QUALCOMM Incorporated Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Fair Value Measurements

Fair Value Measurements

12 Months Ended

Sep. 28, 2014

Notes to Financial Statements [Abstract]

Note 12. 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 September 28, 2014 (in millions):



	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents	$	3,603	$	3,884	$	—	$	7,487
Marketable securities
U.S. Treasury securities and government-related securities	715		840		—		1,555
Corporate bonds and notes	—		14,481		—		14,481
Mortgage- and asset-backed securities	—		1,309		186		1,495
Auction rate securities	—		—		83		83
Common and preferred stock	1,056		741		—		1,797
Equity funds	541		—		—		541
Debt funds	813		3,350		—		4,163
Total marketable securities	3,125		20,721		269		24,115
Derivative instruments	1		4		—		5
Other investments	262		—		—		262
Total assets measured at fair value	$	6,991	$	24,609	$	269	$	31,869
Liabilities
Derivative instruments	$	—	$	1	$	—	$	1
Other liabilities	261		—		—		261
Total liabilities measured at fair value	$	261	$	1	$	—	$	262

Activity between Levels of the Fair Value Hierarchy. There were no significant transfers between Level 1 and Level 2 during fiscal 2014 or 2013. 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 marketable securities and other liabilities classified within Level 3 of the valuation hierarchy (in millions):



	2014					2013
	Auction Rate Securities		Mortgage- and Asset-Backed Securities			Auction Rate Securities			Mortgage- and Asset-Backed Securities
Beginning balance of Level 3	$	83	$	239		$	118		$	203
Total realized and unrealized gains (losses):
Included in investment income, net	—		11			—			8
Included in other comprehensive income	—		(3		)	1			(6		)
Purchases	—		107			—			163
Sales	—		(126		)	—			(70		)
Settlements	—		(40		)	(36		)	(77		)
Transfers (out of) into Level 3	—		(2		)	—			18
Ending balance of Level 3	$	83	$	186		$	83		$	239

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 fiscal 2014 primarily consisted of debt securities with significant upgrades in credit ratings. Transfers into Level 3 in fiscal 2013 primarily consisted of debt securities with significant inputs that became unobservable as a result of an increased likelihood of a shortfall in contractual cash flows or a significant downgrade in credit ratings.

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 fiscal 2014, 2013 and 2012, certain long-lived assets and goodwill related to the Company’s QMT division were written down to their estimated fair values resulting in impairment charges of $607 million, $158 million and $54 million, respectively (Note 2). At September 28, 2014, the carrying values of the QMT division’s property, plant and equipment and goodwill were $148 million and $35 million. During fiscal 2013, the Company recorded its retained investment in the former BWA subsidiaries at its estimated fair value of $34 million (Note 10). During fiscal 2014 and 2012, goodwill related to the Company’s former QRS (Qualcomm Retail Solutions) division was written down to its implied fair value resulting in impairment charges of $16 million and $23 million, respectively, which were recorded in other expenses. The estimation of fair values and cash flows used in these fair value measurements required the use of significant unobservable inputs, and as a result, the fair value measurements were classified as Level 3. During fiscal 2014, 2013 and 2012, 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.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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