Fair Value Measurements

6 Months Ended

Feb. 27, 2014

Disclosure Text Block [Abstract]

Fair Value Measurements

Fair Value Measurements

Accounting standards establish three levels of inputs that may be used to measure fair value: quoted prices in active markets for identical assets or liabilities (referred to as Level 1), inputs other than Level 1 that are observable for the asset or liability either directly or indirectly (referred to as Level 2) and unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities (referred to as Level 3).

Fair Value Measurements on a Recurring Basis

All marketable debt and equity investments are classified as available-for-sale and are carried at fair value. Assets measured at fair value on a recurring basis were as follows:

As of	February 27, 2014								August 29, 2013
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	1,137	$	—	$	—	$	1,137	$	1,188	$	—	$	—	$	1,188
Certificates of deposit	—		81		—		81		—		38		—		38
Government securities	—		5		—		5		—		—		—		—
Commercial paper	—		—		—		—		—		35		—		35
	1,137		86		—		1,223		1,188		73		—		1,261
Short-term investments:
Corporate bonds	—		124		—		124		—		112		—		112
Government securities	—		39		—		39		—		72		—		72
Commercial paper	—		23		—		23		—		26		—		26
Certificates of deposit	—		10		—		10		—		9		—		9
Asset-backed securities	—		3		—		3		—		2		—		2
	—		199		—		199		—		221		—		221
Long-term marketable investments:
Corporate bonds	—		332		—		332		—		302		—		302
Asset-backed securities	—		120		—		120		—		95		—		95
Government securities	—		97		—		97		—		96		—		96
Certificates of deposit	—		2		—		2		—		—		—		—
Marketable equity securities	1		—		—		1		6		—		—		6
	1		551		—		552		6		493		—		499
Restricted cash:
Certificates of deposit	—		7		—		7		—		302		—		302
	—		7		—		7		—		302		—		302
	$	1,138	$	843	$	—	$	1,981	$	1,194	$	1,089	$	—	$	2,283

Government securities consist of securities issued directly by or deemed to be guaranteed by government entities such as U.S. and non U.S. agency securities, government bonds and treasury securities. Level 2 securities are valued using information obtained from pricing services, which obtain quoted market prices for similar instruments, non-binding market consensus prices that are corroborated by observable market data, or various other methodologies, to determine the appropriate value at the measurement date. We perform supplemental analysis to validate information obtained from our pricing services. As of February 27, 2014, no adjustments were made to such pricing information.

Fair Value Measurements on a Nonrecurring Basis

In connection with the Exchange Transactions, we determined the fair value for the debt component of the Exchanged Notes as if it were a stand-alone instrument using an interest rate for similar nonconvertible debt issued by entities with credit ratings comparable to ours at the time of issuance.

In connection with the debt conversions and settlements in the first and second quarters of 2014, substantially all of the holders elected to convert their then outstanding 2014, 2031A and 2027 Notes. As a result of our elections to settle the conversion amounts in cash, each of the settlement obligations became derivative debt liabilities subject to mark-to-market accounting treatment for a period of approximately 30 days beginning on the date we notified the holder of our intention to settle the obligation in cash through the settlement date. The fair values of the underlying derivative settlement obligations were initially determined using the Black-Scholes option valuation model (Level 2 fair value measurements). The Black-Scholes model requires the input of assumptions, including the stock price, expected stock-price volatility, estimated option life, risk-free interest rate and dividend rate. The subsequent measurements and final settlement amounts of our convertible notes settlement obligations were based on the value-weighted average stock price (Level 1 fair value measurements). Changes in fair values of the derivative settlement obligations were included in other non-operating income (expense), net.

Fair Value of Financial Instruments

Amounts reported as cash and equivalents, receivables, and accounts payable and accrued expenses approximate fair value. The estimated fair value and carrying value of debt instruments (carrying value excludes the equity components of our convertible notes classified in equity) were as follows:

As of	February 27, 2014				August 29, 2013
	Fair Value		Carrying Value		Fair Value		Carrying Value
Convertible notes	$	5,693	$	2,658	$	4,167	$	2,506
Elpida creditor installment payments and other notes	2,907		2,843		2,269		2,279

The fair values of our convertible debt instruments were determined based on inputs that are observable in the market or that could be derived from, or corroborated with, observable market data, including our stock price and interest rates based on similar debt issued by parties with credit ratings similar to ours (Level 2).  The fair value of our other debt instruments was estimated based on discounted cash flows using inputs that are observable in the market or that could be derived from, or corroborated with, observable market data, including interest rates based on similar debt issued by parties with credit ratings similar to ours (Level 2).