Dell Computer Corporation has significant investment activities. The following items are from Dell's fiscal year 2006 financial statements (in millions):15
Short-term investments.................................. $ 2,016
Long-term investments.................................... 2,691
Investment income........................................... 227
Purchase of investments.................................. 7,562
Sales of investments..................................... 12,168
Change in unrealized gains (losses) on
Long-term investments, net............................... (24)
Dell states that all debt and equities securities are classified as available-forsale and are subject to an annual impairment test.
1. Where would you find each of the above items in Dell Computer's financial statements?
2. What value (cost or fair value) would you expect the first two items on Dell's balance sheet to represent?
3. What are impairments, and how do they differ from unrealized losses on long-term investments?