
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 30, 2016 and July 25, 2015 were as follows (in millions):



	JULY 30, 2016								JULY 25, 2015
	FAIR VALUE MEASUREMENTS								FAIR VALUE MEASUREMENTS
	Level 1		Level 2		Level 3		Total Balance		Level 1		Level 2		Level 3		Total Balance
Assets:
Cash equivalents:
Money market funds	$	6,049	$	—	$	—	$	6,049	$	5,336	$	—	$	—	$	5,336
Corporate debt securities	—		43		—		43		—		14		—		14
Available-for-sale investments:
U.S. government securities	—		26,544		—		26,544		—		29,939		—		29,939
U.S. government agency securities	—		2,817		—		2,817		—		3,663		—		3,663
Non-U.S. government and agency securities	—		1,100		—		1,100		—		1,128		—		1,128
Corporate debt securities	—		24,292		—		24,292		—		15,783		—		15,783
U.S. agency mortgage-backed securities	—		1,868		—		1,868		—		1,461		—		1,461
Publicly traded equity securities	1,504		—		—		1,504		1,565		—		—		1,565
Derivative assets	—		384		1		385		—		214		4		218
Total	$	7,553	$	57,048	$	1	$	64,602	$	6,901	$	52,202	$	4	$	59,107
Liabilities:
Derivative liabilities	$	—	$	54	$	—	$	54	$	—	$	12	$	—	$	12
Total	$	—	$	54	$	—	$	54	$	—	$	12	$	—	$	12

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 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 indicated (in millions):



	TOTAL GAINS (LOSSES) FOR THE YEARS ENDED
	July 30, 2016			July 25, 2015			July 26, 2014
Investments in privately held companies (impaired)	$	(57	)	$	(38	)	$	(21	)
Purchased intangible assets (impaired)	(74		)	(175		)	—
Gains (losses) on assets no longer held at end of fiscal year	(10		)	(8		)	(2		)
Total gains (losses) for nonrecurring measurements	$	(141	)	$	(221	)	$	(23	)

These assets 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.

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 remaining carrying value of the investments that were impaired was $24 million as of July 30, 2016.

The fair value for purchased intangibles 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, which was included in product cost of sales and operating expenses as applicable. See Note 4. The remaining carrying value of the specific purchased intangible assets that were impaired was zero as of July 30, 2016.

The fair value of property 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.


(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 $829 million and $727 million as of July 30, 2016 and July 25, 2015, 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 30, 2016 and July 25, 2015 was $2.6 billion and $2.2 billion, respectively. 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 30, 2016 and July 25, 2015, the estimated fair value of the short-term debt approximates its carrying value due to the short maturities. As of July 30, 2016, the fair value of the Company’s senior notes and other long-term debt was $30.9 billion, with a carrying amount of $28.6 billion. This compares to a fair value of $26.6 billion and a carrying amount of $25.4 billion as of July 25, 2015. 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.