Cisco System, Inc., the leading Internet protocol- based networking equipment company, has significant holdings of investment securities. Use the financial statement information provided to analyze Cisco€™s holdings and address the following questions:
1. What is the composition of investments in the firm€™s portfolio of held- to- maturity, trading, and available-for- sale securities in fiscal 2013 and 2012? What percentage of total asset do its investments compose? Comment on changes in the composition and percentage of investments to total assets from year to year. Use fair value.
2. Which investment securities did Cisco report at fair value in fiscal 2013 and 2012? What is the difference between fair value and cost?
3. Determine the effect of changes in fair value on net income and other comprehensive income in fiscal 2013, 2012, and 2011. If unrealized gains and losses on available- for- sale securities were reported in net income rather than other comprehensive income, what would be the effect on net income in fiscal 2013, 2012, and 2011?
4. For its investment securities, determine the types and amount of investments in each level in the ­hierarchy in fiscal 2013.
5. Discuss the valuation methods used and comment on any assumptions and estimates used in valuation.
6. The majority of Cisco€™s investment securities are classified as available- for- sale. Why is Cisco concerned about the potential harm to earnings when changes in the fair values of these securities are reported in other comprehensive earnings?

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At or for the year ended in millions) Total Assets Net Income before Taxes July 27, 2013 July 28, 2012 July 30, 2011 (Fiscal 2013) Fscal 2012) (Fiscal 2011) $91.759 $10,159 $101,191 $11.227 $87095 7825 Summary of Comprehensive Income Year Ended Net income Change in: July 27, 2013 July 28, 2012 $8,041 July 30, 2011 96,490 $9.983 Unrealized gains and losses orn investments, net Derivative instruments Cumulative translation adjustment and other (37) 61 (78) 59) 154 (21) 77) $9.930 538 7,161 (496 Comprehensive income (loss $7,408