Fair Value Measurements:

9 Months Ended

Feb. 29, 2012

Fair Value Measurements:

NOTE 5—Fair Value Measurements:

The Company measures certain financial assets and liabilities at fair value on a recurring basis, including derivatives and available-for-sale securities. Fair value is a market-based measurement that should be determined based on the assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the Company uses a three-level hierarchy established by the FASB that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques (market approach, income approach, and cost approach).

The levels of hierarchy are described below:

• Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities.

• Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly; these include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

• Level 3: Unobservable inputs in which there is little or no market data available, which require the reporting entity to develop its own assumptions.

The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. Financial assets and liabilities are classified in their entirety based on the most stringent level of input that is significant to the fair value measurement.

The following table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis as of February 29, 2012 and May 31, 2011 and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value.

	February 29, 2012
	Fair Value Measurements Using						Assets /Liabilities at Fair Value
	Level 1		Level 2		Level 3				Balance Sheet Classification
	(in millions)
Assets
Derivatives:
Foreign exchange forwards		0		141		0		141	Other current assets and other long-term assets
Interest rate swap contracts		0		16		0		16	Other current assets and other long-term assets
Total derivatives		0		157		0		157
Available-for-sale securities:
U.S. Treasury securities		79		0		0		79	Cash and equivalents
U.S. Agency securities		0		95		0		95	Cash and equivalents
Commercial paper and bonds		0		150		0		150	Cash and equivalents
Money market funds		0		801		0		801	Cash and equivalents
U.S. Treasury securities		705		0		0		705	Short-term investments
U.S. Agency securities		0		277		0		277	Short-term investments
Commercial paper and bonds		0		194		0		194	Short-term investments
Non-marketable preferred stock		0		0		3		3	Other long-term assets
Total available-for-sale securities		784		1,517		3		2,304
Total Assets		784		1,674		3		2,461
Liabilities
Derivatives:
Foreign exchange forwards		0		75		0		75	Accrued liabilities and other long-term liabilities
Total Liabilities		0		75		0		75

	May 31, 2011
	Fair Value Measurements Using						Assets /Liabilities at Fair Value
	Level 1		Level 2		Level 3				Balance Sheet Classification
	(in millions)
Assets
Derivatives:
Foreign exchange forwards		0		38		0		38	Other current assets and other long-term assets
Interest rate swap contracts		0		15		0		15	Other current assets and other long-term assets
Total derivatives		0		53		0		53
Available-for-sale securities:
U.S. Treasury securities		125		0		0		125	Cash and equivalents
Commercial paper and bonds		0		157		0		157	Cash and equivalents
Money market funds		0		780		0		780	Cash and equivalents
U.S. Treasury securities		1,473		0		0		1,473	Short-term investments
U.S. Agency securities		0		308		0		308	Short-term investments
Commercial paper and bonds		0		802		0		802	Short-term investments
Total available-for-sale securities		1,598		2,047		0		3,645
Total Assets		1,598		2,100		0		3,698
Liabilities
Derivatives:
Foreign exchange forwards		0		197		0		197	Accrued liabilities and other long-term liabilities
Total Liabilities		0		197		0		197

Derivative financial instruments include foreign exchange forwards, embedded derivatives and interest rate swap contracts. The fair value of derivative contracts is determined using observable market inputs such as the daily market foreign currency rates, forward pricing curve, currency volatilities, currency correlations and interest rates, and considers nonperformance risk of the Company and that of its counterparties. Adjustments relating to these nonperformance risks were not material at February 29, 2012 or May 31, 2011. Refer to Note 11—Risk Management and Derivatives for additional detail.

Available-for-sale securities are primarily comprised of investments in U.S. Treasury and agency securities, money market funds, corporate commercial paper and bonds. These securities are valued using market prices on both active markets (Level 1) and less active markets (Level 2). Level 1 instrument valuations are obtained from real-time quotes for transactions in active exchange markets involving identical assets. Level 2 instrument valuations are obtained from readily available pricing sources for comparable instruments.

Our Level 3 assets are comprised of investments in certain non-marketable preferred stock. These investments are valued using internally developed models with unobservable inputs. These Level 3 investments are an immaterial portion of our portfolio. Changes in Level 3 investment assets were immaterial during the three and nine month periods ended February 29, 2012. As of May 31, 2011, the Company had no Level 3 assets and liabilities.

No transfers among the levels within the fair value hierarchy occurred during the three and nine month periods ended February 29, 2012 and February 28, 2011.

As of February 29, 2012 and May 31, 2011, the Company had no assets or liabilities that were required to be measured at fair value on a non-recurring basis.

Short-Term Investments:

As of February 29, 2012 and May 31, 2011, short-term investments consisted of available-for-sale securities. Available-for-sale securities are recorded at fair value with unrealized gains and losses reported, net of tax, in other comprehensive income, unless unrealized losses are determined to be other than temporary. As of February 29, 2012, the Company held $848 million of available-for-sale securities with maturity dates within one year from purchase date and $328 million with maturity dates over one year and less than five years from purchase date within short-term investments. As of May 31, 2011, the Company held $2,253 million of available-for-sale securities with maturity dates within one year from purchase date and $330 million with maturity dates over one year and less than five years from purchase date within short-term investments.

Short-term investments classified as available-for-sale consist of the following at fair value:

	February 29, 2012		May 31, 2011
	(in millions)
Available-for-sale investments:
U.S. Treasury and agencies	$	982	$	1,781
Corporate commercial paper and bonds		194		802
Total available-for-sale investments	$	1,176	$	2,583

Interest income related to cash and equivalents and short-term investments included within interest expense, net was $7 million and $8 million for the three month periods ended February 29, 2012 and February 28, 2011, respectively, and $22 million and $23 million for the nine month periods ended February 29, 2012 and February 28, 2011, respectively.

Fair Value of Long-Term Debt and Notes Payable:

The Company’s long-term debt is recorded at adjusted cost, net of amortized premiums and discounts and interest rate swap fair value adjustments. The fair value of long-term debt is estimated based upon quoted prices for similar instruments (Level 2). The fair value of the Company’s long-term debt, including the current portion, was approximately $281 million at February 29, 2012 and $482 million at May 31, 2011.

The carrying amounts reflected in the unaudited condensed consolidated balance sheet for notes payable approximate fair value.