Cisco Systems Inc. (CSCO)

Available-for-Sale Investments

Cisco classifies the investments in both fixed income securities and publicly traded equity securities as available-for-sale investments. Fixed income securities primarily consist of U.S. government securities, U.S. government agency securities, non-U.S. government and agency securities, corporate debt securities, and U.S. agency mortgage-backed securities. These available-for-sale investments are primarily held in the custody of a major financial institution. A specific identification method is used to determine the cost basis of fixed income and public equity securities sold. These investments are recorded in the Consolidated Balance Sheets at fair value. Unrealized gains and losses on these investments, to the extent the investments are unhedged, are included as a separate component of accumulated other comprehensive income (AOCI), net of tax. Cisco classifies the investments as current based on the nature of the investments and their availability for use in current operations.

Other-than-Temporary Impairments on Investments

When the fair value of a debt security is less than its amortized cost, it is deemed impaired, and Cisco will assess whether the impairment is other than temporary. An impairment is considered other than temporary if (i) Cisco has the intent to sell the security, (ii) it is more likely than not that Cisco will be required to sell the security before recovery of the entire amortized cost basis, or (iii) Cisco does not expect to recover the entire amortized cost basis of the security. If impairment is considered other than temporary based on condition (i) or (ii) described earlier, the entire difference between the amortized cost and the fair value of the debt security is recognized in earnings. If an impairment is considered other than temporary based on condition (iii), the amount representing credit losses (defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis of the debt security) will be recognized in earnings, and the amount relating to all other factors will be recognized in other comprehensive income (OCI).

Cisco recognizes an impairment charge on publicly traded equity securities when a decline in the fair value of a security below the respective cost basis is judged to be other than temporary. Cisco considers various factors in determining whether a decline in the fair value of these investments is other than temporary, including the length of time and extent to which the fair value of the security has been less than the cost basis, the financial condition and near-term prospects of the issuer, and the intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.

Investments in privately held companies are included in other assets in the Consolidated Balance Sheets and are accounted for using either the cost or equity method. Cisco monitors these investments for impairments and make reductions in carrying values if Cisco determines that an impairment charge is required based primarily on the financial condition and near-term prospects of these companies.

Source: 10-K (filing date: 2018-09-06).

Cisco Systems Inc., adjustment to Net Income

USD $ in millions

	12 months ended	Jul 28, 2018	Jul 29, 2017	Jul 30, 2016	Jul 25, 2015	Jul 26, 2014	Jul 27, 2013
	Net income (as reported)
	Add: Available-for-sale investments, change in net unrealized gains and losses, net of tax
	Less: Available-for-sale investments, net (gains) losses reclassified into earnings, net of tax
	Net income (adjusted)

Based on: 10-K (filing date: 2018-09-06), 10-K (filing date: 2017-09-07), 10-K (filing date: 2016-09-08), 10-K (filing date: 2015-09-08), 10-K (filing date: 2014-09-09), 10-K (filing date: 2013-09-10).

Cisco Systems Inc., adjusted ratios

		Jul 28, 2018	Jul 29, 2017	Jul 30, 2016	Jul 25, 2015	Jul 26, 2014	Jul 27, 2013
	Net Profit Margin
	Reported net profit margin
	Adjusted net profit margin
	Return on Equity (ROE)
	Reported ROE
	Adjusted ROE
	Return on Assets (ROA)
	Reported ROA
	Adjusted ROA

Based on: 10-K (filing date: 2018-09-06), 10-K (filing date: 2017-09-07), 10-K (filing date: 2016-09-08), 10-K (filing date: 2015-09-08), 10-K (filing date: 2014-09-09), 10-K (filing date: 2013-09-10).

Cisco Systems Inc., Ratios: Reported vs. Adjusted

		Jul 28, 2018	Jul 29, 2017	Jul 30, 2016	Jul 25, 2015	Jul 26, 2014	Jul 27, 2013
	As Reported
	Selected Financial Data (USD $ in millions)
	Net income
	Revenue
	Ratio
	Net profit margin1
	Adjusted: Mark to Market Available-for-sale Securities
	Selected Financial Data (USD $ in millions)
	Adjusted net income
	Revenue
	Ratio
	Adjusted net profit margin2

Based on: 10-K (filing date: 2018-09-06), 10-K (filing date: 2017-09-07), 10-K (filing date: 2016-09-08), 10-K (filing date: 2015-09-08), 10-K (filing date: 2014-09-09), 10-K (filing date: 2013-09-10).

2018 Calculations

		Jul 28, 2018	Jul 29, 2017	Jul 30, 2016	Jul 25, 2015	Jul 26, 2014	Jul 27, 2013
	As Reported
	Selected Financial Data (USD $ in millions)
	Net income
	Total Cisco shareholders' equity
	Ratio
	ROE1
	Adjusted: Mark to Market Available-for-sale Securities
	Selected Financial Data (USD $ in millions)
	Adjusted net income
	Total Cisco shareholders' equity
	Ratio
	Adjusted ROE2

Based on: 10-K (filing date: 2018-09-06), 10-K (filing date: 2017-09-07), 10-K (filing date: 2016-09-08), 10-K (filing date: 2015-09-08), 10-K (filing date: 2014-09-09), 10-K (filing date: 2013-09-10).

2018 Calculations

		Jul 28, 2018	Jul 29, 2017	Jul 30, 2016	Jul 25, 2015	Jul 26, 2014	Jul 27, 2013
	As Reported
	Selected Financial Data (USD $ in millions)
	Net income
	Total assets
	Ratio
	ROA1
	Adjusted: Mark to Market Available-for-sale Securities
	Selected Financial Data (USD $ in millions)
	Adjusted net income
	Total assets
	Ratio
	Adjusted ROA2

Based on: 10-K (filing date: 2018-09-06), 10-K (filing date: 2017-09-07), 10-K (filing date: 2016-09-08), 10-K (filing date: 2015-09-08), 10-K (filing date: 2014-09-09), 10-K (filing date: 2013-09-10).

2018 Calculations