Cisco 2005 Annual Report Download - page 56

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Other Commitments
The Company has entered into an agreement to invest approximately $800 million in venture funds managed by SOFTBANK that are
required to be funded on demand. The total commitment is to be invested in venture funds and as senior debt with entities as directed
by SOFTBANK. The Company’s commitment to fund the senior debt is contingent upon the achievement of certain agreed-upon milestones.
As of July 30, 2005, the Company had invested $414 million in the venture funds pursuant to the commitment, compared with
$290 million as of July 31, 2004. In addition, as of July 30, 2005 and July 31, 2004, the Company had invested $49 million in senior debt
pursuant to the commitment, of which $47 million and $19 million has been repaid as of July 30, 2005 and July 31, 2004, respectively.
The Company provides structured financing to certain qualified customers for the purchase of equipment and other needs through
its wholly owned subsidiaries. These loan commitments may be funded over a two- to three-year period, provided that these customers
achieve specific business milestones and satisfy certain financial covenants. As of July 30, 2005, the outstanding loan commitments
were $17 million and all were eligible for draw-down. As of July 31, 2004, the outstanding loan commitments were $61 million, of
which $22 million was eligible for draw-down.
As of July 30, 2005, the Company had a commitment of approximately $25 million to purchase the remaining minority interest
of Cisco Systems, K.K. (Japan), compared with approximately $59 million as of July 31, 2004.
The Company also has certain other funding commitments related to its privately held investments that are based on the achievement
of certain agreed-upon milestones. The funding commitments were approximately $56 million as of July 30, 2005, compared with
approximately $67 million as of July 31, 2004.
Variable Interest Entities
In the ordinary course of business, the Company has investments in privately held companies and provides structured financing to
certain customers through its wholly owned subsidiaries, which may be considered to be variable interest entities. The Company has
evaluated its investments in privately held companies and structured financings and determined that there were no significant
unconsolidated variable interest entities as of July 30, 2005.
Guarantees and Product Warranties
FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others” (“FIN 45”), requires that upon issuance of a guarantee, the guarantor must disclose and recognize a liability
for the fair value of the obligation it assumes under that guarantee.
The requirements of FIN 45 are applicable to the Company’s product warranty liability and certain guarantees. The Company’s
guarantees issued subject to the recognition and disclosure requirements of FIN 45 as of July 30, 2005 and July 31, 2004 were not
material. As of July 30, 2005 and July 31, 2004, the Company’s product warranty liability recorded in other accrued liabilities was
$259 million and $239 million, respectively. The following table summarizes the activity related to the product warranty liability
during fiscal 2005 and 2004 (in millions):
July 30, 2005  
 $ 239   
 411   
 (391)   
 $ 259   
Notes to Consolidated Financial Statements