Quarterly report pursuant to Section 13 or 15(d)

Marketable Securities

v2.4.0.8
Marketable Securities
 9 Months Ended
Jun. 30, 2013
Notes to Financial Statements [Abstract]  
Note 9 - Marketable Securities
Note 9 — Marketable Securities
Marketable securities were comprised as follows (in millions):
 
Current
 
Noncurrent
 
June 30,
2013
 
September 30,
2012
 
June 30,
2013
 
September 30,
2012
Trading:
 
 
 
 
 
 
 
U.S. Treasury securities and government-related securities
$
225

 
$
196

 
$
239

 
$
254

Corporate bonds and notes
276

 
283

 
307

 
176

Mortgage- and asset-backed securities
—

 
—

 
185

 
120

Total trading
501

 
479

 
731

 
550

Available-for-sale:
 
 
 
 
 
 
 
U.S. Treasury securities and government-related securities
251

 
362

 
971

 
592

Corporate bonds and notes
4,711

 
4,554

 
9,735

 
7,570

Mortgage- and asset-backed securities
1,031

 
1,157

 
341

 
241

Auction rate securities
—

 
—

 
83

 
118

Common and preferred stock
22

 
57

 
2,338

 
2,030

Equity funds
—

 
—

 
1,354

 
1,126

Debt funds
2,412

 
1,958

 
2,854

 
1,716

Total available-for-sale
8,427

 
8,088

 
17,676

 
13,393

Fair value option:
 
 
 
 
 
 
 
Debt fund
—

 
—

 
534

 
520

Total marketable securities
$
8,928

 
$
8,567

 
$
18,941

 
$
14,463


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 June 30, 2013, the Company had an effective ownership interest in the debt fund of 21%. During the three months ended June 30, 2013, a decrease in fair value associated with this investment of $4 million was recognized in net investment income. During the nine months ended June 30, 2013, an increase in fair value associated with this investment of $14 million was recognized in net investment income. During the three and nine months ended June 24, 2012, increases in fair value associated with this investment of $5 million and $27 million, respectively, were recognized in net investment income.
The Company classifies certain portfolios of debt securities that utilize derivative instruments to acquire or reduce foreign exchange and/or equity, prepayment and credit risk as trading. Net losses recognized on debt securities classified as trading still held at June 30, 2013 were $21 million and $36 million for the three and nine months ended June 30, 2013, respectively. Net gains recognized on debt securities classified as trading still held at June 24, 2012 were $4 million for the nine months ended June 24, 2012. Net losses recognized on debt securities classified as trading still held at June 24, 2012 were $6 million for the three months ended June 24, 2012.
At June 30, 2013, 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
$
2,403

 
$
8,024

 
$
3,900

 
$
1,341

 
$
6,721

 
$
22,389


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
For the three months ended
 
 
 
 
 
June 30, 2013
$
52

 
$
(5
)
 
$
47

June 24, 2012
76

 
(7
)
 
69

 
 
 
 
 
 
For the nine months ended
 
 
 
 
 
June 30, 2013
$
204

 
$
(14
)
 
$
190

June 24, 2012
177

 
(14
)
 
163


Available-for-sale securities were comprised as follows (in millions):
 
Cost
 
Unrealized Gains
 
Unrealized Losses
 
Fair Value
June 30, 2013
 
 
 
 
 
 
 
Equity securities
$
2,929

 
$
821

 
$
(36
)
 
$
3,714

Debt securities (including debt funds)
22,284

 
424

 
(319
)
 
22,389

 
$
25,213

 
$
1,245

 
$
(355
)
 
$
26,103

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


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):
 
June 30, 2013
 
Less than 12 months
 
More than 12 months
 
Fair Value
 
Unrealized Losses
 
Fair Value
 
Unrealized Losses
U.S. Treasury securities and government-related securities
$
418

 
$
(24
)
 
$
—

 
$
—

Corporate bonds and notes
6,311

 
(140
)
 
49

 
(1
)
Mortgage- and asset-backed securities
577

 
(10
)
 
9

 
—

Auction rate securities
—

 
—

 
83

 
(1
)
Common and preferred stock
337

 
(24
)
 
9

 
(1
)
Debt funds
3,580

 
(143
)
 
4

 
—

Equity funds
239

 
(11
)
 
—

 
—

 
$
11,462

 
$
(352
)
 
$
154

 
$
(3
)

 
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
)

At June 30, 2013, 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):
 
Three Months Ended
 
Nine Months Ended
 
June 30,
2013
 
June 24,
2012
 
June 30,
2013
 
June 24,
2012
Beginning balance of credit losses
$
8

 
$
46

 
$
31

 
$
46

Reductions in credit losses related to securities the Company intends to sell
—

 
—

 
(6
)
 
(1
)
Credit losses recognized on securities previously not impaired
—

 
—

 
1

 
2

Additional credit losses recognized on securities previously impaired
—

 
2

 
1

 
5

Reductions in credit losses related to securities sold
(3
)
 
(5
)
 
(21
)
 
(9
)
Accretion of credit losses due to an increase in cash flows expected to be collected
—

 
—

 
(1
)
 
—

Ending balance of credit losses
$
5

 
$
43

 
$
5

 
$
43