Liberty Media Corporation Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Investments In Available-For-Sale Securities And Other Cost Investments

Investments In Available-For-Sale Securities And Other Cost Investments

12 Months Ended

Dec. 31, 2012

Investments In Available-For-Sale Securities And Other Cost Investments

Investments in available-for-sale securities and other cost investments [Text Block]

Investments in Available-for-Sale Securities and Other Cost Investments

All marketable equity and debt securities held by the Company are classified as available-for-sale ("AFS") and are carried at fair value generally based on quoted market prices. GAAP permits entities to choose to measure many financial instruments, such as AFS securities, and certain other items at fair value and to recognize the changes in fair value of such instruments in the entity's statement of operations. The Company previously had entered into economic hedges for certain of its non-strategic AFS securities (although such instruments were not accounted for as fair value hedges by the Company). Changes in the fair value of those economic hedges were reflected in the Company's statement of operations as unrealized gains (losses). In order to better match the changes in fair value of the subject AFS securities and the changes in fair value of the corresponding economic hedges in the Company's financial statements, the Company has elected to account for those of its AFS securities which it considers to be non-strategic ("Fair Value Option Securities") at fair value. Accordingly, changes in the fair value of Fair Value Option Securities, as determined by quoted market prices, are reported in realized and unrealized gains (losses) on financial instruments in the accompanying consolidated statements of operations.

Investments in AFS securities, including Fair Value Option Securities separately aggregated, and other cost investments are summarized as follows:



	December 31, 2012		December 31, 2011
	amounts in millions
Fair Value Option Securities
Time Warner Inc.(1)	$	211	340
Time Warner Cable Inc.	230		150
Sprint Nextel Corporation ("Sprint")(2)	—		44
Viacom, Inc. (3)	192		345
Century Link, Inc.	70		67
Barnes & Noble, Inc.	262		253
Other equity securities	58		34
Other debt securities	56		202
Total Fair Value Option Securities	1,079		1,435
AFS and cost investments
SIRIUS XM debt securities (4)	249		384
Live Nation debt Securities (5)	25		24
Other AFS and cost investments	39		16
Total AFS and cost investments	313		424
	$	1,392	1,859

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(1)	In November 2012, Liberty physically settled a call option on 5 million shares of Time Warner Inc. common stock for proceeds of $225 million offset by a $24 million payment to settle the derivative obligation.


(2)	In November and December 2012, Liberty physically settled call options on 15 million shares of Sprint common stock for proceeds of $84 million offset by a $33 million payment to settle the derivative obligation.


(3)	In the fourth quarter of 2012, Liberty physically settled call options on 2 million shares of Viacom, Inc. common stock for proceeds of $105 million offset by a $6 million payment to settle the derivative obligation.


(4)	During 2012 SIRIUS XM tendered and retired the 13% and 9.75% bonds of which Liberty owned approximately $125 million in principal.


(5)	In June 2011, Liberty acquired an additional 5.5 million shares of Live Nation for $58 million. The additional ownership required the Company to account for the investment as an equity method affiliate. For additional discussion see note 7. Liberty continues to hold debt securities in Live Nation which are included in available-for-sale securities.

Unrealized Holding Gains and Losses

Unrealized holding gains and losses related to investments in AFS securities are summarized below.



	December 31, 2012			December 31, 2011
	Equity securities		Debt securities	Equity securities	Debt securities
	amounts in millions
Gross unrealized holding gains	$	2	37	1	57
Gross unrealized holding losses (1)	$	—	—	—	—

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(1)	Liberty does not currently have any gross unrealized losses that have been in such position for greater than a year.