Fair Value of Financial Assets and Liabilities (Tables)

9 Months Ended

Sep. 30, 2013

The following tables summarize the composition of our short- and long-term investments at September 30, 2013 and December 31, 2012 (tables in millions):



	September 30, 2013
	Amortized Cost		Unrealized Gains		Unrealized (Losses)			Aggregate Fair Value
U.S. government and agency obligations	$	4,505	$	6	$	(3	)	$	4,508
U.S. corporate debt securities	2,106		6		(3		)	2,109
High yield corporate debt securities	526		17		(7		)	536
Asset-backed securities	5		—		—			5
Municipal obligations	939		3		(1		)	941
Auction rate securities	72		—		(5		)	67
Foreign debt securities	2,037		5		(3		)	2,039
Total fixed income securities	10,190		37		(22		)	10,205
Publicly traded equity securities	78		28		—			106
Total	$	10,268	$	65	$	(22	)	$	10,311



	December 31, 2012
	Amortized Cost		Unrealized Gains		Unrealized (Losses)			Aggregate Fair Value
U.S. government and agency obligations	$	2,191	$	10	$	(1	)	$	2,200
U.S. corporate debt securities	1,480		10		—			1,490
High yield corporate debt securities	486		34		(1		)	519
Asset-backed securities	2		—		—			2
Municipal obligations	1,032		3		—			1,035
Auction rate securities	74		—		(4		)	70
Foreign debt securities	1,270		9		—			1,279
Total fixed income securities	6,535		66		(6		)	6,595
Publicly traded equity securities	47		41		(1		)	87
Total	$	6,582	$	107	$	(7	)	$	6,682

Fair Value Hierarchy For Financial Assets And Liabilities Measured At Fair Value

The following tables represent our fair value hierarchy for our financial assets and liabilities measured at fair value as of September 30, 2013 and December 31, 2012 (tables in millions):



	September 30, 2013
	Level 1		Level 2			Level 3		Total
Cash	$	1,611	$	—		$	—	$	1,611
Cash equivalents	4,942		602			—		5,544
U.S. government and agency obligations	2,201		2,307			—		4,508
U.S. corporate debt securities	—		2,109			—		2,109
High yield corporate debt securities	—		536			—		536
Asset-backed securities	—		5			—		5
Municipal obligations	—		941			—		941
Auction rate securities	—		—			67		67
Foreign debt securities	—		2,039			—		2,039
Publicly traded equity securities	106		—			—		106
Total cash and investments	$	8,860	$	8,539		$	67	$	17,466
Other items:
Strategic investments held at cost	$	—	$	—		$	378	$	378
Investment in joint venture	—		—			34		34
Convertible debt carried at discounted cost	—		(2,676		)	—		(2,676		)
Long-term debt carried at discounted cost	—		(5,449		)	—		(5,449		)
Foreign exchange derivative assets	—		41			—		41
Foreign exchange derivative liabilities	—		(27		)	—		(27		)



	December 31, 2012
	Level 1		Level 2			Level 3		Total
Cash	$	1,454	$	—		$	—	$	1,454
Cash equivalents	2,898		362			—		3,260
U.S. government and agency obligations	1,327		873			—		2,200
U.S. corporate debt securities	—		1,490			—		1,490
High yield corporate debt securities	—		519			—		519
Asset-backed securities	—		2			—		2
Municipal obligations	—		1,035			—		1,035
Auction rate securities	—		—			70		70
Foreign debt securities	—		1,279			—		1,279
Publicly traded equity securities	87		—			—		87
Total cash and investments	$	5,766	$	5,560		$	70	$	11,396
Other items:
Strategic investments held at cost	$	—	$	—		$	364	$	364
Investment in joint venture	—		—			33		33
Convertible debt carried at discounted cost	—		(2,666		)	—		(2,666		)
Foreign exchange derivative assets	—		30			—		30
Foreign exchange derivative liabilities	—		(35		)	—		(35		)
Commodity derivative liabilities	—		(1		)	—		(1		)



	December 31, 2012
	Level 1		Level 2			Level 3		Total
Cash	$	1,454	$	—		$	—	$	1,454
Cash equivalents	2,898		362			—		3,260
U.S. government and agency obligations	1,327		873			—		2,200
U.S. corporate debt securities	—		1,490			—		1,490
High yield corporate debt securities	—		519			—		519
Asset-backed securities	—		2			—		2
Municipal obligations	—		1,035			—		1,035
Auction rate securities	—		—			70		70
Foreign debt securities	—		1,279			—		1,279
Publicly traded equity securities	87		—			—		87
Total cash and investments	$	5,766	$	5,560		$	70	$	11,396
Other items:
Strategic investments held at cost	$	—	$	—		$	364	$	364
Investment in joint venture	—		—			33		33
Convertible debt carried at discounted cost	—		(2,666		)	—		(2,666		)
Foreign exchange derivative assets	—		30			—		30
Foreign exchange derivative liabilities	—		(35		)	—		(35		)
Commodity derivative liabilities	—		(1		)	—		(1		)

Changes in Fair Value of Level 3 Financial Assets

The following table provides a summary of changes in fair value of our LenovoEMC joint venture for the three and nine months ended September 30, 2013 (table in millions):



	September 30, 2013
	Three Months Ended		Nine Months Ended
Balance, beginning of the period	$	34	$	33
Realized gain included in other income (expense)	—		1
Balance, end of period	$	34	$	34

The following table provides a summary of changes in fair value of our Level 3 auction rate securities for the three and nine months ended September 30, 2013 and 2012 (table in millions):



	For the Three Months Ended					For the Nine Months Ended
	September 30, 2013			September 30, 2012		September 30, 2013			September 30, 2012
Balance, beginning of the period	$	68		$	74	$	70		$	75
Calls at par value	—			—		(1		)	—
Other-than-temporary impairment loss	—			—		(1		)	(2		)
(Increase) decrease in previously recognized unrealized losses included in other comprehensive income	(1		)	1		(1		)	2
Balance, end of the period	$	67		$	75	$	67		$	75

Unrealized Losses on Investments by Investment Category and Length of Time in Continuous Unrealized Loss Position

Unrealized losses on investments at September 30, 2013 by investment category and length of time the investment has been in a continuous unrealized loss position are as follows (table in millions):



	Less Than 12 Months					12 Months or Greater					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
U.S. government and agency obligations	$	787	$	(3	)	$	—	$	—		$	787	$	(3	)
U.S. corporate debt securities	823		(3		)	—		—			823		(3		)
High yield corporate debt securities	190		(7		)	—		—			190		(7		)
Municipal obligations	139		(1		)	—		—			139		(1		)
Auction rate securities	—		—			67		(5		)	67		(5		)
Foreign debt securities	805		(3		)	—		—			805		(3		)
Total	$	2,744	$	(17	)	$	67	$	(5	)	$	2,811	$	(22	)

Contractual Maturities of Investments

The contractual maturities of fixed income securities held at September 30, 2013 are as follows (table in millions):



	September 30, 2013
	Amortized Cost Basis		Aggregate Fair Value
Due within one year	$	3,439	$	3,442
Due after 1 year through 5 years	5,707		5,718
Due after 5 years through 10 years	539		546
Due after 10 years	505		499
Total	$	10,190	$	10,205

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), 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); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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