Fair Value

9 Months Ended

Dec. 27, 2013

Fair Value [Abstract]

Fair Value

Fair Value

Fair value measurements on a recurring basis

The following tables presents the Company’s assets and liabilities, excluding pension assets, that are measured at fair value on a recurring basis as of December 27, 2013 and March 29, 2013:

	As of December 27, 2013
			Fair Value Hierarchy
(Amounts in millions)	Fair Value		Level 1		Level 2		Level 3
Assets:
Money market funds and money market deposit accounts	$	563	$	563	$	—	$	—
Time deposits	568		568		—		—
Foreign currency derivative instruments	1				1
Total assets	$	1,132	$	1,131	$	1	$	—
Liabilities:
Foreign currency derivative instruments	$	16	$	—	$	16	$	—
Contingent consideration for an acquisition	137		—		—		137
Total liabilities	$	153	$	—	$	16	$	137

*The fair value of the interest rate swap derivative liabilities as of December 27, 2013 is under $1 million.

	As of March 29, 2013
			Fair Value Hierarchy
(Amounts in millions)	Fair Value		Level 1		Level 2		Level 3
Assets:
Money market funds and money market deposit accounts	$	464	$	464	$	—	$	—
Time deposits	393		393		—		—
Short term investments	6		6		—		—
Foreign currency derivative instruments	5		—		5		—
Total assets	$	868	$	863	$	5	$	—
Liabilities:
Foreign currency derivative instruments	$	11	$	—	$	11	$	—
Total liabilities	$	11	$	—	$	11	$	—

In connection with the acquisition of ServiceMesh, the Company recorded contingent consideration of $137 million at the acquisition date fair value (see Note 3). The fair value of this short-term liability, at December 27, 2013, is based on unobservable inputs, or Level 3 assumptions. The significant inputs used in the valuation of the contingent consideration include ServiceMesh's revenues during the earn-out measurement period and a multiple of these revenues, in accordance with the purchase agreement. Further, the determination of revenues earned during the measurement period is based on U.S. GAAP as laid out in ASC 605, Revenue Recognition.

The sensitivity of the value of the contingent consideration is based on the revenues earned during the measurement period, per U.S. GAAP, and consequently the fair value of the contingent consideration can range between $0 - $137 million. During the third quarter of fiscal 2014, there were no changes to this liability due to payments or revaluation and therefore no gains or losses recognized in earnings related to this liability.

The Company's money market funds, money market deposit accounts and time deposits are reported in cash and cash equivalents; short-term investments and foreign currency derivative instruments are included in prepaid expenses and other current assets; interest rate swap derivative assets are included in other assets; foreign currency derivative liabilities and contingent consideration are included in accrued expenses and other current liabilities and interest rate swap derivative liabilities are included in other long-term liabilities. Gains and losses from changes in the fair value of derivative assets and liabilities are included in earnings and reported in other (income) expense. There were no transfers between Level 1 and Level 2 and no transfers into or out of Level 3.

Derivative assets and liabilities include foreign currency forward and option contracts and interest rate swap contracts (see Note 7). The fair value of foreign currency forward contracts represents the estimated amount required to settle the contracts using current market exchange rates, and is based on the month-end foreign currency exchange rates and forward points. The fair value of currency options is estimated based on valuation models that use the original strike price, movement and volatility in foreign currency exchange rates, and length of time to expiration as inputs. The fair value of interest rate swaps is estimated based on valuation models that use interest rate yield curves as inputs. The inputs used to estimate the fair value of the Company's derivatives are classified as Level 2.

Fair value measurements on a non-recurring basis

Assets and liabilities measured at fair value on a non-recurring basis include goodwill, tangible assets, intangible assets, and other contract related long-lived assets. Such assets are reviewed quarterly for impairment indicators. If a triggering event has occurred, the assets are remeasured when the estimated fair value of the corresponding asset or asset group is less than the carrying value. The fair value measurements, in such instances, are based on significant unobservable inputs (Level 3). There were no significant impairments recorded during the nine months ended December 27, 2013 and December 28, 2012.

Financial Instruments not measured at fair value

The carrying amounts of the Company’s financial instruments with short-term maturities are deemed to approximate their market values. The carrying amount of the Company’s long-term debt, excluding capital leases was $1,856 million and $2,119 million, and the estimated fair value was $2,021 million and $2,324 million, as of December 27, 2013 and March 29, 2013, respectively. The fair value of long-term debt is estimated based on the current interest rates offered to the Company for instruments with similar terms and remaining maturities and are classified as Level 2.

The primary financial instruments other than derivatives (see Note 7) that potentially subject the Company to concentrations of credit risk are accounts receivable. The Company’s customer base includes Fortune 500 companies, the U.S. federal and other governments and other significant, well-known companies operating in North America, Europe and the Pacific Rim. Credit risk with respect to accounts receivable is minimized because of the nature and diversification of the Company’s customer base. Furthermore, the Company continuously reviews its accounts receivable and records provisions for doubtful accounts as needed.

The Company’s credit risk is also affected by customers in bankruptcy proceedings; however, because most of these proceedings involve business reorganizations rather than liquidations and the nature of the Company’s services are often considered essential to the operational continuity of these customers, the Company is generally able to avoid or mitigate significant adverse financial impact in these cases. As of December 27, 2013, the Company had $15 million of accounts receivable, $10 million of related allowance for doubtful accounts, $1 million of other assets, and $4 million of accounts payable with customers involved in bankruptcy proceedings.