Annual report pursuant to Section 13 and 15(d)

Marketable Securities

v3.5.0.2
Marketable Securities
12 Months Ended
Sep. 25, 2016
Marketable Securities [Abstract]  
Marketable Securities
Marketable Securities
Marketable securities were comprised as follows (in millions):
 
Current
 
Noncurrent
 
September 25,
2016
 
September 27,
2015
 
September 25,
2016
 
September 27,
2015
Trading:
 
 
 
 
 
 
 
U.S. Treasury securities and government-related securities
$

 
$

 
$

 
$
12

Corporate bonds and notes

 

 

 
364

Mortgage- and asset-backed and auction rate securities

 

 

 
242

Total trading

 

 

 
618

Available-for-sale:
 
 
 
 
 
 
 
U.S. Treasury securities and government-related securities
1,116

 
156

 
1,099

 
691

Corporate bonds and notes
10,159

 
7,926

 
8,584

 
7,112

Mortgage- and asset-backed and auction rate securities
1,363

 
1,302

 
534

 
263

Equity and preferred securities and equity funds
64

 
377

 
1,682

 
1,253

Debt funds

 

 
1,803

 
2,909

Total available-for-sale
12,702

 
9,761

 
13,702

 
12,228

Fair value option:
 
 
 
 
 
 
 
Debt fund

 

 

 
780

Total marketable securities
$
12,702

 
$
9,761

 
$
13,702

 
$
13,626


During fiscal 2016, the Company exited an investment in a debt fund for which the Company elected the fair value option. The investment would have otherwise been recorded using the equity method. Changes in fair value associated with this investment were recognized in net investment income. During fiscal 2016 and 2015, the net decrease in fair value associated with this investment was negligible and $10 million, respectively. During fiscal 2014, the net increase in fair value associated with this investment was $33 million.
The Company classifies certain portfolios of debt securities that utilize derivative instruments to acquire or reduce foreign exchange, interest rate and/or equity, prepayment and credit risks as trading. Net losses recognized on debt securities classified as trading held at September 27, 2015 and September 28, 2014, respectively, were negligible.
At September 25, 2016, the contractual maturities of available-for-sale debt securities were as follows (in millions):
Years to Maturity
 
 
 
 
Less Than
One Year
 
One to
Five Years
 
Five to
Ten Years
 
Greater Than
Ten Years
 
No Single
Maturity
Date
 
Total
$
4,892

 
$
12,819

 
$
2,269

 
$
978

 
$
3,700

 
$
24,658


Debt securities with no single maturity date included debt funds, mortgage- and asset-backed securities and auction rate securities.
The Company recorded realized gains and losses on sales of available-for-sale securities as follows (in millions):
 
Gross Realized Gains
 
Gross Realized Losses
 
Net Realized Gains
2016
$
277

 
$
(37
)
 
$
240

2015
540

 
(52
)
 
488

2014
732

 
(18
)
 
714


Available-for-sale securities were comprised as follows (in millions):
 
Cost
 
Unrealized Gains
 
Unrealized Losses
 
Fair Value
September 25, 2016
 
 
 
 
 
 
 
Equity securities
$
1,554

 
$
204

 
$
(12
)
 
$
1,746

Debt securities (including debt funds)
24,363

 
388

 
(93
)
 
24,658

 
$
25,917

 
$
592

 
$
(105
)
 
$
26,404

September 27, 2015
 
 
 
 
 
 
 
Equity securities
$
1,394

 
$
264

 
$
(28
)
 
$
1,630

Debt securities (including debt funds)
20,459

 
185

 
(285
)
 
20,359

 
$
21,853

 
$
449

 
$
(313
)
 
$
21,989


The following table shows the gross unrealized losses and fair values of the Company’s investments in individual securities that are classified as available-for-sale and have been in a continuous unrealized loss position deemed to be temporary for less than 12 months and for more than 12 months, aggregated by investment category (in millions):
 
September 25, 2016
 
Less than 12 months
 
More than 12 months
 
Fair Value
 
Unrealized Losses
 
Fair Value
 
Unrealized Losses
U.S. Treasury securities and government-related securities
$
444

 
$
(5
)
 
$
16

 
$

Corporate bonds and notes
2,775

 
(12
)
 
1,033

 
(65
)
Mortgage- and asset-backed and auction rate securities
337

 
(3
)
 
211

 
(2
)
Equity and preferred securities and equity funds
312

 
(4
)
 
130

 
(8
)
Debt funds

 

 
309

 
(6
)
 
$
3,868

 
$
(24
)
 
$
1,699

 
$
(81
)
 
September 27, 2015
 
Less than 12 months
 
More than 12 months
 
Fair Value
 
Unrealized Losses
 
Fair Value
 
Unrealized Losses
U.S. Treasury securities and government-related securities
$
304

 
$
(4
)
 
$

 
$

Corporate bonds and notes
7,656

 
(93
)
 
368

 
(62
)
Mortgage- and asset-backed and auction rate securities
862

 
(3
)
 
108

 
(1
)
Equity and preferred securities and equity funds
392

 
(28
)
 
17

 

Debt funds
1,792

 
(117
)
 
124

 
(5
)
 
$
11,006

 
$
(245
)
 
$
617

 
$
(68
)

At September 25, 2016, the Company concluded that the unrealized losses on its available-for-sale securities were temporary. Further, for common stock and for equity and debt funds with unrealized losses, as of September 25, 2016, the Company had the ability and the intent to hold such securities until they recovered, which was expected to be within a reasonable period of time, and for debt securities and preferred stock with unrealized losses, the Company did not have the intent to sell, nor was it more likely than not that the Company would be required to sell, such securities before recovery or maturity. In the first quarter of fiscal 2017, the Company announced that it entered into an agreement to acquire NXP Semiconductors N.V. (Note 14). As a result, prior to the closing, the Company expects to divest a substantial portion of its marketable securities portfolio in order to finance that transaction. Given the change in the Company’s intention to sell certain marketable securities, the Company may recognize losses.