Fair Value Measurements

6 Months Ended

Jul. 28, 2012

Fair Value Measurements

Note 6. Fair Value Measurements

Fair value is an exit price representing the amount that would be received in the sale of an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering such assumptions, the accounting guidance establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

Level 1 – Observable inputs that reflect quoted prices for identical assets or liabilities in active markets.

Level 2 – Include other inputs that are directly or indirectly observable in the marketplace.

Level 3 – Unobservable inputs that are supported by little or no market activity.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The Company’s Level 1 assets include its institutional money-market funds that are classified as cash equivalents and marketable investments in U.S. federal and state debt securities, which are valued primarily using quoted market prices. The Company’s Level 2 assets and liabilities include its marketable investments in corporate debt securities as the market inputs to value these instruments consist of market yields, reported trades and broker/dealer quotes, which are corroborated with observable market data. In addition, foreign currency exchange contracts are classified within Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments. The Company’s Level 3 assets include its investments in auction rate securities, which are classified within Level 3 because there are currently no active markets for the auction rate securities and consequently the Company is unable to obtain independent valuations from market sources. Therefore, the auction rate securities are valued using a discounted cash flow model. Some of the inputs to the cash flow model are unobservable in the market. The total amount of assets measured using Level 3 valuation methodologies represented 0.3% of total assets as of July 28, 2012.

The tables below set forth, by level, the Company’s financial assets that were accounted for at fair value as of July 28, 2012 and January 28, 2012. The tables do not include assets and liabilities that are measured at historical cost or any basis other than fair value (in thousands):

	Level 1		Level 2		Level 3		Portion of Carrying Value Measured at Fair Value at July 28, 2012
Items measured at fair value on a recurring basis:
Assets
Cash equivalents:
Money market funds	$	93,827	$	—	$	—	$	93,827
Corporate debt securities		—		30,243		—		30,243
Time deposits		—		214,706		—		214,706
Short-term investments:
U.S. federal and state debt securities		609,580		—				609,580
Corporate debt securities		—		616,469		—		616,469
Foreign government		—		2,036		—		2,036
Long-term investments:
Auction rate securities		—		—		18,103		18,103
Other non-current assets:
Severance pay fund		—		1,713		—		1,713
Total assets	$	703,407	$	865,167	$	18,103	$	1,586,677
Liabilities
Accrued liabilities:
Forward contracts	$	—	$	1,772	$	—	$	1,772

	Level 1		Level 2		Level 3		Portion of Carrying Value Measured at Fair Value at January 28, 2012
Items measured at fair value on a recurring basis:
Assets
Cash equivalents:
Money market funds	$	64,247	$	—	$	—	$	64,247
Corporate debt securities		—		12,500		—		12,500
Time deposits		—		205,060		—		205,060
Short-term investments:
U.S. federal and state debt securities		771,715		—		—		771,715
Corporate debt securities		—		687,845		—		687,845
Foreign government		—		2,036		—		2,036
Long-term investments:
Auction rate securities		—		—		23,215		23,215
Other non-current assets:
Severance pay fund		—		1,734		—		1,734
Total assets	$	835,962	$	909,175	$	23,215	$	1,768,352
Liabilities
Accrued liabilities:
Forward contracts	$	—	$	1,520	$	—	$	1,520

The following table summarizes the change in fair value for Level 3 items (in thousands):

	Six Months Ended
	July 28, 2012			July 30, 2011
Beginning balance	$	23,215		$	26,226
Sales and redemption		(5,000	)		(200	)
Unrealized (loss) gain included in accumulated other comprehensive income		(112	)		44
Ending balance	$	18,103		$	26,070