Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements (Notes)

v3.3.1.900
Fair Value Measurements (Notes)
3 Months Ended
Dec. 27, 2015
Notes to Financial Statements [Abstract]  
Fair Value Measurements
Note 10. Fair Value Measurements
The following table presents the Company’s fair value hierarchy for assets and liabilities measured at fair value on a recurring basis at December 27, 2015 (in millions):
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets
 
 
 
 
 
 
 
Cash equivalents
$
2,364

 
$
3,847

 
$

 
$
6,211

Marketable securities
 
 
 
 
 
 
 
U.S. Treasury securities and government-related securities
89

 
914

 

 
1,003

Corporate bonds and notes

 
15,810

 

 
15,810

Mortgage- and asset-backed and auction rate securities

 
1,743

 
174

 
1,917

Equity and preferred securities and equity funds
1,119

 
376

 

 
1,495

Debt funds

 
3,453

 

 
3,453

Total marketable securities
1,208

 
22,296

 
174

 
23,678

Derivative instruments

 
18

 

 
18

Other investments
306

 

 

 
306

Total assets measured at fair value
$
3,878

 
$
26,161

 
$
174

 
$
30,213

Liabilities
 
 
 
 
 
 
 
Derivative instruments
$

 
$
6

 
$

 
$
6

Other liabilities
306

 

 

 
306

Total liabilities measured at fair value
$
306

 
$
6

 
$

 
$
312


Activity between Levels of the Fair Value Hierarchy. There were no significant transfers between Level 1 and Level 2 during the three months ended December 27, 2015 and December 28, 2014. When a determination is made to classify an asset or liability within Level 3, the determination is based upon the significance of the unobservable inputs to the overall fair value measurement. The following table includes the activity for mortgage- and asset-backed and auction rate securities classified within Level 3 of the valuation hierarchy (in millions):
 
Three Months Ended
 
December 27,
2015
 
December 28,
2014
Beginning balance of Level 3
$
224

 
$
269

Total realized and unrealized gains or losses:
 
 
 
Included in other comprehensive income (loss)
(1
)
 

Purchases

 
29

Sales
(1
)
 
(24
)
Settlements
(36
)
 
(44
)
Transfers out of Level 3
(12
)
 

Ending balance of Level 3
$
174

 
$
230


The Company recognizes transfers into and out of levels within the fair value hierarchy at the end of the fiscal month in which the actual event or change in circumstances that caused the transfer occurs. Transfers out of Level 3 during the three months ended December 27, 2015 primarily consisted of debt securities with significant upgrades in credit ratings or for which there were observable inputs. There were no transfers into or out of Level 3 during the three months ended December 28, 2014.
Nonrecurring Fair Value Measurements. The Company measures certain assets at fair value on a nonrecurring basis. These assets include cost and equity method investments when they are deemed to be other-than-temporarily impaired, assets acquired and liabilities assumed in an acquisition or in a nonmonetary exchange, and property, plant and equipment and intangible assets that are written down to fair value when they are held for sale or determined to be impaired. During the three months ended December 28, 2014, the Company updated the business plans and related internal forecasts related to one of the Company’s businesses, resulting in an impairment charge to write down goodwill (Note 2). The Company determined the fair value using an income approach. The estimation of fair value and cash flows used in the fair value measurement required the use of significant unobservable inputs, and as a result, the fair value measurement was classified as Level 3. During the three months ended December 27, 2015 and December 28, 2014, the Company did not have any other significant assets or liabilities that were measured at fair value on a nonrecurring basis in periods subsequent to initial recognition.