 | 1,127 | 1,127 | 1,127 | |||
| Repurchase of common stock | (148) | (1,280) | (2,638) | (3,918) | (3,918) | ||
| Repurchase of common stock for tax withholdings on vesting of restricted stock units | (21) | (557) | (557) | (557) | |||
| Cash dividends declared | (4,750) | (4,750) | (4,750) | ||||
| Tax effects from employee stock incentive plans | 30 | 30 | 30 | ||||
| Share-based compensation | 1,458 | 1,458 | 1,458 | ||||
| Purchase acquisitions | 146 | 146 | 146 | ||||
| Balance at July 30, 2016 | $5,029 | $44,516 | $19,729 | $(379) | $63,866 | $(1) | $63,865 |
Summary of Available-for-Sale Investments
The following table summarizes the Company’s available-for-sale investments (in millions).
| Gross | Gross | |||
| Amortized | Unrealized | Unrealized | ||
| July 30, 2016 | Cost | Gains | Losses | Fair Value |
| Fixed income securities | ||||
| U.S. government securities | $26,885 | $86 | $(2) | $26,969 |
| U.S. government agency securities | 2,809 | 8 | – | 2,817 |
| Non-U.S. government and agency securities | 1,096 | 4 | – | 1,100 |
| Corporate debt securities | 24,044 | 263 | (15) | 24,292 |
| U.S. agency mortgage-backed securities | 1,846 | 22 | – | 1,868 |
| Total fixed income securities | $56,680 | 383 | (17) | $57,046 |
| Publicly traded equity securities | 1,211 | 333 | (40) | 1,504 |
| Total | $57,891 | $716 | $(57) | $58,550 |
What is the amount of Cisco’s investment portfolio on its balance sheet?
$Answer 58550 million
b. What does the number $116 represent in the “Accumulated Other Comprehensive Income” column?
The amount represents an unrealized loss on trading securities that resulted from a decrease in their value during the year.
The amount represents an unrealized loss on available for sale securities that resulted from a decrease in their value during the year.
The amount represents an unrealized gain on trading securities that resulted from an increase in their value during the year.
The amount represents an unrealized gain on available for sale securities that resulted from an increase in their value during the year.
1- Under the new accounting rules that take effect in 2018, how would Cisco treat the $116?
Under the new rules, the amount would not be added to AOCI, instead the unrealized gain would be included in 2015 income.
Under the new rules, the treatment of unrealized gains on securities does not change; the amount would continue to be added to AOCI.
Under the new rules, the amount would not be added to AOCI, nor would it be included in 2015 income.
Compute comprehensive income for 2015.
$Answer 0 million
e. During 2015, did the currencies in the countries where Cisco’s subsidiaries were headquartered weaken or strengthen?
Cisco reports a cumulative translation adjustment loss for 2015, which means that the currencies in which subsidiaries transacted strengthened during the year vis-à-vis the $US.
Cisco reports a cumulative translation adjustment loss for 2015, which means that the currencies in which subsidiaries transacted weakened during the year vis-à-vis the $US.
Cisco reports a cumulative translation adjustment gain for 2015, which means that the currencies in which subsidiaries transacted weakened during the year vis-à-vis the $US.
Cisco reports a cumulative translation adjustment gain for 2015, which means that the currencies in which subsidiaries transacted strenghtened during the year vis-à-vis the $US.