Interpreting Footnotes on Security Investments Cisco Systems Inc. reports the fo
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Question
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.)
Summary of Available-for-Sale Investments
The following table summarizes the Company's available-for-sale investments (in millions).
a. What is the amount of Cisco’s investment portfolio on its balance sheet?
$Answer
0.00 points out of 1.00
million
b. What does the number $111 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.
c. Under the new accounting rules that take effect in 2018, how would Cisco treat the $111?
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.
d. Compute comprehensive income for 2015.
$Answer
0.00 points out of 1.00
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.
Accumulated Common Stock Other Total Cisco's Shares of and Additional Retained Comprehensive Shareholders' Noncontrolling $ millions Common Stock Paid in Capital Earnings Income (Loss) Equity Interests Total Equity Balance at July 25, 2015 5,085 $43,592 $16,045 $61 $59,698 $9 $59,707 Net income 10,914 10,914 10,914 Change in: Unrealized gains and (losses) on investments, net 111 111 (10) 101 Derivative instruments (43) (43) (43) Cumulative translation adjustment and other (472) (472) (472) Other comprehensive income (loss) (404) (404) (10) (414) 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 $19,571 $(343) $63,744 $(1) $63,743Explanation / Answer
a. At 111 and at total fair value $58,341.
b. The amount represents an unrealized gain on trading securities that resulted from an increase in their value during the year.
c. Under the new rules, the treatment of unrealized gains on securities does not change; the amount would continue to be added to AOCI.
d. For computing comprehensive income add, sum of net income+ unrealised gain from sale of securities + unrealised gain from unrealised currency translation- unrealised loss from sale of securities - unrealised loss from unrealised currency translation.
e.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.
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