Cash and Cash Equivalents, Investments and Funds Held for Customers

We consider highly liquid investments with maturities of three months or less at the date of purchase to be cash equivalents. Cash equivalents consist primarily of AAA-rated money market funds in all periods presented. Investments consist of available-for-sale investment-grade debt securities that we carry at fair value. Funds held for customers consist of cash and cash equivalents and investment grade available-for-sale debt securities. Long-term investments consist primarily of illiquid municipal auction rate securities and an available-for-sale corporate equity investment that we intend to hold for more than twelve months, both of which we carry at fair value. See Note 2, “Fair Value Measurements,” for more information. Except for direct obligations of the United States government, securities issued by agencies of the United States government, and money market funds, we diversify our investments in debt securities by limiting our holdings with any individual issuer.

The following table summarizes our cash and cash equivalents, investments and funds held for customers by balance sheet classification at the dates indicated.



	October 31, 2012				July 31, 2012
(In millions)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Classification on balance sheets:
Cash and cash equivalents	$	216	$	216	$	393	$	393
Investments	341		342		350		351
Funds held for customers	209		209		289		290
Long-term investments	42		75		47		75
Total cash and cash equivalents, investments, and funds held for customers	$	808	$	842	$	1,079	$	1,109

The following table summarizes our cash and cash equivalents, investments and funds held for customers by investment category at the dates indicated.



	October 31, 2012				July 31, 2012
(In millions)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Type of issue:
Total cash and cash equivalents	$	250	$	250	$	508	$	508
Available-for-sale debt securities:
Municipal bonds	252		253		259		260
Municipal auction rate securities	33		33		41		41
Corporate notes	145		145		141		142
U.S. agency securities	119		119		124		124
Total available-for-sale debt securities	549		550		565		567
Available-for-sale corporate equity securities	5		38		5		33
Other long-term investments	4		4		1		1
Total cash and cash equivalents, investments, and funds held for customers	$	808	$	842	$	1,079	$	1,109

We use the specific identification method to compute gains and losses on investments. We include realized gains and losses on our available-for-sale debt securities in interest and other income, net in our statements of operations. Gross realized gains and losses on our available-for-sale debt securities for the three months ended October 31, 2012 and October 31, 2011 were not significant.

We accumulate unrealized gains and losses on our available-for-sale debt and equity securities, net of income taxes, in accumulated other comprehensive income in the stockholders’ equity section of our balance sheets. Gross unrealized gains and losses on our available-for-sale debt securities at October 31, 2012 and July 31, 2012 were not significant. The cumulative gross unrealized gain on our available-for-sale corporate equity security was approximately $33 million at October 31, 2012.

We periodically review our investment portfolios to determine if any investment is other-than-temporarily impaired due to changes in credit risk or other potential valuation concerns. We believe that the investments we held at October 31, 2012 were not other-than-temporarily impaired. Unrealized losses at October 31, 2012 were not significant and were due to changes in interest rates, including market credit spreads, and not due to increased credit risks associated with specific securities. We do not intend to sell these investments and it is not more likely than not that we will be required to sell them before recovery at par, which may be at maturity.

The following table summarizes our available-for-sale debt securities classified by the stated maturity date of the security at the dates indicated.



	October 31, 2012				July 31, 2012
(In millions)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due within one year	$	216	$	216	$	218	$	218
Due within two years	148		149		134		135
Due within three years	112		112		131		132
Due after three years	73		73		82		82
Total available-for-sale debt securities	$	549	$	550	$	565	$	567

Available-for-sale debt securities due after three years in the table above include our municipal auction rate securities. See Note 2, “Fair Value Measurements,” for more information. All of the remaining securities in that category had effective maturities of three years or less due to interest reset dates or mandatory call dates.