Fri, Jul 29 at 9:27 PM Financial Statement Analysis Case Cisco Systems, Inc., the leading Internet protocol-based networking equipment company, has significant holdings of investment securities. Use...

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Fri, Jul 29 at 9:27 PM












Financial Statement Analysis Case

Cisco Systems, 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 hold-

ings and answer the following questions and complete the following requirements:

1. What types of investments are in the firm's portfolio in fiscal 2016 and 2015? What percentage of total

assets do its investments compose? Comment on changes in the composition and percentage of invest-

ments to total assets from year to year. Use fair value.

2. Which investment securities did Cisco report at fair value in fiscal 2016 and 2015? What is the differ-

ence between fair value and cost?

3. Determine the effect of changes in fair value on net income and other comprehensive income in fiscal

2016, 2015, and 2014. 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

2016, 2015, and 2014?

4. For its investment securities, determine the types and amount of investments in each level in the hier-

archy in fiscal 2016.

At or for the Year Ended (in millions)

Total Assets

Net Income

Statement of Comprehensive Income (excerpt)

Year Ended

Net income

Available-for-sale investments:

Change in net unrealized gains (losses), net

of tax of $(49), $14, and $(146) for fiscal

2016, 2015, and 2014, respectively

Net (gains) losses reclassified into earnings,

net of tax expense (benefit) of $0, $57

and $111 for fiscal 2016, 2015, and 2014,

respectively

Total

July 30, 2016

(Fiscal 2016)

$121.652

$ 10.739

July 30, 2016

(Fiscal 2016)

$10.739

July 25, 2015

(Fiscal 2015)

$113,373

S

8 981

July 26, 2014

(Fiscal 2014)

$105.070

$

7853

July 25, 2015

(Fiscal 2015)

$8 981

July 26, 2014

(Fiscal 2014)

$7,853

$

92

S

(12)

S

233

tA

93

(100)

S

112)

(189)

44






Answered Same DayJul 30, 2022

Answer To: Fri, Jul 29 at 9:27 PM Financial Statement Analysis Case Cisco Systems, Inc., the leading Internet...

Khushboo answered on Jul 30 2022
78 Votes
1. In the portfolio of the entity, the major investments are in U.S. government securities and corporate debt securities. The other securities in the portfolio are U.S. government agency securities, publicly traded equity securities, Non- U.S. government and agency securities and mortgage backed securities. The percentage of investment securities in fiscal year 2016 and 2015 is as below:
    Particulars
    2016
    2015
    Investments
    58125
    53539
    Total assets
    121652
    113373
    % of total assets
    47.78%
    47.22%
The total investment is almost at equivalent level in both years and the entity has not made any significant changes in its investment strategy. The composition of securities are as below and there is no significant changes in composition structure over the period of 2 years:
    Fixed income securities
    2016
    2015
    U.S. Govt securities
     26,544
    46%
     29,939
    56%
    Mortgage backed...
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