Fair Value

v2.4.0.8

Fair Value	6 Months Ended
	Jun. 29, 2013
Fair Value [Abstract]
Fair Value [Text Block]	Note 2: Fair Value Fair value is 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 fair value, we consider the principal or most advantageous market in which we would transact, and we consider assumptions that market participants would use when pricing the asset or liability. Our financial assets are measured and recorded at fair value, except for equity method investments, cost method investments, cost method loans receivable, and reverse repurchase agreements with original maturities greater than approximately three months. Most of our liabilities are not measured and recorded at fair value. Fair Value Hierarchy The three levels of inputs that may be used to measure fair value are as follows: Level 1. Quoted prices in active markets for identical assets or liabilities. Level 2. Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in less active markets, or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated with observable market data for substantially the full term of the assets or liabilities. Level 2 inputs also include non-binding market consensus prices that can be corroborated with observable market data, as well as quoted prices that were adjusted for security-specific restrictions. Level 3. Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of assets or liabilities. Level 3 inputs also include non-binding market consensus prices or non-binding broker quotes that we were unable to corroborate with observable market data. Investments in Debt Instruments Debt investments reflected in the following table include investments such as asset-backed securities, bank deposits, commercial paper, corporate bonds, government bonds, money market fund deposits, municipal bonds, and reverse repurchase agreements classified as cash equivalents. When we use observable market prices for identical securities that are traded in less active markets, we classify our debt investments as Level 2. When observable market prices for identical securities are not available, we price our debt investments using non-binding market consensus prices that are corroborated with observable market data; quoted market prices for similar instruments; or pricing models, such as a discounted cash flow model, with all significant inputs derived from or corroborated with observable market data. Non-binding market consensus prices are based on the proprietary valuation models of pricing providers or brokers. These valuation models incorporate a number of inputs, including non-binding and binding broker quotes; observable market prices for identical or similar securities; and the internal assumptions of pricing providers or brokers that use observable market inputs and, to a lesser degree, unobservable market inputs. We corroborate non-binding market consensus prices with observable market data using statistical models when observable market data exists. The discounted cash flow model uses observable market inputs, such as LIBOR-based yield curves, currency spot and forward rates, and credit ratings. Debt investments that are classified as Level 3 are classified as such due to the lack of observable market data to corroborate either the non-binding market consensus prices or the non-binding broker quotes. When observable market data is not available, we corroborate our fair value measurements using non-binding market consensus prices and non-binding broker quotes from a second source. Assets/Liabilities Measured and Recorded at Fair Value on a Recurring Basis Assets and liabilities measured and recorded at fair value on a recurring basis consisted of the following types of instruments at the end of each period:      June 29, 2013   December 29, 2012     Fair Value Measured and Recorded at Reporting Date Using       Fair Value Measured and Recorded at Reporting Date Using     (In Millions)   Level 1   Level 2   Level 3   Total   Level 1   Level 2   Level 3   Total Assets                                 Cash equivalents:                                 Bank deposits   $ —   $ 987   $ —   $ 987   $ —   $ 822   $ —   $ 822 Commercial paper   —   2,022   —   2,022   —   2,711   —   2,711 Corporate bonds   —   28   —   28   —   —   —   — Government bonds   —   —   —   —   400   66   —   466 Money market fund deposits   99   —   —   99   1,086   —   —   1,086 Reverse repurchase agreements   —   100   —   100   —   2,800   —   2,800 Short-term investments:                                 Bank deposits   —   992   —   992   —   540   —   540 Commercial paper   —   2,367   —   2,367   —   1,474   —   1,474 Corporate bonds   439   1,276   19   1,734   75   292   21   388 Government bonds   968   153   —   1,121   1,307   290   —   1,597 Trading assets:                                 Asset-backed securities   —   —   434   434   —   —   68   68 Bank deposits   —   105   —   105   —   247   —   247 Commercial paper   —   120   —   120   —   336   —   336 Corporate bonds   2,124   468   —   2,592   482   1,109   —   1,591 Government bonds   2,361   1,575   —   3,936   1,743   1,479   —   3,222 Money market fund deposits   98   —   —   98   18   —   —   18 Municipal bonds   —   73   —   73   —   203   —   203 Other current assets:                                 Derivative assets   —   222   1   223   12   208   1   221 Loans receivable   —   34   —   34   —   203   —   203 Marketable equity securities   5,361   —   —   5,361   4,424   —   —   4,424 Other long-term investments:                                 Asset-backed securities   —   —   9   9   —   —   11   11 Bank deposits   —   91   —   91   —   56   —   56 Corporate bonds   232   609   30   871   10   218   26   254 Government bonds   259   412   —   671   59   113   —   172 Other long-term assets:                                 Derivative assets   —   20   25   45   —   20   18   38 Loans receivable   —   747   —   747   —   577   —   577 Total assets measured and recorded at fair value   $ 11,941   $ 12,401   $ 518   $ 24,860   $ 9,616   $ 13,764   $ 145   $ 23,525 Liabilities                                 Other accrued liabilities:                                 Derivative liabilities   $ 5   $ 441   $ —   $ 446   $ 1   $ 291   $ —   $ 292 Other long-term liabilities:                                 Derivative liabilities   —   42   —   42   —   20   —   20 Total liabilities measured and recorded at fair value   $ 5   $ 483   $ —   $ 488   $ 1   $ 311   $ —   $ 312 Government bonds include bonds issued or deemed to be guaranteed by government entities. Government bonds include instruments such as non-U.S. government bonds, U.S. agency securities, and U.S. Treasury securities. During the first six months of 2013, we purchased $394 million of asset-backed securities and classified these investments as Level 3. During the first six months of 2013, we transferred approximately $255 million of corporate bonds and government bonds from Level 2 to Level 1 of the fair value hierarchy, primarily based on greater market activity for the underlying securities. Our policy is to reflect transfers between the fair value hierarchy levels at the beginning of the quarter in which a change in circumstances resulted in the transfer. Fair Value Option for Loans Receivable We elected the fair value option for loans receivable when the interest rate or foreign exchange rate risk was hedged at inception with a related derivative instrument. As of June 29, 2013, the fair value of our loans receivable for which we elected the fair value option did not significantly differ from the contractual principal balance based on the contractual currency. Loans receivable are classified within other current assets and other long-term assets. Fair value is determined using a discounted cash flow model, with all significant inputs derived from or corroborated with observable market data. Gains and losses from changes in fair value on the loans receivable and related derivative instruments, as well as interest income, are recorded in interest and other, net. During all periods presented, changes in the fair value of our loans receivable were largely offset by changes in the related derivative instruments, resulting in an insignificant net impact on our consolidated condensed statements of income. Gains and losses attributable to changes in credit risk are determined using observable credit default spreads for the issuer or comparable companies; these gains and losses were insignificant during all periods presented. We did not elect the fair value option for loans receivable when the interest rate or foreign exchange rate risk was not hedged at inception with a related derivative instrument. Loans receivable not measured and recorded at a fair value are included in the "Financial Instruments Not Recorded at Fair Value on a Recurring Basis" section that follows. Assets Measured and Recorded at Fair Value on a Non-Recurring Basis Our non-marketable equity investments, marketable equity method investments, and non-financial assets, such as intangible assets and property, plant and equipment, are recorded at fair value only if an impairment charge is recognized. A portion of our non-marketable equity investments has been measured and recorded at fair value due to events or circumstances that significantly impacted the fair value of those investments, resulting in other-than-temporary impairment charges. We classified these measurements as Level 3, as we used unobservable inputs to the valuation methodologies that were significant to the fair value measurements, and the valuations required management judgment due to the absence of quoted market prices. Impairment charges recognized on non-marketable equity investments held as of June 29, 2013 were $60 million during the second quarter of 2013 and $74 million during the first six months of 2013 (impairment charges recognized on non-marketable equity investments held as of June 30, 2012 were $15 million during the second quarter of 2012 and $73 million during the first six months of 2012). The fair value of the non-marketable equity investments impaired during the first six months of 2013 was $60 million at the time of impairment ($31 million for non-marketable equity investments impaired during the first six months of 2012). Financial Instruments Not Recorded at Fair Value on a Recurring Basis On a quarterly basis, we measure the fair value of our non-marketable cost method investments, indebtedness carried at amortized cost, cost method loans receivable, grants receivable, and reverse repurchase agreements with original maturities greater than approximately three months; however, the assets are recorded at fair value only when an impairment charge is recognized. The carrying amounts and fair values of certain financial instruments not recorded at fair value on a recurring basis at the end of each period were as follows:       June 29, 2013 (In Millions)   Carrying Amount   Fair Value Measured Using   Fair Value Level 1     Level 2     Level 3     Non-marketable cost method investments   $ 1,207   $ —   $ —   $ 1,900   $ 1,900 Loans receivable   $ 183   $ —   $ 150   $ 33   $ 183 Reverse repurchase agreements   $ 65   $ —   $ 65   $ —   $ 65 Grants receivable   $ 373   $ —   $ 370   $ —   $ 370 Long-term debt   $ 13,150   $ 10,902   $ 2,601   $ —   $ 13,503 Short-term debt   $ 25   $ —   $ 25   $ —   $ 25 NVIDIA Corporation cross-license agreement liability   $ 581   $ —   $ 593   $ —   $ 593     December 29, 2012 (In Millions)   Carrying Amount   Fair Value Measured Using   Fair Value Level 1   Level 2   Level 3   Non-marketable cost method investments   $ 1,202   $ —   $ —   $ 1,766   $ 1,766 Loans receivable   $ 199   $ —   $ 150   $ 48   $ 198 Reverse repurchase agreements   $ 50   $ —   $ 50   $ —   $ 50 Grants receivable   $ 198   $ —   $ 205   $ —   $ 205 Long-term debt   $ 13,136   $ 11,442   $ 2,926   $ —   $ 14,368 Short-term debt   $ 48   $ —   $ 48   $ —   $ 48 NVIDIA Corporation cross-license agreement liability   $ 875   $ —   $ 890   $ —   $ 890 As of June 29, 2013 and December 29, 2012, the unrealized loss position of our non-marketable cost method investments was insignificant. Our non-marketable cost method investments are valued using the market and income approaches. The market approach includes the use of financial metrics and ratios of comparable public companies. The selection of comparable companies requires management judgment and is based on a number of factors, including comparable companies’ sizes, growth rates, industries, and development stages. The income approach includes the use of a discounted cash flow model, which requires significant estimates for investees’ revenue, costs, and discount rates based on the risk profile of comparable companies. Estimates of revenues and costs are developed using available market, historical, and forecast data. The valuation of these non-marketable cost method investments also takes into account variables such as conditions reflected in the capital markets, recent financing activities by the investees, the investees’ capital structure, the terms of the investees’ issued interests, and the lack of marketability of the investments. The carrying amount and fair value of loans receivable exclude loans measured and recorded at a fair value of $781 million as of June 29, 2013 ($780 million as of December 29, 2012). The carrying amount and fair value of short-term debt exclude drafts payable. The fair value of our loans receivable and reverse repurchase agreements, including those held at fair value, is determined using a discounted cash flow model, with all significant inputs derived from or corroborated with observable market data, such as LIBOR-based yield curves, currency spot and forward rates, and credit ratings. The credit quality of these assets remains high, with credit ratings of A/A2 or better for a substantial majority of our loans receivable and all of our reverse repurchase agreements as of June 29, 2013. Our long-term debt recognized at amortized cost is comprised of our senior notes and our convertible debentures. The fair value of our senior notes is determined using active market prices, and it is therefore classified as Level 1. The fair value of our convertible long-term debt, is determined using discounted cash flow models with observable market inputs, and it takes into consideration variables such as interest rate changes, comparable securities, subordination discount, and credit-rating changes, and it is therefore classified as Level 2. The fair value of our grants receivable is determined using a discounted cash flow model, which discounts future cash flows using an appropriate yield curve. As of June 29, 2013 and December 29, 2012, the carrying amount of our grants receivable was classified within other current assets and other long-term assets, as applicable. The NVIDIA Corporation cross-license agreement liability in the preceding table was incurred as a result of entering into a long-term patent cross-license agreement with NVIDIA in January 2011. We agreed to make payments to NVIDIA over six years. As of June 29, 2013 and December 29, 2012, the carrying amount of the liability arising from the agreement was classified within other accrued liabilities and other long-term liabilities, as applicable. The fair value is determined using a discounted cash flow model, which discounts future cash flows using our incremental borrowing rates.