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, we consider the principal or most advantageous market in which we would transact, and we also consider 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 were as follows (in millions):



	JANUARY 26, 2019 FAIR VALUE MEASUREMENTS						JULY 28, 2018 FAIR VALUE MEASUREMENTS
	Level 1		Level 2		Total Balance		Level 1		Level 2		Total Balance
Assets:
Cash equivalents:
Money market funds	$	7,888	$	—	$	7,888	$	6,890	$	—	$	6,890
Commercial paper	—		99		99		—		—		—
Certificates of deposit	—		25		25		—		—		—
Available-for-sale debt investments:
U.S. government securities	—		3,472		3,472		—		7,275		7,275
U.S. government agency securities	—		354		354		—		727		727
Non-U.S. government and agency securities	—		115		115		—		208		208
Corporate debt securities	—		24,753		24,753		—		27,364		27,364
U.S. agency mortgage-backed securities	—		1,434		1,434		—		1,435		1,435
Commercial paper	—		243		243		—		—		—
Certificates of deposit	—		115		115		—		—		—
Equity investments:
Marketable equity securities	62		—		62		605		—		605
Derivative assets	—		23		23		—		2		2
Total	$	7,950	$	30,633	$	38,583	$	7,495	$	37,011	$	44,506
Liabilities:
Derivative liabilities	$	—	$	40	$	40	$	—	$	74	$	74
Total	$	—	$	40	$	40	$	—	$	74	$	74

Level 1 marketable equity securities are determined by using quoted prices in active markets for identical assets. Level 2 available-for-sale debt investments are priced using quoted market prices for similar instruments or nonbinding market prices that are corroborated by observable market data. We use 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. We use such pricing data as the primary input to make our assessments and determinations as to the ultimate valuation of our investment portfolio and have not made, during the periods presented, any material adjustments to such inputs. We are ultimately responsible for the financial statements and underlying estimates. Our 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. We did not have any transfers between Level 1 and Level 2 fair value measurements during the periods presented.


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

The following table presents gains and losses on assets that were measured at fair value on a nonrecurring basis (in millions):



	TOTAL GAINS (LOSSES) FOR THE THREE MONTHS ENDED					TOTAL GAINS (LOSSES) FOR THE SIX MONTHS ENDED
	January 26, 2019		January 27, 2018			January 26, 2019		January 27, 2018
Non-marketable equity securities	$	12	$	(18	)	$	6	$	(39	)
Property held for sale—land and buildings	—		20			—		20
Total gains (losses) for nonrecurring measurements	$	12	$	2		$	6	$	(19	)

These assets were measured at fair value due to events or circumstances we identified as having significant impact on their fair value during the respective periods. The carrying value of our non-marketable equity securities recorded to fair value on a non-recurring basis is adjusted for observable transactions for identical or similar investments of the same issuer or impairment. These securities are classified as Level 3 in the fair value hierarchy because we estimate the value based on valuation methods using the observable transaction price at the transaction date and other unobservable inputs such as volatility, rights, and obligations of the securities we hold.

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 property held for sale that was impaired was zero as of January 27, 2018.

(d) Other Fair Value Disclosures

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 January 26, 2019 and July 28, 2018 was $3.3 billion and $3.6 billion, respectively. The estimated fair value of long-term loan receivables and financed service contracts approximates their carrying value. We use significant unobservable inputs in determining discounted cash flows to estimate the fair value of our long-term loan receivables and financed service contracts, and therefore they are categorized as Level 3.

As of January 26, 2019, the estimated fair value of our short-term debt approximates its carrying value due to the short maturities. As of January 26, 2019, the fair value of our senior notes and other long-term debt was $26.5 billion with a carrying amount of $25.6 billion. This compares to a fair value of $26.4 billion and a carrying amount of $25.6 billion as of July 28, 2018. 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.