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Table of Contents DELL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Equity and Other Securities — The majority of Dell's investments in equity and other securities consists of various mutual funds held in Dell's Deferred
Compensation Plan. The valuation of these securities is based on pricing models whereby all significant inputs are observable or can be derived from or
corroborated by observable market data. The Level 1 position consists of equity investments which began trading during Fiscal 2012. The valuations are
based on quoted prices in active markets. These investments were previously accounted for under the cost method.
Derivative Instruments — Dell's derivative financial instruments consist primarily of foreign currency forward and purchased option contracts and interest
rate swaps. The fair value of the portfolio is determined using valuation models based on market observable inputs, including interest rate curves, forward and
spot prices for currencies, and implied volatilities . Credit risk is factored into the fair value calculation of Dell's derivative instrument portfolio. For interest
rate derivative instruments, credit risk is determined at the contract level with the use of credit default spreads of either Dell, when in a net liability position,
or the relevant counterparty, when in a net asset position. For foreign exchange derivative instruments, credit risk is determined in a similar manner, except
that the credit default spread is applied based on the net position of each counterparty with the use of the appropriate credit default spreads. See Note 6 of the
Notes to Consolidated Financial Statements for a description of Dell's derivative financial instrument activities.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis — Certain assets are measured at fair value on a nonrecurring basis and therefore are
not included in the recurring fair value table above. These assets consist primarily of investments accounted for under the cost method and non-financial
assets such as goodwill and intangible assets. Investments accounted for under the cost method included in equity and other securities, approximated $12
million and $15 million, on February 3, 2012, and January 28, 2011, respectively. Goodwill and intangible assets are measured at fair value initially and
subsequently when there is an indicator of impairment and the impairment is recognized. See Note 8 of the Notes to Consolidated Financial Statements for
additional information about goodwill and intangible assets.
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