Fair Value Measurements

12 Months Ended

Aug. 30, 2012

Disclosure Text Block [Abstract]

Fair Value Measurements

Fair Value Measurements

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), 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

All marketable debt and equity investments are classified as available-for-sale and are carried at fair value. Assets measured at fair value on a recurring basis were as follows:

As of	2012								2011
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	2,159	$	—	$	—	$	2,159	$	1,462	$	—	$	—	$	1,462
Commercial paper	—		29		—		29		—		—		—		—
Certificates of deposit	—		27		—		27		—		155		—		155
Government securities	—		5		—		5		—		—		—		—
	2,159		61		—		2,220		1,462		155		—		1,617
Short-term investments:
Government securities	—		51		—		51		—		—		—		—
Corporate bonds	—		31		—		31		—		—		—		—
Commercial paper	—		10		—		10		—		—		—		—
Asset-backed securities	—		4		—		4		—		—		—		—
Certificates of deposit	—		4		—		4		—		—		—		—
	—		100		—		100		—		—		—		—
Long-term marketable investments:
Corporate bonds	—		203		—		203		—		—		—		—
Government securities	—		88		—		88		—		—		—		—
Asset-backed securities	—		73		—		73		—		—		—		—
Marketable equity securities	5		5		—		10		37		15		—		52
	5		369		—		374		37		15		—		52
Noncurrent assets:
Assets held for sale	—		—		25		25		—		—		35		35
	—		—		25		25		—		—		35		35
	$	2,164	$	530	$	25	$	2,719	$	1,499	$	170	$	35	$	1,704

Government securities consist of securities issued directly by or deemed to be guaranteed by government entities such as U.S and non U.S. agency securities, government bonds and treasury securities. Level 2 securities are valued using information obtained from pricing services, which obtain quoted market prices for similar instruments, non-binding market consensus prices that are corroborated by observable market data, or various other methodologies, to determine the appropriate value at the measurement date. We periodically perform supplemental analysis to validate information obtained from our pricing services. As of August 30, 2012, no adjustments were made to such pricing information.

Level 3 assets consisted primarily of semiconductor equipment and facilities classified as held for sale. Fair value for semiconductor equipment was based on quotations obtained from equipment dealers, which consider the remaining useful life and configuration of the equipment. Fair value for facilities was determined based on sales of similar facilities and properties in comparable markets. Losses recognized in 2012 and 2011 due to fair value measurements using Level 3 inputs were not significant. For 2012, activity of assets held for sale was not significant.

Marketable equity securities included approximately 1.3 million ordinary shares (subsequent to a 1 for 15 reverse stock split on August 6, 2012) of Tower Semiconductor Ltd. ("Tower") received in connection with our sale of our wafer fabrication facility in Japan in June 2011. As of September 1, 2011, the shares were valued using quoted market prices in an active market and discounted using a protective put model for our resale restriction (Level 2). During 2012, the resale restrictions lapsed for 0.7 million of the shares, which were valued using quoted market prices (Level 1) as of August 30, 2012.

Fair Value Measurements on a Nonrecurring Basis

Our non-marketable securities, equity method investments, and non-financial assets such as intellectual property and property, plant and equipment are carried at cost unless impairment is deemed to have occurred.

During the third quarter of 2012, the Board of Directors of Transform approved a liquidation plan. As a result, we impaired our investment in Transform to the estimated liquidation values for its assets and liabilities measured using unobservable inputs (Level 3). Transform's primary assets were semiconductor equipment and a manufacturing facility. The fair values for semiconductor equipment were based on quotations obtained from equipment dealers, which consider the remaining useful life and configuration of the equipment. Fair value for the facility was determined based on sales of similar facilities and properties in comparable markets. Based on our valuation of Transform's net assets, we recognized an other-than-temporary impairment charge of $69 million in equity in net loss of equity method investees.

Fair Value of Financial Instruments

Amounts reported as cash and equivalents, receivables, and accounts payable and accrued expenses approximate fair value. The estimated fair value and carrying value of debt instruments (carrying value excludes the equity components of the 2014 Notes, the 2027 Notes, the 2031 Notes, and the 2032 Notes classified in equity) were as follows:

As of	2012				2011
	Fair Value		Carrying Value		Fair Value		Carrying Value
Convertible notes	$	2,669	$	2,321	$	1,845	$	1,578
Other notes	56		58		—		—

The fair value of our convertible debt instruments was determined based on inputs that are observable in the market or that could be derived from, or corroborated with, observable market data, including our stock price and interest rates based on similar debt issued by parties with credit ratings similar to ours (Level 2).  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 similar debt issued by parties with credit ratings similar to ours (Level 2).