Fair Value Measurement

6 Months Ended

Jul. 31, 2019

The Company uses a three-tier fair value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

Level 1. Quoted prices (unadjusted) in active markets for identical assets or liabilities.

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

Level 3. Significant unobservable inputs which are supported by little or no market activity.

All of the Company’s cash equivalents, marketable securities and foreign currency derivative contracts are classified within Level 1 or Level 2 because the Company’s cash equivalents, marketable securities and foreign currency derivative contracts are valued using quoted market prices or alternative pricing sources and models utilizing observable market inputs.

The following table presents information about the Company’s assets that are measured at fair value as of July 31, 2019 and indicates the fair value hierarchy of the valuation (in millions):



Description	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of July 31, 2019
Cash equivalents (1):
Time deposits	$	0	$	622	$	0	$	622
Money market mutual funds	829		0		0		829
Marketable securities:
Corporate notes and obligations	0		1,476		0		1,476
U.S. treasury securities	0		122		0		122
Mortgage backed obligations	0		88		0		88
Asset backed securities	0		505		0		505
Municipal securities	0		109		0		109
Foreign government obligations	0		49		0		49
U.S. agency obligations	0		10		0		10
Time deposits	0		8		0		8
Covered bonds	0		165		0		165
Strategic investments:
Publicly held equity securities	607		0		0		607
Foreign currency derivative contracts (2)	0		37		0		37
Total assets	$	1,436	$	3,191	$	0	$	4,627

___________

(1)Included in “cash and cash equivalents” in the accompanying condensed consolidated balance sheet as of July 31, 2019, in addition to $2.1 billion of cash.

(2)Included in “prepaid expenses and other current assets” in the accompanying condensed consolidated balance sheet as of July 31, 2019.

The following table presents information about the Company’s assets that are measured at fair value as of January 31, 2019 and indicates the fair value hierarchy of the valuation (in millions):



Description	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of January 31, 2019
Cash equivalents (1):
Time deposits	$	0	$	314	$	0	$	314
Money market mutual funds	1,234		0		0		1,234
Marketable securities:
Corporate notes and obligations	0		1,019		0		1,019
U.S. treasury securities	0		88		0		88
Mortgage backed obligations	0		78		0		78
Asset backed securities	0		244		0		244
Municipal securities	0		104		0		104
Foreign government obligations	0		57		0		57
U.S. agency obligations	0		4		0		4
Time deposits	0		4		0		4
Covered bonds	0		75		0		75
Strategic investments:
Publicly held equity securities	436		0		0		436
Foreign currency derivative contracts (2)	0		42		0		42
Total assets	$	1,670	$	2,029	$	0	$	3,699

______________

(1)Included in “cash and cash equivalents” in the accompanying condensed consolidated balance sheet as of January 31, 2019, in addition to $1.1 billion of cash.

(2)Included in “prepaid expenses and other current assets” in the accompanying condensed consolidated balance sheet as of January 31, 2019.

Strategic investments measured and recorded at fair value on a non-recurring basis

The Company's privately held debt and equity securities and equity method investments are recorded at fair value only if an impairment or observable price adjustment is recognized in the current period. If an impairment or observable price adjustment is recognized on the Company's non-marketable equity securities during the period, the Company classifies these assets as Level 3 within the fair value hierarchy based on the nature of the fair value inputs.

The Company classified privately held debt and equity securities and equity method investments as Level 3. The Company's privately held debt and equity securities and equity method investments amounted to $1.0 billion as of July 31, 2019 and $0.9 billion as of January 31, 2019.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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