
9.	Fair Value


(a)	Assets and Liabilities Measured at Fair Value on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis as of July 26, 2014 and July 27, 2013 were as follows (in millions):



	JULY 26, 2014 FAIR VALUE MEASUREMENTS								JULY 27, 2013 FAIR VALUE MEASUREMENTS
	Level 1		Level 2		Level 3		Total Balance		Level 1		Level 2		Total Balance
Assets:
Cash equivalents:
Money market funds	$	4,935	$	—	$	—	$	4,935	$	6,045	$	—	$	6,045
Available-for-sale investments:
U.S. government securities	—		31,734		—		31,734		—		27,823		27,823
U.S. government agency securities	—		1,063		—		1,063		—		3,089		3,089
Non-U.S. government and agency securities	—		861		—		861		—		1,095		1,095
Corporate debt securities	—		9,159		—		9,159		—		7,881		7,881
U.S. agency mortgage-backed securities	—		579		—		579		—		—		—
Publicly traded equity securities	1,952		—		—		1,952		2,797		—		2,797
Derivative assets	—		158		2		160		—		182		182
Total	$	6,887	$	43,554	$	2	$	50,443	$	8,842	$	40,070	$	48,912
Liabilities:
Derivative liabilities	$	—	$	67	$	—	$	67	$	—	$	171	$	171
Total	$	—	$	67	$	—	$	67	$	—	$	171	$	171

Level 1 publicly traded equity securities are determined by using quoted prices in active markets for identical assets. Level 2 fixed income securities are priced using quoted market prices for similar instruments or nonbinding market prices that are corroborated by observable market data. The Company uses inputs such as actual trade data, benchmark yields, broker/dealer quotes, and other similar data, which are obtained from quoted market prices, independent pricing vendors, or other sources, to determine the ultimate fair value of these assets and liabilities. The Company uses such pricing data as the primary input to

make its assessments and determinations as to the ultimate valuation of its investment portfolio and has not made, during the periods presented, any material adjustments to such inputs. The Company is ultimately responsible for the financial statements and underlying estimates. The Company’s derivative instruments are primarily classified as Level 2, as they are not actively traded and are valued using pricing models that use observable market inputs. The Company did not have any transfers between Level 1 and Level 2 fair value measurements during the periods presented.

Level 3 assets include certain derivative instruments, the values of which are determined based on discounted cash flow models using inputs that the Company could not corroborate with market data.


(b)	Assets Measured at Fair Value on a Nonrecurring Basis

The following table presents the Company’s financial instruments and nonfinancial assets that were measured at fair value on a nonrecurring basis during the indicated periods and the related recognized gains and losses for the periods (in millions):



	July 26, 2014					July 27, 2013					July 28, 2012
	Net Carrying Value as of Year End		Total Gains (Losses) for the Year Ended			Net Carrying Value as of Year End		Total Gains (Losses) for the Year Ended			Net Carrying Value as of Year End		Total Gains (Losses) for the Year Ended
Assets held for sale	$	—	$	—		$	1	$	(1	)	$	63	$	(413	)
Investments in privately held companies (impaired)	$	28	(21		)	$	63	(31		)	$	47	(23		)
Purchased intangible assets	$	—	—			$	—	—			$	—	(12		)
Gains (losses) on assets no longer held at end of fiscal year			(2		)			75					14
Total gains (losses) for nonrecurring measurements			$	(23	)			$	43				$	(434	)

The assets in the preceding table were measured at fair value due to events or circumstances the Company identified as having significant impact on their fair value during the respective periods. To arrive at the valuation of these assets, the Company considers any significant changes in the financial metrics and economic variables and also uses third-party valuation reports to assist in the valuation as necessary. These assets were classified as Level 3 assets because the Company used unobservable inputs to value them.

The assets held for sale represent land and buildings that met the criteria to be classified as held for sale. The fair value of assets held for sale was measured with the assistance of third-party valuation models, which used discounted cash flow techniques as part of their analysis. The fair value measurement was categorized as Level 3 as significant unobservable inputs were used in the valuation report. The impairment charges as a result of the valuations, which represented the difference between the fair value less cost to sell and the carrying amount of the assets held for sale, were included in G&A expenses.

The fair value measurement of the impaired investments was classified as Level 3 because significant unobservable inputs were used in the valuation due to the absence of quoted market prices and inherent lack of liquidity. Significant unobservable inputs, which included financial metrics of comparable private and public companies, financial condition and near-term prospects of the investees, recent financing activities of the investees, and the investees’ capital structure as well as other economic variables, reflected the assumptions market participants would use in pricing these assets. The impairment charges, representing the difference between the net book value and the fair value as a result of the evaluation, were recorded to other income (loss), net.

The fair value of purchased intangible assets measured at fair value on a nonrecurring basis was categorized as Level 3 due to the use of significant unobservable inputs in the valuation. Significant unobservable inputs that were used included expected revenues and net income related to the assets and the expected life of the assets. The difference between the estimated fair value and the carrying value of the assets was recorded as an impairment charge. There was no impairment charge related to purchased intangible assets during the fiscal years ended July 26, 2014 and July 27, 2013. For the fiscal year ended July 28, 2012, such impairment charges were recorded in cost of sales and operating expenses as appropriate. See Note 4.


(c)	Other Fair Value Disclosures

The carrying value of the Company’s investments in privately held companies that were accounted for under the cost method was $269 million and $242 million as of July 26, 2014 and July 27, 2013, respectively. It was not practicable to estimate the fair value of this portfolio.

The fair value of the Company’s short-term loan receivables and financed service contracts approximates their carrying value due to their short duration. The aggregate carrying value of the Company’s long-term loan receivables and financed service contracts and other as of July 26, 2014 and July 27, 2013 was $2.1 billion. The estimated fair value of the Company’s long-

term loan receivables and financed service contracts and other approximates their carrying value. The Company uses significant unobservable inputs in determining discounted cash flows to estimate the fair value of its long-term loan receivables and financed service contracts, and therefore they are categorized as Level 3.

As of July 26, 2014 and July 27, 2013, the estimated fair value of the short-term debt approximates its carrying value due to the short maturities. As of July 26, 2014, the fair value of the Company’s senior notes and other long-term debt was $22.4 billion with a carrying amount of $20.9 billion. This compares to a fair value of $17.6 billion and a carrying amount of $16.2 billion as of July 27, 2013. The fair value of the senior notes and other long-term debt was determined based on observable market prices in a less active market and was categorized as Level 2 in the fair value hierarchy.