Fair Value

v2.4.0.8

Fair Value	3 Months Ended
	Mar. 29, 2014
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. Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis Assets and liabilities measured and recorded at fair value on a recurring basis at the end of each period were as follows:      March 29, 2014   December 28, 2013     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:                                 Corporate debt   $ 154   $ 1,855   $ —   $ 2,009   $ 154   $ 1,920   $ —   $ 2,074 Financial institution instruments   173   1,763   —   1,936   887   1,190   —   2,077 Government debt   —   125   —   125   —   269   —   269 Reverse repurchase agreements   —   150   —   150   —   400   —   400 Short-term investments:                                 Corporate debt   269   1,250   19   1,538   274   1,374   19   1,667 Financial institution instruments   167   2,315   —   2,482   194   2,895   —   3,089 Government debt   368   846   —   1,214   183   1,033   —   1,216 Trading assets:                                 Asset-backed securities   —   757   26   783   —   684   4   688 Corporate debt   2,450   635   —   3,085   2,161   628   —   2,789 Financial institution instruments   1,194   450   —   1,644   1,188   418   —   1,606 Government debt   1,638   1,885   —   3,523   1,625   1,733   —   3,358 Other current assets:                                 Derivative assets   12   230   —   242   48   309   —   357 Loans receivable   —   257   —   257   —   103   —   103 Marketable equity securities   6,085   —   —   6,085   6,221   —   —   6,221 Other long-term investments:                                 Asset-backed securities   —   —   9   9   —   —   9   9 Corporate debt   463   458   27   948   228   270   27   525 Financial institution instruments   131   330   —   461   90   402   —   492 Government debt   168   179   —   347   259   188   —   447 Other long-term assets:                                 Derivative assets   —   5   30   35   —   7   29   36 Loans receivable   —   556   —   556   —   702   —   702 Total assets measured and recorded at fair value   $ 13,272   $ 14,046   $ 111   $ 27,429   $ 13,512   $ 14,525   $ 88   $ 28,125 Liabilities                                 Other accrued liabilities:                                 Derivative liabilities   $ 7   $ 355   $ —   $ 362   $ —   $ 372   $ —   $ 372 Other long-term liabilities:                                 Derivative liabilities   —   47   —   47   —   50   —   50 Total liabilities measured and recorded at fair value   $ 7   $ 402   $ —   $ 409   $ —   $ 422   $ —   $ 422 Government debt includes instruments such as non-U.S. government bonds, U.S. agency securities, and U.S. Treasury securities. Financial institution instruments include instruments such as bank deposits, commercial paper, floating and fixed rate bonds, and money market funds. During the first three months of 2014, we transferred approximately $230 million of corporate debt, government debt, and financial institution instruments 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. Investments in Debt Instruments Debt instruments reflected in the preceding table include investments such as asset-backed securities, corporate debt, financial institution instruments, government debt, and reverse repurchase agreements classified as cash equivalents. We classify our debt instruments as Level 2 when we use observable market prices for identical securities that are traded in less active markets. When observable market prices for identical securities are not available, we price the debt investments using our own models, such as a discounted cash flow model, or non-binding market consensus prices based on the proprietary valuation models of pricing providers or brokers. We corroborate non-binding market consensus prices with observable market data using statistical models when observable market data exists, quoted market prices for similar instruments, or pricing models such as a discounted cash flow model. 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 unobservable market inputs that we consider to be not significant. The discounted cash flow model uses observable market inputs, such as LIBOR-based yield curves, currency spot and forward rates, and credit ratings. All significant inputs are derived from or corroborated with observable market data. Debt instruments classified as Level 3, are classified as such because the fair values are generally derived from discounted cash flow models, performed either by us or our pricing providers, using inputs that we are unable to corroborate with observable market data. We monitor and review the inputs and results of these valuation models to ensure the fair value measurements are reasonable and consistent with market experience in similar asset classes. Fair Value Option for Loans Receivable We elected the fair value option for loans receivable when the interest rate or currency exchange rate risk was hedged at inception with a related derivative instrument. As of March 29, 2014, 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 currency exchange rate risk was not hedged at inception with a related derivative instrument. Loans receivable not measured and recorded at 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. Some of our non-marketable equity investments have 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 investments as Level 3 because the valuations used unobservable inputs that were significant to the fair value measurements and required management judgment due to the absence of quoted market prices. Impairment charges recognized on non-marketable equity investments held as of March 29, 2014, were $38 million during the first three months of 2014 ($14 million during the first three months of 2013 on non-marketable equity investments held as of March 30, 2013). Financial Instruments Not Recorded at Fair Value on a Recurring Basis On a quarterly basis, we measure the fair value of our grants receivable, cost method loans receivable, non-marketable cost method investments, reverse repurchase agreements with original maturities greater than approximately three months, and indebtedness carried at amortized cost; however, the assets are recorded at fair value only when an impairment charge is recognized. The carrying amounts and fair values of financial instruments not recorded at fair value on a recurring basis at the end of each period were as follows:     March 29, 2014 (In Millions)   Carrying Amount   Fair Value Measured Using   Fair Value Level 1   Level 2     Level 3     Grants receivable   $ 569   $ —   $ 576   $ —   $ 576 Loans receivable   $ 259   $ —   $ 250   $ 9   $ 259 Non-marketable cost method investments   $ 1,285   $ —   $ —   $ 2,120   $ 2,120 Reverse repurchase agreements   $ 432   $ —   $ 432   $ —   $ 432 Short-term debt   $ —   $ —   $ —   $ —   $ — Long-term debt   $ 13,172   $ 11,224   $ 2,714   $ —   $ 13,938 NVIDIA Corporation cross-license agreement liability   $ 389   $ —   $ 397   $ —   $ 397     December 28, 2013 (In Millions)   Carrying Amount   Fair Value Measured Using   Fair Value Level 1   Level 2   Level 3   Grants receivable   $ 416   $ —   $ 481   $ —   $ 481 Loans receivable   $ 267   $ —   $ 250   $ 17   $ 267 Non-marketable cost method investments   $ 1,270   $ —   $ —   $ 2,105   $ 2,105 Reverse repurchase agreements   $ 400   $ —   $ 400   $ —   $ 400 Short-term debt   $ 24   $ —   $ 24   $ —   $ 24 Long-term debt   $ 13,165   $ 10,937   $ 2,601   $ —   $ 13,538 NVIDIA Corporation cross-license agreement liability   $ 587   $ —   $ 597   $ —   $ 597 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 March 29, 2014 and December 28, 2013, the carrying amount of our grants receivable was classified within other current assets and other long-term assets, as applicable. The carrying amount and fair value of loans receivable exclude loans measured and recorded at a fair value of $813 million as of March 29, 2014 ($805 million as of December 28, 2013). 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. All significant inputs in the models are 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+/A1 or better for a substantial majority of our loans receivable and reverse repurchase agreements as of March 29, 2014. As of March 29, 2014 and December 28, 2013, 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 regarding investees’ revenue, costs, and discount rates based on the risk profile of comparable companies. Estimates of revenue 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 short-term debt exclude drafts payable. 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 is therefore classified as Level 1. The fair value of our convertible debentures is determined using discounted cash flow models with observable market inputs, and takes into consideration variables such as interest rate changes, comparable securities, subordination discount, and credit-rating changes, and is therefore classified as Level 2. The NVIDIA Corporation (NVIDIA) 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 March 29, 2014 and December 28, 2013, 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.