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Fair Value
9 Months Ended
Apr. 28, 2018
Fair Value Disclosures [Abstract]  
Fair Value
Fair Value
Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be either recorded or disclosed at fair value, the Company considers the principal or most advantageous market in which it would transact, and it also considers assumptions that market participants would use when pricing the asset or liability.

(a)
Fair Value Hierarchy
The accounting guidance for fair value measurement requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is as follows:
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability, such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
(b)
Assets and Liabilities Measured at Fair Value on a Recurring Basis
Assets and liabilities measured at fair value on a recurring basis as of April 28, 2018 and July 29, 2017 were as follows (in millions):
 
APRIL 28, 2018
FAIR VALUE MEASUREMENTS
 
JULY 29, 2017
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
$
4,732

 
$

 
$

 
$
4,732

 
$
9,567

 
$

 
$

 
$
9,567

U.S. government securities

 

 

 

 

 
139

 

 
139

Commercial paper

 

 

 

 

 
160

 

 
160

Certificates of deposit

 

 

 

 

 
25

 

 
25

Available-for-sale investments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 

U.S. government securities

 
13,531

 

 
13,531

 

 
19,823

 

 
19,823

U.S. government agency securities

 
1,156

 

 
1,156

 

 
2,052

 

 
2,052

Non-U.S. government and agency securities

 
281

 

 
281

 

 
388

 

 
388

Corporate debt securities

 
29,238

 

 
29,238

 

 
31,735

 

 
31,735

U.S. agency mortgage-backed securities

 
1,936

 

 
1,936

 

 
2,023

 

 
2,023

Commercial paper

 
195

 

 
195

 

 
996

 

 
996

Certificates of deposit

 
50

 

 
50

 

 
60

 

 
60

Publicly traded equity securities
1,325

 

 

 
1,325

 
1,707

 

 

 
1,707

Derivative assets

 
13

 

 
13

 

 
149

 

 
149

Total
$
6,057

 
$
46,400

 
$

 
$
52,457

 
$
11,274

 
$
57,550

 
$

 
$
68,824

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative liabilities
$

 
$
92

 
$

 
$
92

 
$

 
$
4

 
$

 
$
4

Total
$

 
$
92

 
$

 
$
92

 
$

 
$
4

 
$

 
$
4



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.
(c)
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 THREE MONTHS ENDED
 
TOTAL GAINS (LOSSES) FOR THE NINE MONTHS ENDED
 
April 28, 2018
 
April 29, 2017
 
April 28, 2018
 
April 29, 2017
Investments in privately held companies (impaired)
$
(12
)
 
$
(51
)
 
$
(51
)
 
$
(162
)
Purchased intangible assets (impaired)
(1
)
 

 
(1
)
 
(42
)
Property held for sale—land and buildings

 

 
20

 
(24
)
Gains (losses) on assets no longer held
(5
)
 

 
(5
)
 

Total gains (losses) for nonrecurring measurements
$
(18
)
 
$
(51
)
 
$
(37
)
 
$
(228
)

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 $56 million and $92 million as of April 28, 2018 and April 29, 2017, respectively.
The fair value for 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, 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 and $7 million as of April 28, 2018 and April 29, 2017, respectively.
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 charge 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, was included in restructuring and other charges. The remaining carrying value of the property held for sale that was impaired was zero and $11 million as of April 28, 2018 and April 29, 2017, respectively.

(d) Other Fair Value Disclosures
The carrying value of investments in privately held companies that were accounted for under the cost method was $851 million and $859 million as of April 28, 2018 and July 29, 2017, respectively. It was not practicable to estimate the fair value of this portfolio.
The fair value of short-term loan receivables and financed service contracts approximates their carrying value due to their short duration. The aggregate carrying value of long-term loan receivables and financed service contracts as of April 28, 2018 and July 29, 2017 was $3.6 billion and $3.4 billion, respectively. The estimated fair value of long-term loan receivables and financed service contracts 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 April 28, 2018, the estimated fair value of the short-term debt approximates its carrying value due to the short maturities. As of April 28, 2018, the fair value of the Company’s senior notes and other long-term debt was $29.0 billion with a carrying amount of $28.1 billion. This compares to a fair value of $32.1 billion and a carrying amount of $30.5 billion as of July 29, 2017. 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.