Interpreting Footnotes on Security Investments

Interpreting Footnotes on Security Investments Cisco Systems Inc. reports the following information derived from its 2016 10-K report.

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.

 

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