The Company follows the authoritative guidance on fair value measurements and disclosures, with respect to assets and liabilities that are measured at fair value on both a recurring and nonrecurring basis. Under this guidance, fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The authoritative guidance also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company's assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances. The hierarchy is broken down into three levels. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). Descriptions of the three levels of the fair value hierarchy are discussed in Note 7 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended April 27, 2012.

See the section below titled Valuation Techniques for further discussion of how the Company determines fair value for financial assets and liabilities.

The authoritative guidance is principally applied to financial assets and liabilities such as marketable equity securities and debt and equity securities that are classified and accounted for as trading, available-for-sale, and derivative instruments. Derivatives include cash flow hedges, freestanding derivative forward contracts, and interest rate swaps. These items are marked-to-market at each reporting period. The information in the following paragraphs and tables primarily addresses matters relative to these financial assets and liabilities.

The following tables provide information by level for assets and liabilities that are measured at fair value on a recurring basis:

	Fair Value		Fair Value Measurements
	as of		Using Inputs Considered as
(in millions)	October 26, 2012		Level 1		Level 2		Level 3
Assets:
Corporate debt securities	$	3,697	$	-	$	3,687	$	10
Auction rate securities		129		-		-		129
Mortgage-backed securities		1,060		-		1,033		27
U.S. government and agency securities		3,513		1,647		1,866		-
Foreign government and agency securities		47		-		47		-
Certificates of deposit		6		-		6		-
Other asset-backed securities		492		-		487		5
Marketable equity securities		260		260		-		-
Exchange-traded funds		45		45		-		-
Derivative assets		283		88		195		-
Total assets	$	9,532	$	2,040	$	7,321	$	171

Liabilities:
Derivative liabilities	$	131	$	45	$	86	$	-
Total liabilities	$	131	$	45	$	86	$	-

	Fair Value		Fair Value Measurements
	as of		Using Inputs Considered as
(in millions)	April 27, 2012		Level 1		Level 2		Level 3
Assets:
Corporate debt securities	$	3,541	$	-	$	3,531	$	10
Auction rate securities		127		-		-		127
Mortgage-backed securities		839		-		810		29
U.S. government and agency securities		3,084		1,511		1,573		-
Foreign government and agency securities		67		-		67		-
Certificates of deposit		47		-		47		-
Other asset-backed securities		537		-		531		6
Marketable equity securities		253		253		-		-
Exchange-traded funds		46		46		-		-
Derivative assets		254		87		167		-
Total assets	$	8,795	$	1,897	$	6,726	$	172

Liabilities:
Derivative liabilities	$	82	$	37	$	45	$	-
Total liabilities	$	82	$	37	$	45	$	-

Financial assets that are classified as Level 1 securities include highly liquid government bonds within the U.S. government and agency securities, marketable equity securities, and exchange-traded funds for which quoted market prices are available. In addition, the Company has determined that foreign currency forward contracts will be included in Level 1 as these are valued using quoted market prices in active markets which have identical assets or liabilities.

The valuation for most fixed maturity securities are classified as Level 2. Financial assets that are classified as Level 2 include corporate debt securities, U.S. government and agency securities, foreign government and agency securities, certificates of deposit, other asset-backed securities, and certain mortgage-backed securities whose value is determined using inputs that are observable in the market or can be derived principally from or corroborated by observable market data such as pricing for similar securities, recently executed transactions, cash flow models with yield curves, and benchmark securities. In addition, interest rate swaps are included in Level 2 as the Company uses inputs other than quoted prices that are observable for the asset. The Level 2 derivative instruments are primarily valued using standard calculations and models that use readily observable market data as their basis.

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies, or similar techniques, and at least one significant model assumption or input is unobservable. Level 3 financial assets also include certain investment securities for which there is limited market activity such that the determination of fair value requires significant judgment or estimation. Level 3 investment securities primarily include certain corporate debt securities, auction rate securities, certain mortgage-backed securities, and certain other asset-backed securities for which there was a decrease in the observability of market pricing for these investments. At October 26, 2012, with the exception of auction rate securities, these securities were valued using third-party pricing sources that incorporate transaction details such as contractual terms, maturity, timing, and amount of expected future cash flows, as well as assumptions about liquidity and credit valuation adjustments of market participants. The fair value of auction rate securities is estimated by the Company using a discounted cash flow model, which incorporates significant unobservable inputs. The significant unobservable inputs used in the fair value measurement of the Company's auction rate securities are years to principal recovery and the illiquidity premium that is incorporated into the discount rate. Significant increases (decreases) in any of those inputs in isolation would result in a significantly lower (higher) fair value of the securities. Additionally, the Company uses level 3 inputs in the measurement of contingent milestone payments and related liabilities for all acquisitions subsequent to April 24, 2009. See Note 4 for further information regarding contingent consideration.

The following table represents the range of unobservable inputs utilized in the fair value measurement of auction rate securities classified as Level 3 as of October 26, 2012:

The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the ability to observe valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. The Company's policy is to recognize transfers into and out of levels within the fair value hierarchy at the end of the fiscal quarter in which the actual event or change in circumstances that caused the transfer occurs. There were no significant transfers between Level 1, Level 2, or Level 3 during the three or six months ended October 26, 2012 or October 28, 2011. 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 tables provide a reconciliation of the beginning and ending balances of items measured at fair value on a recurring basis that used significant unobservable inputs (Level 3) for the three and six months ended October 26, 2012 and October 28, 2011:

Three months ended October 26, 2012
(in millions)	Total Level 3 Investments		Corporate debt securities		Auction rate securities		Mortgage-backed securities		Other asset-backed securities
Balance as of July 27, 2012	$	173	$	10	$	129	$	28	$	6
Total unrealized gains/(losses) included in other comprehensive income		(1)		-		-		-		(1)
Settlements		(1)		-		-		(1)		-
Balance as of October 26, 2012	$	171	$	10	$	129	$	27	$	5

Three months ended October 28, 2011
(in millions)	Total Level 3 Investments		Corporate debt securities		Auction rate securities		Mortgage-backed securities		Other asset-backed securities
Balance as of July 29, 2011	$	190	$	17	$	134	$	33	$	6
Total realized losses and other-than-temporary impairment losses included in earnings		(1)		(1)		-		-		-
Total unrealized gains/(losses) included in other comprehensive income		(7)		1		(7)		(1)		-
Settlements		(8)		(7)		-		(1)		-
Balance as of October 28, 2011	$	174	$	10	$	127	$	31	$	6

Six months ended October 26, 2012
(in millions)	Total Level 3 Investments		Corporate debt securities		Auction rate securities		Mortgage-backed securities		Other asset-backed securities
Balance as of April 27, 2012	$	172	$	10	$	127	$	29	$	6
Total unrealized gains/(losses) included in other comprehensive income		1		-		2		-		(1)
Settlements		(2)		-		-		(2)		-
Balance as of October 26, 2012	$	171	$	10	$	129	$	27	$	5

Six months ended October 28, 2011
(in millions)	Total Level 3 Investments		Corporate debt securities		Auction rate securities		Mortgage-backed securities		Other asset-backed securities
Balance as of April 29, 2011	$	191	$	17	$	133	$	35	$	6
Total realized losses and other-than-temporary impairment losses included in earnings		(2)		(1)		-		-		(1)
Total unrealized gains/(losses) included in other comprehensive income		(5)		1		(6)		(1)		1
Settlements		(10)		(7)		-		(3)		-
Balance as of October 28, 2011	$	174	$	10	$	127	$	31	$	6

Non-financial assets such as equity and other securities that are accounted for using the cost or equity method, goodwill and IPR&D, intangible assets, and property, plant, and equipment are measured at fair value when there is an indicator of impairment and recorded at fair value only when an impairment is recognized.

The Company holds investments in equity and other securities that are accounted for using the cost or equity method, which are classified as long-term investments in the condensed consolidated balance sheets. The aggregate carrying amount of these investments was $483 million as of October 26, 2012 and $508 million as of April 27, 2012. These cost or equity method investments are measured at fair value on a nonrecurring basis. The fair value of the Company's cost or equity method investments is not estimated if there are no identified events or changes in circumstance that may have a significant adverse effect on the fair value of these investments. During the three months ended July 27, 2012, the Company determined that the fair values of certain cost method investments were below their carrying values and that the carrying values of these investments were not expected to be recoverable within a reasonable period of time. As a result, the Company recognized $6 million in impairment charges during the three months ended July 27, 2012. The Company did not record any impairment charges related to cost method investments during the three months ended October 26, 2012. During the three and six months ended October 28, 2011, the Company determined that the fair values of certain cost method investments were below their carrying values and that the carrying values of these investments were not expected to be recoverable within a reasonable period of time. As a result, the Company recognized $4 million in impairment charges during the three and six months ended October 28, 2011. The impairment charges related to the cost method investments were recorded in other expense, net in the condensed consolidated statements of earnings. These investments fall within Level 3 of the fair value hierarchy, due to the use of significant unobservable inputs to determine fair value, as the investments are privately held entities without quoted market prices. To determine the fair value of these investments, the Company used all pertinent financial information that was available related to the entities, including financial statements and market participant valuations from recent and proposed equity offerings.

The Company assesses the impairment of intangible assets annually in the third quarter and whenever events or changes in circumstances indicate that the carrying amount of an intangible asset may not be recoverable. The aggregate carrying amount of intangible assets, excluding IPR&D, was $2.132 billion as of October 26, 2012 and $2.277 billion as of April 27, 2012. These assets are measured at fair value on a nonrecurring basis. The fair value of the Company's intangible assets is not estimated if there is no change in events or circumstances that indicate the carrying amount of an intangible asset may not be recoverable. The Company did not record any intangible asset impairments during the three and six months ended October 26, 2012 or October 28, 2011.

The Company assesses the impairment of goodwill and IPR&D annually in the third quarter and whenever events or changes in circumstances indicate that the carrying amount may be impaired. The aggregate carrying amount of goodwill was $9.944 billion as of October 26, 2012 and $9.934 billion as of April 27, 2012. The aggregate carrying amount of IPR&D was $368 million as of October 26, 2012 and $370 million as of April 27, 2012. These assets are measured at fair value on a nonrecurring basis. The fair value of the Company's goodwill and IPR&D is not estimated if there is no change in events or circumstances that indicate the carrying amount of goodwill or IPR&D may be impaired. The Company did not record any goodwill or IPR&D impairments during the three and six months ended October 26, 2012 or October 28, 2011. However, due to the nature of IPR&D projects, the Company may experience delays or failures to obtain regulatory approvals to conduct clinical trials, failures of such clinical trials, delays or failures to obtain required market clearances or other failures to achieve a commercially viable product, and as a result, may record impairment losses in the future.

The Company assesses the impairment of property, plant, and equipment whenever events or changes in circumstances indicate that the carrying amount of property, plant, and equipment assets may not be recoverable. The Company did not recognize any significant impairments of property, plant, and equipment during the three and six months ended October 26, 2012 or October 28, 2011.

The estimated fair value of the Company's long-term debt, including the short-term portion, as of October 26, 2012 was $10.103 billion compared to a principal value of $9.135 billion, and as of April 27, 2012 was $9.965 billion compared to a principal value of $9.138 billion. Fair value was estimated using quoted market prices for the public registered senior notes and senior convertible notes, classified as Level 1 within the fair value hierarchy, and quoted market prices for similar instruments for the term loan on capital lease buyout, classified as Level 2 within the fair value hierarchy. The fair values and principal values consider the terms of the related debt and exclude the impacts of debt discounts and derivative/hedging activity.

- 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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