UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended January 27, 2017

Commission File Number 001-36820

MEDTRONIC PUBLIC LIMITED COMPANY
(Exact name of registrant as specified in its charter)
Ireland	98-1183488
(State of incorporation)	(I.R.S. Employer Identification No.)

20 On Hatch, Lower Hatch Street

Dublin 2, Ireland

(Address of principal executive offices) (Zip Code)

+353 1 438-1700

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x	Accelerated filer o
Non-accelerated filer o	Smaller Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

As of March 1, 2017, 1,368,884,991 ordinary shares, par value $0.0001, and 1,872 A preferred shares, par value $1.00, of the registrant were outstanding.

TABLE OF CONTENTS

Item	Description	Page
	PART I
1.	Financial Statements (unaudited)	1
2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	51
3.	Quantitative and Qualitative Disclosures About Market Risk	70
4.	Controls and Procedures	70
	PART II
1.	Legal Proceedings	71
2.	Unregistered Sales of Equity Securities and Use of Proceeds	71
6.	Exhibits	71
	Signatures	72

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

Medtronic plc

Consolidated Statements of Income

(Unaudited)

	Three months ended						Nine months ended
(in millions, except per share data)	January 27, 2017			January 29, 2016			January 27, 2017			January 29, 2016
Net sales	$	7,283		$	6,934		$	21,794		$	21,266
Costs and expenses:
Cost of products sold	2,268			2,141			6,855			6,779
Research and development expense	530			546			1,640			1,649
Selling, general, and administrative expense	2,388			2,317			7,232			7,109
Special charge	100			—			100			—
Restructuring charges, net	21			19			162			159
Certain litigation charges	218			—			300			26
Acquisition-related items	68			63			148			183
Amortization of intangible assets	497			484			1,484			1,448
Other expense, net	46			9			174			127
Operating profit	1,147			1,355			3,699			3,786
Interest income	(88		)	(99		)	(272		)	(321		)
Interest expense	268			275			804			905
Interest expense, net	180			176			532			584
Income from operations before income taxes	967			1,179			3,167			3,202
Provision for income taxes	147			84			307			767
Net income	820			1,095			2,860			2,435
Net loss attributable to noncontrolling interests	(1		)	—			(5		)	—
Net income attributable to Medtronic	$	821		$	1,095		$	2,865		$	2,435
Basic earnings per share	$	0.60		$	0.78		$	2.07		$	1.72
Diluted earnings per share	$	0.59		$	0.77		$	2.05		$	1.70
Basic weighted average shares outstanding	1,372.2			1,406.6			1,381.9			1,412.5
Diluted weighted average shares outstanding	1,383.1			1,422.2			1,394.7			1,429.2
Cash dividends declared per ordinary share	$	0.43		$	0.38		$	1.29		$	1.14

The accompanying notes are an integral part of these consolidated financial statements.

1

Medtronic plc

Consolidated Statements of Comprehensive Income

(Unaudited)

	Three months ended						Nine months ended
(in millions)	January 27, 2017			January 29, 2016			January 27, 2017			January 29, 2016
Net income	$	820		$	1,095		$	2,860		$	2,435
Other comprehensive loss, net of tax:
Unrealized (loss) gain on available-for-sale securities, net of tax (benefit) expense of $(40), $(34), $(3), and $(149) respectively	(115		)	(61		)	(40		)	(268		)
Currency adjustment, net	(553		)	(1,454		)	(1,239		)	(1,513		)
Net change in retirement obligations, net of tax expense of $5, $10, $15, and $30, respectively	22			27			66			62
Unrealized gain (loss) on derivatives, net of tax expense (benefit) of $55, $(3), 113 and $(36), respectively	95			(6		)	202			(62		)
Other comprehensive loss	(551		)	(1,494		)	(1,011		)	(1,781		)
Comprehensive income (loss) including noncontrolling interests	269			(399		)	1,849			654
Comprehensive loss attributable to noncontrolling interests	(1		)	—			(5		)	—
Comprehensive income (loss) attributable to Medtronic	$	270		$	(399	)	$	1,854		$	654

The accompanying notes are an integral part of these consolidated financial statements.

2

Medtronic plc

Consolidated Balance Sheets

(Unaudited)

(in millions)	January 27, 2017			April 29, 2016
ASSETS
Current assets:
Cash and cash equivalents	$	2,768		$	2,876
Investments	8,690			9,758
Accounts receivable, less allowances of $168 and $161, respectively	5,453			5,562
Inventories	3,720			3,473
Other current assets	1,792			1,931
Total current assets	22,423			23,600
Property, plant, and equipment	10,436			9,714
Accumulated depreciation	(5,489		)	(4,873		)
Property, plant, and equipment, net	4,947			4,841
Goodwill	41,224			41,500
Other intangible assets, net	26,209			26,899
Tax assets	1,484			1,383
Other assets	1,291			1,421
Total assets	$	97,578		$	99,644
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current debt obligations	$	6,226		$	993
Accounts payable	1,557			1,709
Accrued compensation	1,521			1,712
Accrued income taxes	821			566
Other accrued expenses	2,547			2,185
Total current liabilities	12,672			7,165
Long-term debt	25,923			30,109
Accrued compensation and retirement benefits	1,610			1,759
Accrued income taxes	2,527			2,903
Deferred tax liabilities	3,643			3,729
Other liabilities	1,710			1,916
Total liabilities	48,085			47,581
Commitments and contingencies (Notes 3 and 16)
Shareholders’ equity:
Ordinary shares— par value $0.0001	—			—
Retained earnings	52,266			53,931
Accumulated other comprehensive loss	(2,879		)	(1,868		)
Total shareholders’ equity	49,387			52,063
Noncontrolling interests	106			—
Total equity	49,493			52,063
Total liabilities and equity	$	97,578		$	99,644

The accompanying notes are an integral part of these consolidated financial statements.

3

Medtronic plc

Consolidated Statements of Cash Flows

(Unaudited)

	Nine months ended
(in millions)	January 27, 2017			January 29, 2016
Operating Activities:
Net income	$	2,860		$	2,435
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	2,199			2,112
Amortization of debt discount and issuance costs	21			22
Acquisition-related items	(43		)	216
Provision for doubtful accounts	31			43
Deferred income taxes	(404		)	(291		)
Stock-based compensation	272			291
Other, net	(113		)	(117		)
Change in operating assets and liabilities, net of acquisitions:
Accounts receivable, net	18			86
Inventories	(261		)	(388		)
Accounts payable and accrued liabilities	(124		)	177
Other operating assets and liabilities	495			(399		)
Certain litigation charges	300			26
Certain litigation payments	(144		)	(321		)
Net cash provided by operating activities	5,107			3,892
Investing Activities:
Acquisitions, net of cash acquired	(1,328		)	(1,132		)
Additions to property, plant, and equipment	(924		)	(693		)
Purchases of investments	(3,354		)	(4,509		)
Sales and maturities of investments	4,286			4,017
Other investing activities, net	21			(11		)
Net cash used in investing activities	(1,299		)	(2,328		)
Financing Activities:
Acquisition-related contingent consideration	(58		)	(21		)
Change in current debt obligations, net	1,118			1,223
Repayment of short-term borrowings (maturities greater than 90 days)	(2		)	(48		)
Proceeds from short-term borrowings (maturities greater than 90 days)	4			139
Issuance of long-term debt	131			—
Payments on long-term debt	(361		)	(1,612		)
Dividends to shareholders	(1,782		)	(1,608		)
Issuance of ordinary shares	309			360
Repurchase of ordinary shares	(3,409		)	(2,170		)
Other financing activities	80			60
Net cash used in financing activities	(3,970		)	(3,677		)
Effect of exchange rate changes on cash and cash equivalents	54			(9		)
Net change in cash and cash equivalents	(108		)	(2,122		)
Cash and cash equivalents at beginning of period	2,876			4,843
Cash and cash equivalents at end of period	$	2,768		$	2,721
Supplemental Cash Flow Information
Cash paid for:
Income taxes	$	474		$	1,236
Interest	626			707

The accompanying notes are an integral part of these consolidated financial statements.

4

Medtronic plc

Notes to Consolidated Financial Statements

(Unaudited)

1. Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S.) (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information necessary for a fair presentation of results of operations, comprehensive income, financial condition, and cash flows in conformity with U.S. GAAP. In the opinion of management, the consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of the results of Medtronic plc and its subsidiaries (Medtronic plc, Medtronic, or the Company) for the periods presented. Certain reclassifications have been made to prior year financial statements to conform to classifications used in the current year.

Operating results for interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole. The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures at the date of the financial statements and during the reporting period. Actual results could materially differ from these estimates. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended April 29, 2016.

The accompanying unaudited consolidated financial statements include the accounts of Medtronic plc, its wholly-owned subsidiaries, entities for which the Company has a controlling financial interest, and variable interest entities for which the Company is the primary beneficiary. Intercompany transactions and balances have been fully eliminated in consolidation.

The Company’s fiscal years 2017, 2016, and 2015 will end or ended on April 28, 2017, April 29, 2016, and April 24, 2015, respectively.

2. New Accounting Pronouncements

Recently Adopted

In April 2015, the Financial Accounting Standards Board (FASB) issued accounting guidance that requires debt issuance costs to be presented in the balance sheet as a direct deduction from the related debt liability. Prior to this amendment, debt issuance costs were recognized as an asset in the balance sheet and did not offset the related debt liability. The Company retrospectively adopted this guidance in the first quarter of fiscal year 2017. Its adoption resulted in a reduction of both assets and liabilities of $138 million on the Company's consolidated balance sheet at April 29, 2016 as previously filed in the 2016 Annual Report on Form 10-K.

Not Yet Adopted

In May 2014, the FASB issued amended revenue recognition guidance to clarify the principles for recognizing revenue from contracts with customers. The guidance requires an entity to recognize revenue in an amount that reflects the consideration to which an entity expects to be entitled in exchange for the transfer of goods or services. The guidance also requires expanded disclosures relating to the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Additionally, qualitative and quantitative disclosures are required about customer contracts, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. This accounting guidance is effective for the Company beginning in the first quarter of fiscal year 2019 using one of two prescribed retrospective methods. The Company is evaluating the impact of the amended revenue recognition guidance on the Company’s consolidated financial statements.

In January 2016, the FASB issued guidance which requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. The guidance also includes a simplified impairment assessment of equity investments without readily determinable fair values and presentation and disclosure changes. This accounting guidance is effective for the Company beginning in the first quarter of fiscal year 2019. The Company is evaluating the impact of the equity investment guidance on the Company's consolidated financial statements.

In February 2016, the FASB issued guidance which requires lessees to recognize right-of-use assets and lease liabilities on the balance sheet. The guidance is to be applied using a modified retrospective approach at the beginning of the earliest comparative period in the financial statements and is effective for the Company beginning in the first quarter of fiscal year 2020. Early adoption is permitted. The Company is evaluating the impact of the lease guidance on the Company's consolidated financial statements.

5

Medtronic plc

Notes to Consolidated Financial Statements

(Unaudited)

In March 2016, the FASB issued guidance to simplify the accounting for share-based payment transactions by requiring all excess tax benefits and deficiencies to be recognized in income tax expense or benefit in earnings; eliminating the requirement to classify the excess tax benefit and deficiencies as additional paid-in capital. For the three and nine months ended January 27, 2017, the Company recognized $5 million and $80 million, respectively, of excess tax benefits in additional paid-in capital. Under the new guidance, an entity makes an accounting policy election to either estimate the expected forfeiture awards or account for forfeitures as they occur. This accounting guidance is effective for the Company beginning in the first quarter of fiscal year 2018.

In October 2016, the FASB issued guidance that requires the tax effect of inter-entity transactions, other than sales of inventory, to be recognized when the transaction occurs. This would eliminate the exception under the current guidance in which the tax effects of inter-entity asset transactions are deferred until the transferred asset is sold to a third party or otherwise recovered through use. This accounting guidance is effective for the Company beginning in the first quarter of fiscal year 2019. The Company is evaluating the impact of the inter-entity transaction guidance on the Company's consolidated financial statements.

3. Acquisitions and Acquisition-Related Items

The Company had various acquisitions during the first three quarters of fiscal year 2017. The Company accounted for the acquisitions noted below as business combinations using the acquisition method of accounting. In accordance with authoritative guidance on business combination accounting, the assets and liabilities of the businesses acquired were recorded and consolidated on the acquisition date at their respective fair values. The pro forma impact of these acquisitions was not significant, either individually or in the aggregate, to the results of the Company for the three and nine months ended January 27, 2017 and January 29, 2016. The results of operations related to each business acquired have been included in the Company's consolidated statements of income since the date each business was acquired.

The preliminary fair values of the assets acquired and liabilities assumed during the nine months ended January 27, 2017 were as follows:

(in millions)	HeartWare International, Inc.		Smith & Nephew's Gynecology Business		All Other		Total
Other current assets	$	351	$	—	$	17	$	368
Property, plant, and equipment	13		3		4		20
Other intangible assets	625		167		65		857
Goodwill	479		180		113		772
Other assets	55		—		15		70
Total assets acquired	1,523		350		214		2,087
Current liabilities	144		—		9		153
Deferred tax liabilities	60		—		9		69
Long-term debt	245		—		—		245
Other liabilities	2		—		4		6
Total liabilities assumed	451		—		22		473
Net assets acquired	$	1,072	$	350	$	192	$	1,614

HeartWare International, Inc.

On August 23, 2016, the Company's Cardiac and Vascular Group acquired HeartWare International, Inc. (HeartWare), a medical device company that develops and manufactures miniaturized implantable heart pumps, or ventricular assist devices, to treat patients around the world suffering from advanced heart failure. Total consideration for the transaction was approximately $1.1 billion. Based upon a preliminary acquisition valuation, the Company acquired $602 million of technology-based and customer-related intangible assets and $23 million of tradenames, with estimated useful lives of 15 and 5 years, respectively, and $479 million of goodwill. The acquired goodwill is not deductible for tax purposes. In addition, the Company acquired $245 million of debt through the acquisition, of which the Company redeemed $203 million as part of a cash tender offer in August 2016. The remaining $42 million of debt acquired is due December 2017 and is recorded within current debt obligations on the consolidated balance sheets.

6

Medtronic plc

Notes to Consolidated Financial Statements

(Unaudited)

Smith & Nephew's Gynecology Business

On August 5, 2016, the Company's Minimally Invasive Therapies Group acquired Smith & Nephew's gynecology business, which expands and strengthens Medtronic's minimally invasive surgical offerings and further complements its existing global gynecology business. Total consideration for the transaction was approximately $350 million, which primarily related to an upfront payment. Based upon a preliminary acquisition valuation, the Company acquired $167 million of other intangible assets, which primarily consisted of customer-related and technology related intangible assets with useful lives of 13 years, and $180 million of goodwill. The acquired goodwill is deductible for tax purposes.

For information on the Company's fiscal year 2016 acquisitions, refer to Note 2 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended April 29, 2016.

Acquisition-Related Items

During the three and nine months ended January 27, 2017, the Company recognized acquisition-related items expense of $68 million and $148 million, primarily due to expenses incurred in connection with the Covidien integration and expenses incurred in connection with the HeartWare acquisition. For the nine months ended January 27, 2017, these expenses were partially offset by the change in fair value of contingent consideration as a result of revised revenue forecasts and anticipated regulatory milestones.

During the three and nine months ended January 29, 2016, the Company recognized acquisition-related items expense of $63 million and $183 million, respectively, primarily due to expenses incurred in connection with the Covidien integration, partially offset by the change in fair value of contingent consideration.

Contingent Consideration

Certain of the Company’s business combinations involve the potential for the payment of future consideration upon the achievement of certain product development milestones and/or various other favorable operating conditions. Payment of the additional consideration is generally contingent on the acquired business reaching certain performance milestones, including attaining specified revenue levels or achieving product development milestones. A liability is recorded for the estimated fair value of the contingent consideration on the acquisition date. The fair value of the contingent consideration is remeasured at each reporting period using Level 3 inputs, and the change in fair value is recognized within acquisition-related items in the consolidated statements of income.

The fair value of contingent consideration is measured using projected payment dates, discount rates, probabilities of payment, and projected revenues (for revenue-based considerations). Projected contingent payment amounts are discounted back to the current period using a discounted cash flow model. Projected revenues are based on the Company’s most recent internal operational budgets and long-range strategic plans. Changes in projected revenues, probabilities of payment, discount rates, and projected payment dates may result in adjustments to the fair value measurement. The recurring Level 3 fair value measurements of contingent consideration include the following significant unobservable inputs:

	Fair Value at
(in millions)	January 27, 2017	Valuation Technique	Unobservable Input	Range
			Discount rate	11% - 32.5%
Revenue-based payments	$111	Discounted cash flow	Probability of payment	30% - 100%
			Projected fiscal year of payment	2017 - 2025
			Discount rate	0.3% - 5.5%
Product development-based payments	$151	Discounted cash flow	Probability of payment	75% - 100%
			Projected fiscal year of payment	2017 - 2025

The fair value of contingent consideration at January 27, 2017 and April 29, 2016 was $262 million and $377 million, respectively. At January 27, 2017, $200 million was reflected in other liabilities and $62 million was reflected in other accrued expenses in the consolidated balance sheets. At April 29, 2016, $311 million was reflected in other liabilities and $66 million was reflected in other accrued expenses in the consolidated balance sheet. Contingent consideration payments related to the acquisition date fair value are reported as financing activities in the consolidated statements of cash flows. Amounts paid in excess of the original acquisition date fair value are reported as operating activities in the consolidated statements of cash flows.

7

Medtronic plc

Notes to Consolidated Financial Statements

(Unaudited)

The following table provides a reconciliation of the beginning and ending balances of contingent consideration:

	Three months ended						Nine months ended
(in millions)	January 27, 2017			January 29, 2016			January 27, 2017			January 29, 2016
Beginning Balance	$	285		$	368		$	377		$	264
Purchase price contingent consideration	(4		)	14			28			149
Payments	(23		)	(2		)	(62		)	(22		)
Change in fair value	4			(9		)	(81		)	(20		)
Ending Balance	$	262		$	371		$	262		$	371

4. Special Charge

During the three and nine months ended January 27, 2017, continuing the Company's commitment to improve the health of people and communities throughout the world, the Company made a $100 million charitable cash contribution to meet the multi-year funding needs of the Medtronic Foundation, a related party non-profit organization.

During the three and nine months ended January 29, 2016, the Company did not recognize a special charge. 

5. Restructuring Charges

Cost Synergies Initiative

The cost synergies initiative is the Company's restructuring program primarily related to the integration of Covidien. This initiative is expected to contribute to the approximately $850 million in cost synergies expected to be achieved as a result of the integration of the Covidien acquisition through fiscal year 2018, including administrative office optimization, manufacturing and supply chain infrastructure, certain program cancellations, and reduction of general and administrative redundancies. Restructuring charges are expected to be primarily related to employee termination costs and costs related to manufacturing and facility closures and are expected to be incurred on a quarterly basis throughout fiscal year 2017 and in future fiscal years as cost synergy strategies are finalized.

A summary of the restructuring accrual, recorded within other accrued expenses and other liabilities in the consolidated balance sheets, and related activity is presented below:

(in millions)	Employee Termination Costs			Asset Write-downs			Other Costs			Total
April 29, 2016	$	213		$	—		$	37		$	250
Restructuring charges	152			18			44			214
Payments/write-downs	(146		)	(18		)	(49		)	(213		)
Reversal of excess accrual	(40		)	—			(2		)	(42		)
January 27, 2017	$	179		$	—		$	30		$	209

As part of the cost synergies initiative, for the three and nine months ended January 27, 2017, the Company recognized $56 million and $214 million in restructuring charges, respectively, which were partially offset by reversals of excess restructuring reserves of $35 million and $42 million, respectively. Reversals of restructuring reserves relate to certain employees identified for termination finding other positions within the Company and employee termination costs being less than initially estimated. In addition, for the three months and nine months ended January 27, 2017, asset write-downs included $1 million and $8 million, respectively, related to property, plant, and equipment impairments. For the nine months ended January 27, 2017, asset write-downs also included $10 million related to inventory write-offs of discontinued product lines, which were recognized within cost of products sold in the consolidated statements of income.

As part of the cost synergies initiative, for the three and nine months ended January 29, 2016, the Company recognized $55 million and $208 million in restructuring charges, respectively, which were partially offset by reversals of excess restructuring reserves of $19 million and $32 million, respectively. Reversals of restructuring reserves primarily relate to certain employees identified for termination finding other positions within the Company. For the three and nine months ended January 29, 2016, restructuring charges consisted primarily of employee termination costs. In addition, for the three months and nine months ended January 29, 2016, asset write-downs included $3 million and $13 million, respectively, related to property, plant, and equipment

8

Medtronic plc

Notes to Consolidated Financial Statements

(Unaudited)

impairments. For the nine months ended January 29, 2016, asset write-downs also included $9 million related to inventory write-offs of discontinued product lines, which were recognized within cost of products sold in the consolidated statements of income.

6. Financial Instruments

The Company holds investments consisting primarily of marketable debt and equity securities. The authoritative guidance is principally applied to financial assets and liabilities, such as marketable equity securities and debt and equity securities, that are classified and accounted for as trading and available-for-sale and are measured on a recurring basis. The Company also holds cost method, equity method, and other investments which are measured at fair value on a nonrecurring basis. For information on the valuation techniques and inputs used in the fair value measurements, refer to Note 1 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended April 29, 2016.

The following table summarizes the Company's investments by significant investment category and the consolidated balance sheet classification at January 27, 2017:

	Valuation									Balance Sheet Classification
(in millions)	Cost		Unrealized Gains		Unrealized Losses			Fair Value		Investments		Other Assets
Available-for-sale securities:
Level 1:
U.S. government and agency securities	$	577	$	1	$	(12	)	$	566	$	566	$	—
Marketable equity securities	102		21		(3		)	120		—		120
Total Level 1	679		22		(15		)	686		566		120
Level 2:
Corporate debt securities	4,637		49		(35		)	4,651		4,651		—
U.S. government and agency securities	973		1		(15		)	959		959		—
Mortgage-backed securities	761		6		(20		)	747		747		—
Foreign government and agency securities	50		—		(1		)	49		49		—
Other asset-backed securities	198		1		—			199		199		—
Debt funds	1,743		—		(224		)	1,519		1,519		—
Total Level 2	8,362		57		(295		)	8,124		8,124		—
Level 3:
Corporate debt securities	1		—		—			1		—		1
Auction rate securities	47		—		(3		)	44		—		44
Total Level 3	48		—		(3		)	45		—		45
Total available-for-sale securities	$	9,089	$	79	$	(313	)	$	8,855	$	8,690	$	165
Cost method, equity method, and other investments:
Level 3:
Cost method, equity method, and other investments	589		—		—			N/A		—		589
Total Level 3	589		—		—			N/A		—		589
Total cost method, equity method, and other investments	$	589	$	—	$	—		N/A		$	—	$	589
Total investments	$	9,678	$	79	$	(313	)	$	8,855	$	8,690	$	754

9

Medtronic plc

Notes to Consolidated Financial Statements

(Unaudited)

The following table summarizes the Company's investments by significant investment category and the related consolidated balance sheet classification at April 29, 2016:

	Valuation									Balance Sheet Classification
(in millions)	Cost		Unrealized Gains		Unrealized Losses			Fair Value		Investments		Other Assets
Available-for-sale securities:
Level 1:
U.S. government and agency securities	$	792	$	14	$	(1	)	$	805	$	805	$	—
Marketable equity securities	75		21		(11		)	85		—		85
Total Level 1	867		35		(12		)	890		805		85
Level 2:
Corporate debt securities	3,935		85		(24		)	3,996		3,996		—
U.S. government and agency securities	902		2		—			904		904		—
Mortgage-backed securities	1,016		17		(18		)	1,015		1,015		—
Other asset-backed securities	192		3		—			195		195		—
Debt funds	3,040		5		(281		)	2,764		2,764		—
Total Level 2	9,085		112		(323		)	8,874		8,874		—
Level 3:
Corporate debt securities	1		—		—			1		—		1
Auction rate securities	47		—		(3		)	44		—		44
Total Level 3	48		—		(3		)	45		—		45
Total available-for-sale securities	$	10,000	$	147	$	(338	)	$	9,809	$	9,679	$	130
Trading securities:
Level 1:
Exchange-traded funds	65		15		(1		)	79		79		—
Total Level 1	65		15		(1		)	79		79		—
Total trading securities	$	65	$	15	$	(1	)	$	79	$	79	$	—
Cost method, equity method, and other investments:
Level 3:
Cost method, equity method, and other investments	506		—		—			N/A		—		506
Total Level 3	506		—		—			N/A		—		506
Total cost method, equity method, and other investments	$	506	$	—	$	—		N/A		$	—	$	506
Total investments	$	10,571	$	162	$	(339	)	$	9,888	$	9,758	$	636

10

Medtronic plc

Notes to Consolidated Financial Statements

(Unaudited)

Marketable Debt and Equity Securities

The following tables represent the gross unrealized losses and fair values of the Company’s available-for-sale securities that have been in a continuous unrealized loss position deemed to be temporary, aggregated by investment category at January 27, 2017 and April 29, 2016:

	January 27, 2017
	Less than 12 months					More than 12 months
(in millions)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Corporate debt securities	$	1,568	$	(30	)	$	82	$	(5	)
Auction rate securities	—		—			44		(3		)
Mortgage-backed securities	402		(8		)	133		(12		)
U.S. government and agency securities	1,011		(27		)	—		—
Foreign government and agency securities	49		(1		)	—		—
Debt funds	227		(8		)	1,091		(216		)
Marketable equity securities	17		(1		)	1		(2		)
Total	$	3,274	$	(75	)	$	1,351	$	(238	)

	April 29, 2016
	Less than 12 months					More than 12 months
(in millions)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Corporate debt securities	$	756	$	(18	)	$	136	$	(6	)
Auction rate securities	—		—			44		(3		)
Mortgage-backed securities	196		(5		)	92		(5		)
U.S. government and agency securities	308		(4		)	67		(5		)
Debt funds	670		(26		)	1,601		(256		)
Marketable equity securities	45		(11		)	—		—
Total	$	1,975	$	(64	)	$	1,940	$	(275	)

The following table represents the range of the unobservable inputs utilized in the fair value measurement of the auction rate securities classified as Level 3 at January 27, 2017:

	Valuation Technique	Unobservable Input	Range (Weighted Average)
Auction rate securities	Discounted cash flow	Years to principal recovery	2 yrs. - 12 yrs. (3 yrs.)
		Illiquidity premium	6%

The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the ability to observe valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. The Company’s policy is to recognize transfers into and out of levels within the fair value hierarchy at the end of the fiscal quarter in which the actual event or change in circumstances that caused the transfer occurs. There were no transfers between Level 1, Level 2, or Level 3 during the three and nine months ended January 27, 2017 and January 29, 2016. When a determination is made to classify an asset or liability within Level 3, the determination is based upon the significance of the unobservable inputs to the overall fair value measurement.

11

Medtronic plc

Notes to Consolidated Financial Statements

(Unaudited)

The following tables provide a reconciliation of the beginning and ending balances of items measured at fair value on a recurring basis that used significant unobservable inputs (Level 3):

	Three months ended January 27, 2017
(in millions)	Total Level 3 Investments			Corporate debt securities		Auction rate securities
October 28, 2016	$	45		$	1	$	44
Total unrealized (losses) gains included in other comprehensive income	—			—		—
January 27, 2017	$	45		$	1	$	44
	Three months ended January 29, 2016
(in millions)	Total Level 3 Investments			Corporate debt securities		Auction rate securities
October 30, 2015	$	103		$	1	$	102
Total unrealized (losses) gains included in other comprehensive income	—			—		—
January 29, 2016	$	103		$	1	$	102
	Nine months ended January 27, 2017
(in millions)	Total Level 3 Investments			Corporate Debt Securities		Auction Rate Securities
April 29, 2016	$	45		$	1	$	44
Total unrealized (losses) gains included in other comprehensive income	—			—		—
January 27, 2017	$	45		$	1	$	44
	Nine months ended January 29, 2016
(in millions)	Total Level 3 Investments			Corporate Debt Securities		Auction Rate Securities
April 24, 2015	$	106		$	1	$	105
Total unrealized (losses) gains included in other comprehensive income	(3		)	—		(3		)
January 29, 2016	$	103		$	1	$	102

Activity related to the Company’s investment portfolio is as follows:

	Three months ended
	January 27, 2017						January 29, 2016
(in millions)	Debt (1)			Equity (2)			Debt (1)			Equity (2)
Proceeds from sales	$	661		$	1		$	1,261		$	4
Gross realized gains	10			—			2			4
Gross realized losses	(7		)	—			(9		)	—
Impairment losses recognized	—			(10		)	—			(2		)
	Nine months ended
	January 27, 2017						January 29, 2016
(in millions)	Debt (1)			Equity (2)			Debt (1)			Equity (2)
Proceeds from sales	$	4,203		$	83		$	3,979		$	38
Gross realized gains	74			29			11			36
Gross realized losses	(56		)	—			(21		)	—
Impairment losses recognized	—			(20		)	—			(43		)

(1) Includes available-for-sale debt securities.

(2) Includes marketable equity securities, cost method, equity method, exchange-traded funds, and other investments.

12

Medtronic plc

Notes to Consolidated Financial Statements

(Unaudited)

Credit losses represent the difference between the present value of cash flows expected to be collected on certain mortgage-backed securities and auction rate securities and the amortized cost of these securities. Based on the Company’s assessment of the credit quality of the underlying collateral and credit support available to each of the remaining securities in which the Company is invested, the Company believes it has recognized all necessary other-than-temporary impairments, as the Company does not have the intent to sell, nor is it more likely than not that the Company will be required to sell, before recovery of the amortized cost.

At January 27, 2017 and April 29, 2016, the credit loss portion of other-than-temporary impairments on debt securities was not significant. The total reductions of available-for-sale debt securities sold during the three and nine months ended January 27, 2017 and January 29, 2016, were not significant. The total other-than-temporary impairment losses on available-for-sale debt securities for the three and nine months ended January 27, 2017 and January 29, 2016 were not significant.

The January 27, 2017 balance of available-for-sale debt securities, excluding debt funds which have no single maturity date, by contractual maturity is shown in the following table. Within the table, maturities of mortgage-backed securities have been allocated based upon timing of estimated cash flows assuming no change in the current interest rate environment. Actual maturities may differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties.

(in millions)	January 27, 2017
Due in one year or less	$	1,185
Due after one year through five years	2,905
Due after five years through ten years	3,043
Due after ten years	83
Total	$	7,216

The Company holds investments in marketable equity securities, which are classified as other assets in the consolidated balance sheets. The aggregate carrying amount of these investments was $120 million and $85 million at January 27, 2017 and April 29, 2016, respectively. The Company did not recognize any significant impairment charges related to marketable equity securities during the three and nine months ended January 27, 2017, nor during the three months ended January 29, 2016. During the nine months ended January 29, 2016, the Company determined that the fair values of certain marketable equity securities were below the carrying values and that the carrying values of these investments were not expected to be recoverable within a reasonable period of time. As a result, the Company recognized $20 million in impairment charges for the nine months ended January 29, 2016, which were recognized within other expense, net in the consolidated statements of income.

Cost method, equity method, and other investments

The Company holds investments in equity and other securities that are accounted for using the cost or equity method, which are classified as other assets in the consolidated balance sheets. At January 27, 2017 and April 29, 2016, the aggregate carrying amount of equity and other securities without a quoted market price and accounted for using the cost or equity method was $589 million and $506 million, respectively. Cost and equity method investments are measured at fair value on a nonrecurring basis. The total carrying value of these investments is reviewed quarterly for changes in circumstance or the occurrence of events that suggest the Company’s investment may not be recoverable. If there are identified events or changes in circumstances that may have a material adverse effect on the fair value of the investment, the investment is assessed for impairment.

Cost method investments fall within Level 3 of the fair value hierarchy due to the use of significant unobservable inputs to determine fair value, as the investments are in privately-held entities without quoted market prices. To determine the fair value of these investments, the Company uses all pertinent financial information available related to the entities, including financial statements and market participant valuations from recent and proposed equity offerings. During the three and nine months ended January 27, 2017 and January 29, 2016, the Company determined that the fair values of certain cost method investments were below their carrying values and that the carrying values of these investments were not expected to be recoverable within a reasonable period of time. As a result, the Company recognized $10 million and $20 million in impairment charges during the three and nine months ended January 27, 2017, respectively, which were recognized in other expense, net in the consolidated statements of income. The Company recognized $2 million and $23 million in impairment charges during the three and nine months ended January 29, 2016, respectively, which were recognized in other expense, net in the consolidated statements of income.

13

Medtronic plc

Notes to Consolidated Financial Statements

(Unaudited)

7. Financing Arrangements

Commercial Paper

The Company maintains a commercial paper program that allows the Company to have a maximum of $3.5 billion in commercial paper outstanding. Commercial paper outstanding at January 27, 2017 was $1.1 billion. No amounts were outstanding at April 29, 2016. During the three and nine months ended January 27, 2017, the weighted average original maturity of the commercial paper outstanding was approximately 40 days and 38 days, respectively, and the weighted average interest rate was 0.87 percent and 0.82 percent, respectively. The issuance of commercial paper proportionately reduced the amount of credit available under the Company’s existing Credit Facility, as defined below.

Line of Credit

The Company has a $3.5 billionfive year credit facility (Credit Facility) which provides back-up funding for the commercial paper program described above. At January 27, 2017 and April 29, 2016, no amounts were outstanding.

Interest rates are determined by a pricing matrix based on the Company’s long-term debt ratings, which are assigned by Standard & Poor’s Ratings Services and Moody’s Investors Service. Facility fees are payable on the Credit Facility and are determined in the same manner as the interest rates. The Credit Facility agreement also contains customary covenants, all of which the Company remained in compliance with at January 27, 2017.

14

Medtronic plc

Notes to Consolidated Financial Statements

(Unaudited)

Long-Term Debt

Long-term debt consisted of the following:

(in millions, except interest rates)	Maturity by Fiscal Year	January 27, 2017			April 29, 2016
6.000 percent ten-year 2008 CIFSA senior notes	2018	$	—		$	1,150
1.500 percent three-year 2015 senior notes	2018	1,000			1,000
1.375 percent five-year 2013 senior notes	2018	1,000			1,000
5.600 percent ten-year 2009 senior notes	2019	400			400
4.450 percent ten-year 2010 senior notes	2020	766			766
2.500 percent five-year 2015 senior notes	2020	2,500			2,500
Floating rate five-year 2015 senior notes	2020	500			500
4.200 percent ten-year 2010 CIFSA senior notes	2021	600			600
4.125 percent ten-year 2011 senior notes	2021	500			500
3.125 percent ten-year 2012 senior notes	2022	675			675
3.150 percent seven-year 2015 senior notes	2022	2,500			2,500
3.200 percent ten-year 2012 CIFSA senior notes	2023	650			650
2.750 percent ten-year 2013 senior notes	2023	530			530
2.950 percent ten-year 2013 CIFSA senior notes	2024	310			310
3.625 percent ten-year 2014 senior notes	2024	850			850
3.500 percent ten-year 2015 senior notes	2025	4,000			4,000
4.375 percent twenty-year 2015 senior notes	2035	2,382			2,382
6.550 percent thirty-year 2008 CIFSA senior notes	2038	374			374
6.500 percent thirty-year 2009 senior notes	2039	300			300
5.550 percent thirty-year 2010 senior notes	2040	500			500
4.500 percent thirty-year 2012 senior notes	2042	400			400
4.000 percent thirty-year 2013 senior notes	2043	325			325
4.625 percent thirty-year 2014 senior notes	2044	650			650
4.625 percent thirty-year 2015 senior notes	2045	4,000			4,000
Three-year term loan	2018	—			3,000
Interest rate swaps (Note 8)	2018 - 2022	41			89
Capital lease obligations	2018 - 2025	24			26
Bank borrowings	2018-2021	142			56
Debt premium	2018-2045	128			214
Deferred financing costs (1)	2018-2045	(124		)	(138		)
Long-term debt		$	25,923		$	30,109

(1) The Company retrospectively adopted the guidance to simplify the presentation of deferred issuance costs in the quarter ended July 29, 2016. As a result, deferred issuance costs have been reclassified from other assets to long-term debt. See Note 2 to the consolidated financial statements for additional information.

Senior Notes

The Company had outstanding unsecured senior obligations (collectively, the Senior Notes), with a principal value of $27.4 billion at both January 27, 2017 and April 29, 2016. The Senior Notes rank equally with all other unsecured and unsubordinated indebtedness of the Company. The indentures under which the Senior Notes were issued contain customary covenants, all of which the Company remained in compliance with at January 27, 2017. The Company used the net proceeds from the sale of the Senior Notes primarily for general corporate uses, which includes the repayment of other indebtedness of the Company and to fund the acquisition of Covidien in fiscal year 2015. For additional information regarding the terms of these agreements, refer to Note 7 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended April 29, 2016.

15

Medtronic plc

Notes to Consolidated Financial Statements

(Unaudited)

Financial Instruments Not Measured at Fair Value

At January 27, 2017, the estimated fair value of the Company’s Senior Notes, including the current portion, was $28.6 billion compared to a principal value of $27.4 billion. At April 29, 2016, the estimated fair value was $29.8 billion compared to a principal value of $27.4 billion. The fair value was estimated using quoted market prices for the publicly registered Senior Notes, which are classified as Level 2 within the fair value hierarchy. The fair values and principal values consider the terms of the related debt and exclude the impacts of debt discounts and derivative/hedging activity.

8. Derivatives and Currency Exchange Risk Management

The Company uses operational and economic hedges, as well as currency exchange rate derivative contracts and interest rate derivative instruments, to manage the impact of currency exchange and interest rate changes on earnings and cash flows. In addition, the Company uses cross currency interest rate swaps to manage currency risk related to certain debt. In order to minimize earnings and cash flow volatility resulting from currency exchange rate changes, the Company enters into derivative instruments, principally forward currency exchange rate contracts. These contracts are designed to hedge anticipated foreign currency transactions and changes in the value of specific assets and liabilities. At inception of the contract, the derivative is designated as either a freestanding derivative or a cash flow hedge. The primary currencies of the derivative instruments are the Euro and Japanese Yen. The Company does not enter into currency exchange rate derivative contracts for speculative purposes. The gross notional amount of all currency exchange rate derivative instruments outstanding at January 27, 2017 and April 29, 2016 was $10.9 billion and $10.8 billion, respectively.

The information that follows explains the various types of derivatives and financial instruments used by the Company, reasons the Company uses such instruments, and the impact such instruments have on the Company’s consolidated balance sheets, statements of income, and statements of cash flows.

Freestanding Derivative Contracts

Freestanding derivative contracts are used to offset the Company’s exposure to the change in value of specific foreign currency denominated assets and liabilities and to offset variability of cash flows associated with forecasted transactions denominated in a foreign currency. The gross notional amount of these contracts, not designated as hedging instruments, outstanding at January 27, 2017 and April 29, 2016, was $5.1 billion and $5.0 billion, respectively.

The amounts and classification of the gains in the consolidated statements of income related to derivative instruments, not designated as hedging instruments, for the three and nine months ended January 27, 2017 and January 29, 2016 were as follows:

		Three months ended				Nine months ended
(in millions)	Classification	January 27, 2017		January 29, 2016		January 27, 2017		January 29, 2016
Currency exchange rate contracts gains	Other expense, net	$	67	$	19	$	27	$	35

Cash Flow Hedges

Currency Exchange Rate Risk

Forward contracts designated as cash flow hedges are designed to hedge the variability of cash flows associated with forecasted transactions denominated in a foreign currency that will take place in the future. No gains or losses relating to ineffectiveness of foreign currency cash flow hedges were recognized in earnings during the three and nine months ended January 27, 2017 and January 29, 2016. No components of the hedge contracts were excluded in the measurement of hedge ineffectiveness and no hedges were derecognized or discontinued during the three and nine months ended January 27, 2017 and January 29, 2016. The gross notional amount of these contracts, designated as cash flow hedges, outstanding at both January 27, 2017 and April 29, 2016, was $5.7 billion and will mature within the subsequent three-year period.

16

Medtronic plc

Notes to Consolidated Financial Statements

(Unaudited)

The amount of gross gains (losses), classification of the gains (losses) in the consolidated statements of income, and the accumulated other comprehensive (loss) income (AOCI) related to the effective portion of currency exchange rate contract derivative instruments designated as cash flow hedges for the three and nine months ended January 27, 2017 and January 29, 2016 were as follows:

	Three months ended January 27, 2017
	Recognized in OCI		Recognized in Income
(in millions)	Amount		Classification	Amount
Currency exchange rate contracts	$	190	Other expense, net	$	68
Total	$	190		$	68
	Three months ended January 29, 2016
	Recognized in OCI		Recognized in Income
(in millions)	Amount		Classification	Amount
Currency exchange rate contracts	$	104	Other expense, net	$	111
			Cost of products sold	(9		)
Total	$	104		$	102
	Nine months ended January 27, 2017
	Recognized in OCI		Recognized in Income
(in millions)	Amount		Classification	Amount
Currency exchange rate contracts	$	378	Other expense, net	$	89
Total	$	378		$	89
	Nine months ended January 29, 2016
	Recognized in OCI		Recognized in Income
(in millions)	Amount		Classification	Amount
Currency exchange rate contracts	$	108	Other expense, net	$	295
			Cost of products sold	(45		)
Total	$	108		$	250

Forecasted Debt Issuance Interest Rate Risk

Forward starting interest rate derivative instruments designated as cash flow hedges are designed to manage the exposure to interest rate volatility with regard to future issuances of fixed-rate debt. No gains or losses relating to ineffectiveness of forward starting interest rate derivative instruments were recognized in interest expense, net during the three and nine months ended January 27, 2017 and January 29, 2016. No components of the hedge contracts were excluded in the measurement of hedge ineffectiveness during the three and nine months ended January 27, 2017 and January 29, 2016. At January 27, 2017, the Company had $300 million of fixed pay, forward starting interest rate swaps with a weighted average fixed-rate of 3.10 percent in anticipation of planned debt issuances in fiscal year 2017.

For the three and nine months ended January 27, 2017 and January 29, 2016, the reclassification of the effective portion of the net losses on forward starting interest rate derivative instruments from accumulated other comprehensive loss to interest expense, net was not significant.

The unrealized losses on outstanding forward starting interest rate swap derivative instruments at January 27, 2017 and April 29, 2016 were $26 million and $48 million, respectively. Unrealized losses on outstanding forward starting interest rate swap derivative instruments were recorded in other liabilities, with the offset recorded in accumulated other comprehensive loss in the consolidated balance sheets. For the three months ended January 27, 2017 and January 29, 2016, the Company recognized $28 million and $(14) million, respectively, of unrealized gains (losses) in accumulated other comprehensive loss. For the nine months ended January 27, 2017 and January 29, 2016, the Company recognized $22 million and $30 million, respectively, of unrealized gains in accumulated other comprehensive loss.

17

Medtronic plc

Notes to Consolidated Financial Statements

(Unaudited)

At January 27, 2017 and April 29, 2016, the Company had $112 million and $(90) million, respectively, in after-tax net unrealized gains (losses) associated with cash flow hedging instruments recorded in accumulated other comprehensive loss. The Company expects that $120 million of after-tax net unrealized gains at January 27, 2017 will be recognized in the consolidated statements of income over the next 12 months.

Fair Value Hedges

Interest rate derivative instruments designated as fair value hedges are designed to manage the exposure to interest rate movements and to reduce borrowing costs by converting fixed-rate debt into floating-rate debt. Under these agreements, the Company agrees to exchange, at specified intervals, the difference between fixed and floating interest amounts calculated by reference to an agreed-upon notional principal amount.

At January 27, 2017 and April 29, 2016, the Company had interest rate swaps in gross notional amounts of $1.2 billion, designated as fair value hedges of underlying fixed-rate senior note obligations. For additional information regarding the terms of the Company’s interest rate swap agreements, refer to Note 8 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended April 29, 2016.

At January 27, 2017, the market value of outstanding interest rate swap agreements was a net $41 million unrealized gain, and the market value of the hedged item was a net $41 million unrealized loss. The amounts were recorded in other assets with the offsets recorded in long-term debt and current debt obligations in the consolidated balance sheet.

During the three and nine months ended January 27, 2017 and January 29, 2016, the Company did not have any significant ineffective fair value hedging instruments. In addition, during the three and nine months ended January 27, 2017 and January 29, 2016, the Company did not recognize any significant gains or losses on firm commitments that no longer qualify as fair value hedges.

18

Medtronic plc

Notes to Consolidated Financial Statements

(Unaudited)

Balance Sheet Presentation

The following tables summarize the balance sheet classification and fair value of derivative instruments included in the consolidated balance sheets at January 27, 2017 and April 29, 2016. The fair value amounts are presented on a gross basis and are segregated between derivatives that are designated and qualify as hedging instruments and those that are not and are further segregated by type of contract within those two categories.

	January 27, 2017
	Asset Derivatives			Liability Derivatives
(in millions)	Balance Sheet Classification	Fair Value		Balance Sheet Classification	Fair Value
Derivatives designated as hedging instruments:
Currency exchange rate contracts	Other current assets	$	217	Other accrued expenses	$	33
Interest rate contracts	Other assets	41		Other liabilities	26
Currency exchange rate contracts	Other assets	79		Other liabilities	11
Total derivatives designated as hedging instruments		$	337		$	70
Derivatives not designated as hedging instruments:
Currency exchange rate contracts	Other current assets	$	35	Other accrued expenses	$	42
Cross currency interest rate contracts	Other current assets	1		Other accrued expenses	—
Cross currency interest rate contracts	Other assets	6		Other liabilities	11
Total derivatives not designated as hedging instruments		$	42		$	53
Total derivatives		$	379		$	123

	April 29, 2016
	Asset Derivatives			Liability Derivatives
(in millions)	Balance Sheet Classification	Fair Value		Balance Sheet Classification	Fair Value
Derivatives designated as hedging instruments:
Currency exchange rate contracts	Other current assets	$	123	Other accrued expenses	$	89
Interest rate contracts	Other assets	89		Other liabilities	48
Currency exchange rate contracts	Other assets	9		Other liabilities	54
Total derivatives designated as hedging instruments		$	221		$	191
Derivatives not designated as hedging instruments:
Commodity derivatives	Other current assets	$	—	Other accrued expenses	$	1
Currency exchange rate contracts	Other current assets	13		Other accrued expenses	23
Cross currency interest rate contracts	Other assets	14		Other liabilities	4
Total derivatives not designated as hedging instruments		$	27		$	28
Total derivatives		$	248		$	219

19

Medtronic plc

Notes to Consolidated Financial Statements

(Unaudited)

The following table provides information by level for the derivative assets and liabilities that are measured at fair value on a recurring basis.

	January 27, 2017				April 29, 2016
(in millions)	Level 1		Level 2		Level 1		Level 2
Derivative assets	$	331	$	48	$	145	$	103
Derivative liabilities	86		37		166		53

The Company has elected to present the fair value of derivative assets and liabilities within the consolidated balance sheets on a gross basis even when derivative transactions are subject to master netting arrangements and may otherwise qualify for net presentation. The following table provides information as if the Company had elected to offset the asset and liability balances of derivative instruments, netted in accordance with various criteria as stipulated by the terms of the master netting arrangements with each of the counterparties. Derivatives not subject to master netting arrangements are not eligible for net presentation.

January 27, 2017