Fair Value Measurements

12 Months Ended

Sep. 01, 2011

Notes to Financial Statements [Abstract]

Accounting standards establish three levels of inputs that may be used to measure fair value: quoted prices in active markets for identical assets or liabilities (referred to as Level 1), observable inputs other than Level 1 that are observable for the asset or liability either directly or indirectly (referred to as Level 2) and unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities (referred to as Level 3).

Fair Value Measurements on a Recurring Basis

Assets measured at fair value on a recurring basis were as follows:



	2011								2010
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Money market⁽¹⁾	$	1,462	—		—		$	1,462	$	2,170	—		—		$	2,170
Certificates of deposit⁽²⁾	—		155		—		155		—		705		—		705
Marketable equity investments⁽³⁾	37		15		—		52		19		—		—		19
Assets held for sale⁽³⁾	—		—		35		35		—		—		56		56
	$	1,499	$	170	$	35	$	1,704	$	2,189	$	705	$	56	$	2,950


⁽¹⁾	Included in cashand equivalents.


⁽²⁾	Amounts as of September 1, 2011 were included in cash and equivalents. As of September 2, 2010, $371 million was included in cashand equivalents and $334 million was included in restricted cash.


⁽³⁾	Included in other noncurrent assets.

Certificates of deposit: Certificates of deposit assets were valued using observable inputs in active markets for similar assets (Level 2).

Marketable equity investments: All marketable equity investments were classified as available-for-sale. As of September 1, 2011, accumulated other comprehensive income included gross gains of $32 million and gross losses of $7 million from our available-for-sale securities. As of September 1, 2011, available-for-sale securities with a fair value of $15 million had unrealized losses of $7 million and been unrealized for less than three months. Gross realized gains and gross realized losses on sales of our marketable equity investments were not material for 2011, 2010 or 2009. Marketable equity investments as of September 1, 2011 included approximately 20 million ordinary shares of Tower received in connection with our sale of the Japan Fab, which were valued using quoted market prices in an active market and discounted using a protective put model for our resale restriction (Level 2).

Assets held for sale: Assets held for sale primarily included semiconductor equipment and facilities. Fair value for semiconductor equipment is based on quotations obtained from equipment dealers, which consider the remaining useful life and configuration of the equipment, and fair value of facilities is determined based on sales of similar facilities and properties in comparable markets (Level 3). Losses recognized in 2011 and 2010 due to fair value measurements using Level 3 inputs were not material.

Fair Value Measurements on a Nonrecurring Basis

We hold strategic investments in equity securities which are accounted for under the cost method. As of September 1, 2011, the aggregate carrying amount of all cost method investments was $12 million.

Fair Value of Financial Instruments

The estimated fair value and carrying value of debt instruments (carrying value excludes the equity component of the 2014 Notes, the 2027 Notes and the 2031 Notes which is classified in equity) were as follows:



	2011				2010
	Fair Value		Carrying Value		Fair Value		Carrying Value
Convertible debt instruments (Level 1)	$	1,216	$	1,049	$	1,494	$	1,288
Convertible debt instruments (Level 2)	629		529		—		—
Other debt instruments	436		423		1,071		1,072

The fair value of our Level 1 convertible debt instruments was based on quoted market prices in active markets. The fair value of our Level 2 convertible debt instruments was determined based on observable inputs of quoted market prices in markets with insufficient activity to be considered active and market prices for our stock. The fair value of our other debt instruments was estimated based on discounted cash flows using inputs that are observable in the market or that could be derived from or corroborated with observable market data, including interest rates based on yield curves of similar debt issued by parties with credit ratings similar to ours (Level 2). Amounts reported as cash and equivalents, receivables, and accounts payable and accrued expenses approximate fair value.

- Definition

This element represents the disclosure related to the fair value measurement of assets and liabilities which includes [financial] instruments measured at fair value that are classified in stockholders' equity. Such assets and liabilities may be measured on a recurring or nonrecurring basis. The disclosures which may be required or desired include: (1) for assets and liabilities measured on a recurring basis, disclosure may include: (a) the fair value measurements at the reporting date; (b) the level within the fair value hierarchy in which the fair value measurements in their entirety fall, segregating fair value measurements using quoted prices in active markets for identical assets or liabilities (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3); (c) for fair value measurements using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (i) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (ii) purchases, sales, issuances, and settlements (net); (iii) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs); (d) the amount of the total gains or losses for the period in subparagraph (c) (i) above included in earnings (or changes in net assets) that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date and a description of where those unrealized gains or losses are reported in the statement of income (or activities); (e) the valuation technique(s) used to measure fair value and a discussion of changes in valuation techniques, if any, during the period and (2) for assets and liabilities that are measured at fair value on a nonrecurring basis (for example, impaired assets) disclosure may include, in addition to (a) above: (a) the reasons for the fair value measurements recorded; (b) the same as (b) above; (c) for fair value measurements using significant unobservable inputs (Level 3), a description of the inputs and the information used to develop the inputs; and (d) the valuation technique(s) used to measure fair value and a discussion of changes, if any, in the valuation technique(s) used to measure similar assets and/or liabilities in prior periods.

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