Annual report pursuant to Section 13 and 15(d)

Marketable Securities

v2.4.0.8
Marketable Securities
 12 Months Ended
Sep. 29, 2013
Notes to Financial Statements [Abstract]  
Note 13 - Marketable Securities
Note 13. Marketable Securities
Marketable securities were comprised as follows (in millions):
 
Current
 
Noncurrent
 
September 29, 2013
 
September 30, 2012
 
September 29, 2013
 
September 30, 2012
Trading:
 
 
 
 
 
 
 
U.S. Treasury securities and government-related securities
$
241

 
$
196

 
$
49

 
$
254

Corporate bonds and notes
269

 
283

 
256

 
176

Mortgage- and asset-backed securities
—

 
—

 
104

 
120

Total trading
$
510

 
479

 
409

 
550

Available-for-sale:
 
 
 
 
 
 
 
U.S. Treasury securities and government-related securities
$
721

 
$
362

 
$
71

 
$
592

Corporate bonds and notes
4,533

 
4,554

 
6,812

 
7,570

Mortgage- and asset-backed securities
745

 
1,157

 
328

 
241

Auction rate securities
—

 
—

 
83

 
118

Common and preferred stock
8

 
57

 
2,351

 
2,030

Equity funds
—

 
—

 
960

 
1,126

Debt funds
2,307

 
1,958

 
2,889

 
1,716

Total available-for-sale
8,314

 
8,088

 
13,494

 
13,393

Fair value option:
 
 
 
 
 
 
 
Debt fund
—

 
—

 
537

 
520

Total marketable securities
$
8,824

 
$
8,567

 
$
14,440

 
$
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 September 29, 2013, the Company had an effective ownership interest in the debt fund of 21%. Net increases in fair value associated with this investment of $17 million, $45 million and $9 million were recognized in net investment income in fiscal 2013, 2012 and 2011, respectively.
The Company classifies certain portfolios of debt securities that utilize derivative instruments to acquire or reduce foreign exchange risk, interest rate risk and/or equity, prepayment and credit risk as trading. Net losses recognized on debt securities classified as trading still held at September 29, 2013 were $20 million. Net gains recognized on debt securities classified as trading still held at September 30, 2012 were $22 million. The Company did not hold any securities classified as trading during fiscal 2011.
At September 29, 2013, 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
$
1,695

 
$
6,842

 
$
2,303

 
$
1,296

 
$
6,353

 
$
18,489

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):
Fiscal Year
Gross Realized Gains
 
Gross Realized Losses
 
Net Realized Gains
2013
$
430

 
$
(142
)
 
$
288

2012
296

 
(25
)
 
271

2011
356

 
(30
)
 
326

Available-for-sale securities were comprised as follows (in millions):
 
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Value
September 29, 2013
 
 
 
 
 
 
 
Equity securities
$
2,570

 
$
793

 
$
(44
)
 
$
3,319

Debt securities (including debt funds)
18,255

 
396

 
(162
)
 
18,489

 
$
20,825

 
$
1,189

 
$
(206
)
 
$
21,808

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):
 
September 29, 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
$
42

 
$
(1
)
 
$
—

 
$
—

Corporate bonds and notes
2,084

 
(31
)
 
24

 
(1
)
Mortgage- and asset-backed securities
367

 
(5
)
 
24

 
—

Auction rate securities
—

 
—

 
83

 
(1
)
Common and preferred stock
291

 
(41
)
 
—

 
—

Debt funds
2,776

 
(123
)
 
4

 
—

Equity funds
82

 
(3
)
 
—

 
—

 
$
5,642

 
$
(204
)
 
$
135

 
$
(2
)
 
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 September 29, 2013, the Company concluded that the unrealized losses on its available-for-sale securities were temporary. Further, for common and certain 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):
 
2013
 
2012
 
2011
Beginning balance of credit losses
$
31

 
$
46

 
$
109

Reductions in credit losses related to securities the Company intends to sell
(7
)
 
(1
)
 
(40
)
Credit losses recognized on securities previously not impaired
1

 
5

 
2

Additional credit losses recognized on securities previously impaired
1

 
2

 
—

Reductions in credit losses related to securities sold
(21
)
 
(21
)
 
(20
)
Accretion of credit losses due to an increase in cash flows expected to be collected
(1
)
 
—

 
(5
)
Ending balance of credit losses
$
4

 
$
31

 
$
46