Fair Value Measurements

The guidance for fair value measurements established by FASB defines fair value as the exchange price that would be received from selling an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which Xilinx would transact and also considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions and risk of nonperformance.

The Company determines the fair value for marketable debt securities using industry standard pricing services, data providers and other third-party sources and by internally performing valuation testing and analyses. The Company primarily uses a consensus price or weighted-average price for its fair value assessment. The Company determines the consensus price using market prices from a variety of industry standard pricing services, data providers, security master files from large financial institutions and other third party sources and uses those multiple prices as inputs into a distribution-curve-based algorithm to determine the daily market value. The pricing services use multiple inputs to determine market prices, including reportable trades, benchmark yield curves, credit spreads and broker/dealer quotes as well as other industry and economic events. For certain securities with short maturities, such as discount commercial paper and certificates of deposit, the security is accreted from purchase price to face value at maturity. If a subsequent transaction on the same security is observed in the marketplace, the price on the subsequent transaction is used as the current daily market price and the security will be accreted to face value based on the revised price. For certain other securities, such as student loan auction rate securities, the Company performs its own valuation analysis using a discounted cash flow pricing model.

The Company validates the consensus prices by taking random samples from each asset type and corroborating those prices using reported trade activity, benchmark yield curves, binding broker/dealer quotes or other relevant price information. There have not been any changes to the Company's fair value methodology during the first six months of fiscal 2014 and the Company did not adjust or override any fair value measurements as of September 28, 2013.

Fair Value Hierarchy

The fair value framework requires the categorization of assets and liabilities into three levels based upon the assumptions (inputs) used to price the assets or liabilities. The guidance for fair value measurements requires that assets and liabilities carried at fair value be classified and disclosed in one of the following categories:

Level 1 — Quoted (unadjusted) prices in active markets for identical assets or liabilities.

The Company's Level 1 assets consist of U.S. government and agency securities and money market funds.

Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.

The Company's Level 2 assets consist of bank certificates of deposit, commercial paper, corporate bonds, municipal bonds, U.S. agency securities, foreign government and agency securities, mortgage-backed securities and a debt mutual fund. The Company's Level 2 assets and liabilities also include foreign currency forward contracts and commodity swap contracts.

Level 3 — Unobservable inputs to the valuation methodology that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities. Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques, as well as significant management judgment or estimation.

The Company's Level 3 assets and liabilities include student loan auction rate securities and the embedded derivative related to the Company's debentures.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

In instances where the inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value measurement has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company's assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability. The following tables present information about the Company's assets and liabilities measured at fair value on a recurring basis as of September 28, 2013 and March 30, 2013:



	September 28, 2013
(In thousands)	Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
Assets
Cash equivalents:
Money market funds	$	168,053	$	—	$	—	$	168,053
Bank certificates of deposit	—		29,997		—		29,997
Commercial paper	—		222,987		—		222,987
U.S. government and agency securities	25,000		—		—		25,000
Foreign government and agency securities	—		79,997		—		79,997
Short-term investments:
Bank certificates of deposit	—		64,979		—		64,979
Commercial paper	—		359,361		—		359,361
Corporate bonds	—		57,276		—		57,276
Municipal bonds	—		8,757		—		8,757
U.S. government and agency securities	632,517		186,250		—		818,767
Foreign government and agency securities	—		239,963		—		239,963
Mortgage-backed securities	—		144,468		—		144,468
Long-term investments:
Corporate bonds	—		242,670		—		242,670
Auction rate securities	—		—		22,636		22,636
Municipal bonds	—		19,837		—		19,837
U.S. government and agency securities	32,184		48,305		—		80,489
Mortgage-backed securities	—		1,012,206		—		1,012,206
Debt mutual fund	—		58,943		—		58,943
Derivative financial instruments, net	—		512		—		512
Total assets measured at fair value	$	857,754	$	2,776,508	$	22,636	$	3,656,898
Liabilities
Convertible debentures — embedded derivative	$	—	$	—	$	407	$	407
Total liabilities measured at fair value	$	—	$	—	$	407	$	407
Net assets measured at fair value	$	857,754	$	2,776,508	$	22,229	$	3,656,491



	March 30, 2013
(In thousands)	Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
Assets
Cash equivalents:
Money market funds	$	108,311	$	—	$	—	$	108,311
Bank certificates of deposit	—		79,995		—		79,995
Commercial paper	—		208,667		—		208,667
U.S. government and agency securities	95,039		—		—		95,039
Foreign government and agency securities	—		54,989		—		54,989
Short-term investments:
Bank certificates of deposit	—		44,992		—		44,992
Commercial paper	—		294,883		—		294,883
Corporate bonds	—		40,728		—		40,728
Municipal bonds	—		3,706		—		3,706
U.S. government and agency securities	416,887		75,011		—		491,898
Foreign government and agency securities	—		214,912		—		214,912
Mortgage-backed securities	—		68		—		68
Long-term investments:
Corporate bonds	—		235,275		—		235,275
Auction rate securities	—		—		28,700		28,700
Municipal bonds	—		21,234		—		21,234
U.S. government and agency securities	55,142		55,143		—		110,285
Mortgage-backed securities	—		1,192,612		—		1,192,612
Debt mutual fund	—		62,927		—		62,927
Total assets measured at fair value	$	675,379	$	2,585,142	$	28,700	$	3,289,221
Liabilities
Derivative financial instruments, net	$	—	$	1,615	$	—	$	1,615
Convertible debentures — embedded derivative	—		—		1,090		1,090
Total liabilities measured at fair value	$	—	$	1,615	$	1,090	$	2,705
Net assets measured at fair value	$	675,379	$	2,583,527	$	27,610	$	3,286,516

Changes in Level 3 Instruments Measured at Fair Value on a Recurring Basis

The following table is a reconciliation of all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3):



	Three Months Ended					Six Months Ended
(In thousands)	September 28, 2013			September 29, 2012		September 28, 2013			September 29, 2012
Balance as of beginning of period	$	28,081		$	27,270	$	27,610		$	27,998
Total realized and unrealized gains (losses):
Included in interest and other expense, net	758			—		683			(614		)
Included in other comprehensive income	(260		)	254		586			490
Sales and settlements, net	(6,350		)	—		(6,650		)	(350		)
Balance as of end of period	$	22,229		$	27,524	$	22,229		$	27,524

The amount of total gains (losses) included in net income attributable to the change in unrealized gains (losses) relating to assets and liabilities still held as of the end of the period was as follows:



	Three Months Ended				Six Months Ended
(In thousands)	September 28, 2013		September 29, 2012		September 28, 2013		September 29, 2012
Interest and other expense, net	$	758	$	—	$	683	$	(614	)

As of September 28, 2013, there were no material change to the input assumptions of the pricing model for the student loan auction rate securities as compared to the assumptions used as of our last fiscal year end. The valuation methodology was consistent with prior year.

The 3.125% Junior Convertible Debentures due March 15, 2037 (3.125% Debentures) included embedded features that qualify as an embedded derivative, and was separately accounted for as a discount on the 3.125% Debentures. Its fair value was established at the inception of the 3.125% Debentures. Each quarter, the change in the fair value of the embedded derivative, if any, is recorded in the condensed consolidated statements of income. The Company uses a derivative valuation model to derive the value of the embedded derivative. Key inputs into this valuation model are the Company’s current stock price, risk-free interest rates, the stock dividend yield, the stock volatility and the 3.125% Debenture’s credit spread over London Interbank Offered Rate (LIBOR). The first three inputs are based on observable market data and are considered Level 2 inputs while the last two inputs require management judgment and are Level 3 inputs.

Financial Instruments Not Recorded at Fair Value on a Recurring Basis

Our Senior Convertible Debentures due June 15, 2017 (2.625% Debentures) and 3.125% Debentures are measured at fair value on a quarterly basis for disclosure purposes. The fair value of the 2.625% and 3.125% Debentures as of September 28, 2013 were approximately $973.8 million and $1.11 billion, respectively, based on the last trading price of the respective debentures for the period (classified as level 2 in fair value hierarchy due to relatively low trading volume).