QUALCOMM Incorporated Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

Fair Value Measurements

6 Months Ended

Mar. 29, 2015

Notes to Financial Statements [Abstract]

Note 11 — 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 March 29, 2015 (in millions):



	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents	$	2,453	$	2,751	$	—	$	5,204
Marketable securities (a)
U.S. Treasury securities and government-related securities	252		1,209		—		1,461
Corporate bonds and notes	—		15,440		—		15,440
Mortgage- and asset-backed securities	—		1,355		181		1,536
Auction rate securities	—		—		47		47
Common and preferred stock	676		715		—		1,391
Equity funds	646		—		—		646
Debt funds	—		3,597		—		3,597
Total marketable securities	1,574		22,316		228		24,118
Derivative instruments	1		6		—		7
Other investments (a)	318		—		—		318
Total assets measured at fair value	$	4,346	$	25,073	$	228	$	29,647
Liabilities
Derivative instruments	$	2	$	4	$	—	$	6
Other liabilities	294		—		—		294
Total liabilities measured at fair value	$	296	$	4	$	—	$	300

(a) Included amounts that are restricted (Note 12).

Activity between Levels of the Fair Value Hierarchy. There were no significant transfers between Level 1 and Level 2 during the six months ended March 29, 2015 or March 30, 2014. 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 classified within Level 3 of the valuation hierarchy (in millions):



	Six Months Ended March 29, 2015						Six Months Ended March 30, 2014
	Auction Rate Securities			Mortgage- and Asset-Backed Securities			Auction Rate Securities		Mortgage- and Asset-Backed Securities
Beginning balance of Level 3	$	83		$	186		$	83	$	239
Total realized and unrealized gains or losses:
Included in investment income, net	—			3			—		3
Included in other comprehensive income	—			(4		)	—		1
Purchases	—			50			—		49
Sales	—			(41		)	—		(18		)
Settlements	(36		)	(13		)	—		(22		)
Transfers out of Level 3	—			—			—		(2		)
Ending balance of Level 3	$	47		$	181		$	83	$	250

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. There were no transfers in or out of Level 3 during the six months ended March 29, 2015. Transfers out of Level 3 during the six months ended March 30, 2014 primarily consisted of debt securities with significant upgrades 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 the six months ended March 29, 2015, the Company updated the business plans and related internal forecasts related to the Company’s push-to-talk services business and its display businesses, resulting in impairment charges of $104 million related to goodwill and $27 million related to in-process research and development (IPR&D). During the six months ended March 30, 2014, the Company recorded impairment charges of $444 million to write down certain property, plant and equipment related to one of the Company’s display businesses and $16 million related to goodwill in its former QRS division. The IPR&D impairment charge was recorded in research and development expenses, and the other impairment charges were recorded in other operating expenses. The Company determined the fair values using cost, income and market approaches. The estimation of fair value and cash flows used in the fair value measurements required the use of significant unobservable inputs, and as a result, the fair value measurements were classified as Level 3. During the six months ended March 29, 2015 and March 30, 2014, 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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