Fair Value Measurements

6 Months Ended

Oct. 28, 2011

Note 7 – Fair Value Measurements

The Company follows the authoritative guidance on fair value measurements and disclosures, with respect to assets and liabilities that are measured at fair value on both a recurring and nonrecurring basis. Under this guidance, fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The authoritative guidance also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company's assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances. The hierarchy is broken down into three levels. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). Descriptions of the three levels of the fair value hierarchy are discussed in Note 6 of the Company's Annual Report on Form 10-K for the year ended April 29, 2011.

See the section below titled Valuation Techniques for further discussion of how the Company determines fair value for financial assets and liabilities.

Assets and Liabilities That Are Measured at Fair Value on a Recurring Basis

The authoritative guidance is principally applied to financial assets and liabilities such as marketable debt and equity securities that are classified and accounted for as trading, available-for-sale, and derivative instruments. Derivatives include cash flow hedges, freestanding derivative forward contracts, and interest rate swaps. These items are marked-to-market at each reporting period. The information in the following paragraphs and tables primarily addresses matters relative to these financial assets and liabilities.

The following tables provide information by level for assets and liabilities that are measured at fair value on a recurring basis.

	Fair Value		Fair Value Measurements
	as of		Using Inputs Considered as
(in millions)	October 28, 2011		Level 1		Level 2		Level 3
Assets:
Corporate debt securities	$	2,523	$	-	$	2,513	$	10
Auction rate securities		127		-		-		127
Mortgage-backed securities		931		-		900		31
U.S. government and agency securities		2,885		1,556		1,329		-
Foreign government and agency securities		91		-		91		-
Certificates of deposit		97		-		97		-
Other asset-backed securities		438		-		432		6
Marketable equity securities		164		164		-		-
Exchange-traded funds		44		44		-		-
Derivative assets		177		41		136		-
Total assets	$	7,477	$	1,805	$	5,498	$	174

Liabilities:
Derivative liabilities	$	190	$	180	$	10	$	-
Total liabilities	$	190	$	180	$	10	$	-

	Fair Value		Fair Value Measurements
	as of		Using Inputs Considered as
(in millions)	April 29, 2011		Level 1		Level 2		Level 3
Assets:
Corporate debt securities	$	1,961	$	-	$	1,944	$	17
Auction rate securities		133		-		-		133
Mortgage-backed securities		785		-		750		35
U.S. government and agency securities		2,756		1,453		1,303		-
Foreign government and agency securities		131		-		131		-
Certificates of deposit		119		-		119		-
Other asset-backed securities		349		-		343		6
Marketable equity securities		237		237		-		-
Exchange-traded funds		39		39		-		-
Derivative assets		130		21		109		-
Total assets	$	6,640	$	1,750	$	4,699	$	191

Liabilities:
Derivative liabilities	$	303	$	303	$	-	$	-
Total liabilities	$	303	$	303	$	-	$	-

Valuation Techniques

Financial assets that are classified as Level 1 securities include highly liquid government bonds within the U.S. government and agency securities, marketable equity securities, and exchange-traded funds for which quoted market prices are available. In addition, the Company has determined that foreign currency forward contracts will be included in Level 1 as these are valued using quoted market prices in active markets which have identical assets or liabilities.

The valuation for most fixed maturity securities are classified as Level 2. Financial assets that are classified as Level 2 include corporate debt securities, U.S. government and agency securities, foreign government and agency securities, certificates of deposit, other asset-backed securities, and certain mortgage-backed securities whose value is determined using inputs that are observable in the market or can be derived principally from or corroborated by observable market data such as pricing for similar securities, recently executed transactions, cash flow models with yield curves, and benchmark securities. In addition, interest rate swaps are included in Level 2 as the Company uses inputs other than quoted prices that are observable for the asset. The Level 2 derivative instruments are primarily valued using standard calculations and models that use readily observable market data as their basis.

Financial assets and liabilities are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies, or similar techniques, and at least one significant model assumption or input is unobservable. Level 3 financial assets also include certain investment securities for which there is limited market activity such that the determination of fair value requires significant judgment or estimation. Level 3 investment securities primarily include certain corporate debt securities, auction rate securities, certain mortgage-backed securities, and certain other asset-backed securities for which there was a decrease in the observability of market pricing for these investments. At October 28, 2011, these securities were valued primarily using broker pricing models that incorporate transaction details such as contractual terms, maturity, timing, and amount of expected future cash flows, as well as assumptions about liquidity and credit valuation adjustments of marketplace participants. The Company uses level 3 inputs in the measurement of contingent milestone payments and related liabilities for all acquisitions subsequent to April 24, 2009. See Note 3 for further information regarding contingent consideration.

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 significant transfers between Level 1, Level 2, or Level 3 during the three or six months ended October 28, 2011 or October 29, 2010. 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. 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) for the three and six months ended October 28, 2011 and October 29, 2010

Three months ended October 28, 2011
(in millions)	Total Level 3 Investments		Corporate debt securities		Auction rate securities		Mortgage-backed securities		Other asset-backed securities
Balance as of July 29, 2011	$	190	$	17	$	134	$	33	$	6
Total realized losses and other-than-temporary impairment losses included in earnings		(1)		(1)		-		-		-
Total unrealized gains/(losses) included in other comprehensive income		(7)		1		(7)		(1)		-
Settlements		(8)		(7)		-		(1)		-
Balance as of October 28, 2011	$	174	$	10	$	127	$	31	$	6

Three months ended October 29, 2010
(in millions)	Total Level 3 Investments		Corporate debt securities		Auction rate securities		Mortgage-backed securities		Other asset-backed securities
Balance as of July 30, 2010	$	198	$	16	$	138	$	37	$	7
Total realized losses and other-than-temporary impairment losses included in earnings		(2)		(1)		-		(1)		-
Total unrealized gains/(losses) included in other comprehensive income		9		2		5		2		-
Settlements		(3)		-		-		(2)		(1)
Balance as of October 29, 2010	$	202	$	17	$	143	$	36	$	6

Six months ended October 28, 2011
(in millions)	Total Level 3 Investments		Corporate debt securities		Auction rate securities		Mortgage-backed securities		Other asset-backed securities
Balance as of April 29, 2011	$	191	$	17	$	133	$	35	$	6
Total realized losses and other-than-temporary impairment losses included in earnings		(2)		(1)		-		-		(1)
Total unrealized gains/(losses) included in other comprehensive income		(5)		1		(6)		(1)		1
Settlements		(10)		(7)		-		(3)		-
Balance as of October 28, 2011	$	174	$	10	$	127	$	31	$	6

Six months ended October 29, 2010
(in millions)	Total Level 3 Investments		Corporate debt securities		Auction rate securities		Mortgage-backed securities		Other asset-backed securities
Balance as of April 30, 2010	$	213	$	16	$	142	$	39	$	16
Total realized losses and other-than-temporary impairment losses included in earnings		(4)		(2)		-		(2)		-
Total unrealized gains/(losses) included in other comprehensive income		7		4		1		2		-
Settlements		(14)		(1)		-		(3)		(10)
Balance as of October 29, 2010	$	202	$	17	$	143	$	36	$	6

- 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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