Fair Value Measurements

The guidance for fair value measurements established by the 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 analysis. 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 quarter of fiscal 2017 and the Company did not adjust or override any fair value measurements as of July 2, 2016.

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 financial institution securities, non-financial institution securities, municipal bonds, U.S. government and agency securities, foreign government and agency securities, mortgage-backed securities, debt mutual funds, bank loans, asset-backed securities and commercial mortgage-backed securities. 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.

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 July 2, 2016 and April 2, 2016:



	July 2, 2016
(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	$	275,694	$	—	$	—	$	275,694
Financial institution securities	—		28,765		—		28,765
Non-financial institution securities	—		159,932		—		159,932
Foreign government and agency securities	—		37,971				37,971
Short-term investments:
Financial institution securities	—		479,779		—		479,779
Non-financial institution securities	—		426,673		—		426,673
Municipal bonds	—		51,203		—		51,203
U.S. government and agency securities	53,826		43,572		—		97,398
Foreign government and agency securities	—		234,731		—		234,731
Mortgage-backed securities	—		1,093,508		—		1,093,508
Debt mutual funds	—		33,718		—		33,718
Bank loans	—		98,318		—		98,318
Asset-backed securities	—		208,635		—		208,635
Commercial mortgage-backed securities	—		211,653		—		211,653
Long-term investments:
Auction rate securities	—		—		10,068		10,068
Municipal bonds	—		5,734		—		5,734
Mortgage-backed securities	—		129,601		—		129,601
Debt mutual fund	—		57,335		—		57,335
Asset-backed securities	—		6,277		—		6,277
Derivative financial instruments, net	—		216		—		216
Total assets measured at fair value	$	329,520	$	3,307,621	$	10,068	$	3,647,209



	April 2, 2016
(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	$	232,698	$	—	$	—	$	232,698
Non-financial institution securities	—		104,964		—		104,964
Foreign government and agency securities	—		98,967		—		98,967
Municipal bonds	—		1,003		—		1,003
Short-term investments:
Financial institution securities	—		284,853		—		284,853
Non-financial institution securities	—		460,148		—		460,148
Municipal Bonds	—		61,579		—		61,579
U.S. government and agency securities	81,873		110,420		—		192,293
Foreign government and agency securities	—		214,201		—		214,201
Mortgage-backed securities	—		1,067,157		—		1,067,157
Debt mutual fund	—		35,116		—		35,116
Bank loans	—		102,015		—		102,015
Asset-backed securities	—		210,051		—		210,051
Commercial mortgage-backed securities	—		206,470		—		206,470
Long-term investments:
Auction rate securities	—		—		9,977		9,977
Municipal bonds	—		7,100		—		7,100
Mortgage-backed securities	—		140,382		—		140,382
Debt mutual fund	—		56,785		—		56,785
Asset-backed securities	—		6,563		—		6,563
Derivative financial instruments, net	—		744		—		744
Total assets measured at fair value	$	314,571	$	3,168,518	$	9,977	$	3,493,066

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
(In thousands)	July 2, 2016		June 27, 2015
Balance as of beginning of period	$	9,977	$	10,312
Total realized and unrealized gains (losses):
Included in other comprehensive income	91		97
Balance as of end of period	$	10,068	$	10,409

As of July 2, 2016, marketable securities measured at fair value using Level 3 inputs were comprised of $10.1 million of student loan auction rate securities. There was no material change to the input assumptions of the pricing model for these student loan auction securities.

Financial Instruments Not Recorded at Fair Value on a Recurring Basis

The Company’s 2017 Convertible Notes, 2019 Notes and 2021 Notes are measured at fair value on a quarterly basis for disclosure purposes. The fair values of the 2017 Convertible Notes, 2019 Notes and 2021 Notes as of July 2, 2016 were approximately $963.1 million, $508.2 million and $524.0 million, 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).