Annual report pursuant to Section 13 and 15(d)

Marketable Securities

v2.4.0.6
Marketable Securities
 12 Months Ended
Sep. 30, 2012
Notes to Financial Statements [Abstract]  
Note 12 - Marketable Securities
Note 12. Marketable Securities
Marketable securities were comprised as follows (in millions):
 
Current
 
Noncurrent
 
September 30, 2012
 
September 25, 2011
 
September 30, 2012
 
September 25, 2011
Trading:
 
 
 
 
 
 
 
U.S. Treasury securities and government-related securities
$
196

 
$
—

 
$
254

 
$
—

Corporate bonds and notes
283

 
—

 
176

 
—

Mortgage- and asset-backed securities
—

 
—

 
120

 
—

Total trading
479

 
—

 
550

 
—

Available-for-sale:
 
 
 
 
 
 
 
U.S. Treasury securities and government-related securities
$
362

 
$
516

 
$
592

 
$
6

Corporate bonds and notes
4,554

 
3,665

 
7,570

 
4,900

Mortgage- and asset-backed securities
1,157

 
606

 
241

 
99

Auction rate securities
—

 
—

 
118

 
124

Common and preferred stock
57

 
76

 
2,030

 
1,713

Equity funds
—

 
—

 
1,126

 
845

Debt funds
1,958

 
1,327

 
1,716

 
1,098

Total available-for-sale
8,088

 
6,190

 
13,393

 
8,785

Fair value option:
 
 
 
 
 
 
 
Debt fund
—

 
—

 
520

 
476

Total marketable securities
$
8,567

 
$
6,190

 
$
14,463

 
$
9,261


The Company holds an investment in a debt fund for which the Company elected the fair value option because the Company is able to redeem its shares at net asset value, which is determined daily. The investment would have otherwise been recorded using the equity method. The debt fund has no single maturity date. At September 30, 2012, the Company had an effective ownership interest in the debt fund of 22%. Increases in fair value associated with this investment of $45 million and $9 million were recognized in net investment income in fiscal 2012 and 2011, respectively.
Net gains recognized on debt securities classified as trading still held at September 30, 2012 were $22 million for fiscal 2012. The Company did not hold any securities classified as trading during fiscal 2011.
At September 30, 2012, the contractual maturities of available-for-sale debt securities were as follows (in millions):
Years to Maturity
 
No Single
 
 
Less Than
 
One to
 
Five to
 
Greater Than
 
Maturity
 
 
One Year
 
Five Years
 
Ten Years
 
Ten Years
 
Date
 
Total
$
535

 
$
7,633

 
$
3,573

 
$
1,336

 
$
5,191

 
$
18,268

Debt securities with no single maturity date included debt funds, corporate bonds and notes, 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):
Fiscal Year
Gross Realized Gains
 
Gross Realized Losses
 
Net Realized Gains
2012
$
296

 
$
(25
)
 
$
271

2011
356

 
(30
)
 
326

2010
415

 
(31
)
 
384

Available-for-sale securities were comprised as follows (in millions):
 
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Value
September 30, 2012
 
 
 
 
 
 
 
Equity securities
$
2,599

 
$
628

 
$
(14
)
 
$
3,213

Debt securities (including debt funds)
17,714

 
573

 
(19
)
 
18,268

 
$
20,313

 
$
1,201

 
$
(33
)
 
$
21,481

September 25, 2011
 
 
 
 
 
 
 
Equity securities
$
2,426

 
$
278

 
$
(70
)
 
$
2,634

Debt securities (including debt funds)
12,179

 
294

 
(132
)
 
12,341

 
$
14,605

 
$
572

 
$
(202
)
 
$
14,975


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 30, 2012
 
Less than 12 months
 
More than 12 months
 
Fair Value
 
Unrealized
Losses
 
Fair Value
 
Unrealized
Losses
Corporate bonds and notes
$
723

 
$
(8
)
 
$
256

 
$
(9
)
Mortgage- and asset-backed securities
143

 
(1
)
 
7

 
—

Auction rate securities
—

 
—

 
115

 
(1
)
Common and preferred stock
105

 
(5
)
 
9

 
—

Equity funds
64

 
(4
)
 
36

 
(5
)
 
$
1,035

 
$
(18
)
 
$
423

 
$
(15
)
 
September 25, 2011
 
Less than 12 months
 
More than 12 months
 
Fair Value
 
Unrealized
Losses
 
Fair Value
 
Unrealized
Losses
Corporate bonds and notes
$
3,576

 
$
(125
)
 
$
59

 
$
(3
)
Auction rate securities
3

 
—

 
121

 
(2
)
Common and preferred stock
495

 
(43
)
 
4

 
—

Equity funds
255

 
(27
)
 
—

 
—

Debt funds
153

 
(2
)
 
1

 
—

 
$
4,482

 
$
(197
)
 
$
185

 
$
(5
)

At September 30, 2012, the Company concluded that the unrealized losses on its available-for-sale securities were temporary. Further, for common and preferred stock and for equity and debt funds with unrealized losses, the Company has the ability and the intent to hold such securities until they recover, which is expected to be within a reasonable period of time. For debt securities with unrealized losses, the Company does not have the intent to sell, nor is it more likely than not that the Company will be required to sell, such securities before recovery or maturity.
The following table shows the activity for the credit loss portion of other-than-temporary impairments on debt securities held by the Company (in millions):
 
2012
 
2011
 
2010
Beginning balance of credit losses
$
46

 
$
109

 
$
170

Reductions in credit losses related to securities the Company intends to sell
(1
)
 
(40
)
 
—

Credit losses recognized on securities previously not impaired
5

 
2

 
1

Additional credit losses recognized on securities previously impaired
2

 
—

 
1

Reductions in credit losses related to securities sold
(21
)
 
(20
)
 
(39
)
Accretion of credit losses due to an increase in cash flows expected to be collected
—

 
(5
)
 
(24
)
Ending balance of credit losses
$
31

 
$
46

 
$
109