FAIR VALUE MEASUREMENTS (Notes)

3 Months Ended

Jan. 31, 2020

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

The authoritative guidance defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, we consider the principal or most advantageous market and assumptions that market participants would use when pricing the asset or liability.

Fair Value Hierarchy

The guidance establishes a fair value hierarchy that prioritizes the use of inputs used in valuation techniques into three levels. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. There are three levels of inputs that may be used to measure fair value:

Level 1- applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2- applies to assets or liabilities for which there are inputs other than quoted prices included within level 1 that are observable, either directly or indirectly, for the asset or liability such as: quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in less active markets; or other inputs that can be derived principally from, or corroborated by, observable market data.

Level 3- applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

Financial assets and liabilities measured at fair value on a recurring basis as of January 31, 2020 were as follows:

 

			Fair Value Measurement at January 31, 2020 Using
	January 31, 2020		Quoted Prices  in Active  Markets for  Identical Assets  (Level 1)		Significant  Other  Observable  Inputs  (Level 2)		Significant  Unobservable  Inputs  (Level 3)
	(in millions)
Assets:
Short-term
Cash equivalents (money market funds)	$	602	$	602	$	—	$	—
Derivative instruments (foreign exchange contracts)	6		—		6		—
Long-term
Trading securities	29		29		—		—
Other investments	25		—		25		—
Total assets measured at fair value	$	662	$	631	$	31	$	—
Liabilities:
Short-term
Derivative instruments (foreign exchange contracts)	$	6	$	—	$	6	$	—
Long-term
Deferred compensation liability	29		—		29		—
Total liabilities measured at fair value	$	35	$	—	$	35	$	—

Financial assets and liabilities measured at fair value on a recurring basis as of October 31, 2019 were as follows:

			Fair Value Measurement at October 31, 2019 Using
	October 31, 2019		Quoted Prices  in Active  Markets for  Identical Assets  (Level 1)		Significant  Other  Observable  Inputs  (Level 2)		Significant  Unobservable  Inputs  (Level 3)
	(in millions)
Assets:
Short-term
Cash equivalents (money market funds)	$	784	$	784	$	—	$	—
Derivative instruments (foreign exchange contracts)	12		—		12		—
Long-term
Trading securities	30		30		—		—
Other investments	25		—		25		—
Total assets measured at fair value	$	851	$	814	$	37	$	—
Liabilities:
Short-term
Derivative instruments (foreign exchange contracts)	$	6	$	—	$	6	$	—
Long-term
Deferred compensation liability	30		—		30		—
Total liabilities measured at fair value	$	36	$	—	$	36	$	—

Our money market funds and trading securities are generally valued using quoted market prices and therefore are classified within level 1 of the fair value hierarchy. Our derivative financial instruments are classified within level 2, as there is not an active market for each hedge contract, but the inputs used to calculate the value of the instruments are tied to active markets. Our deferred compensation liability is classified as level 2 because, although the values are not directly based on quoted market prices, the inputs used in the calculations are observable. Other investments represent shares we own in a special fund that targets underlying investments of approximately 40 percent in debt securities and 60 percent in equity securities. It has been classified as level 2

because, although the shares of the fund are not traded on any active stock exchange, each of the individual underlying securities are or can be derived from and hence we have a readily determinable value for the underlying securities, from which we are able to determine the fair market value for the special fund itself.

Trading securities, which is comprised of mutual funds, bonds and other similar instruments, other investments and deferred compensation liability are reported at fair value, with gains or losses resulting from changes in fair value recognized currently in net income. Certain derivative instruments are reported at fair value, with unrealized gains and losses, net of tax, included in accumulated other comprehensive loss within stockholders' equity. Realized gains and losses from the sale of these instruments are recorded in net income.

Impairment of Investments. There were no impairments of investments for the three months ended January 31, 2020 and 2019.

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

For the three months ended January 31, 2020 and 2019, there were no impairments of long-lived assets held and used or long-lived assets held for sale. For the three months ended January 31, 2020 and 2019, there were no impairment of non-marketable securities. For the three months ended January 31, 2020 and 2019, an unrealized gain of $16 million and zero, respectively, were included in net income as adjustments to the carrying value of non-marketable equity securities without readily determinable fair value based on an observable market transaction. As of January 31, 2020 and October 31, 2019, the carrying amount of non-marketable equity securities without readily determinable fair values was $63 million and $47 million, respectively.

Fair values for the non-marketable securities included in long-term investments on the condensed consolidated balance sheet were measured using Level 3 inputs because they are primarily equity stock issued by private companies without quoted market prices. To estimate the fair value of our non-marketable securities, we use the measurement alternative to record these investments at cost and to adjust for impairments and observable price changes (orderly transactions for the identical or a similar security from the same issuer) as and when it occurs.