Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements (Notes)

v3.5.0.2
Fair Value Measurements (Notes)
 9 Months Ended
Jun. 26, 2016
Notes to Financial Statements [Abstract]  
Fair Value Measurements
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 June 26, 2016 (in millions):
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets
 
 
 
 
 
 
 
Cash equivalents
$
3,698

 
$
1,538

 
$
—

 
$
5,236

Marketable securities
 
 
 
 
 
 
 
U.S. Treasury securities and government-related securities
853

 
1,295

 
—

 
2,148

Corporate bonds and notes
—

 
17,159

 
—

 
17,159

Mortgage- and asset-backed and auction rate securities
—

 
1,999

 
60

 
2,059

Equity and preferred securities and equity funds
1,106

 
459

 
—

 
1,565

Debt funds
—

 
2,216

 
—

 
2,216

Total marketable securities
1,959

 
23,128

 
60

 
25,147

Derivative instruments
—

 
88

 
—

 
88

Other investments
295

 
—

 
—

 
295

Total assets measured at fair value
$
5,952

 
$
24,754

 
$
60

 
$
30,766

Liabilities
 
 
 
 
 
 
 
Derivative instruments
$
—

 
$
11

 
$
—

 
$
11

Other liabilities
295

 
—

 
—

 
295

Total liabilities measured at fair value
$
295

 
$
11

 
$
—

 
$
306


Activity between Levels of the Fair Value Hierarchy. There were no significant transfers between Level 1 and Level 2 during the nine months ended June 26, 2016 and June 28, 2015. 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):
 
Nine Months Ended
 
June 26,
2016
 
June 28,
2015
Beginning balance of Level 3
$
224

 
$
269

Total realized and unrealized gains or losses:
 
 
 
Included in investment income, net
(3
)
 
3

Included in other comprehensive income (loss)
(2
)
 
(4
)
Purchases
2

 
62

Sales
(103
)
 
(46
)
Settlements
(41
)
 
(57
)
Transfers out of Level 3
(17
)
 
—

Ending balance of Level 3
$
60

 
$
227


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 nine months ended June 26, 2016 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 nine months ended June 28, 2015.
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 nine months ended June 26, 2016, the Company updated the business plan and related internal forecast related to one of the Company’s businesses, resulting in impairment charges of $44 million to write down intangible assets, which were recorded in cost of equipment and services revenues, research and development expenses and selling, general and administrative expenses. The estimation of fair value and cash flows used in the fair value measurements required the use of significant unobservable inputs, and as a result, the fair value measurements were classified as Level 3. During the nine months ended June 28, 2015, the Company updated the business plans and related internal forecasts related to certain of the Company’s businesses, resulting in impairment charges to write down goodwill and intangible assets (Note 2). The Company determined the fair values using an income approach. The estimation of fair value and cash flows used in the fair value measurements required the use of significant unobservable inputs, and as a result, the fair value measurements were classified as Level 3. During the nine months ended June 26, 2016 and June 28, 2015, 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.