Fair Value of Financial Assets and Liabilities (Tables)

12 Months Ended

Dec. 31, 2013

The following tables summarize the composition of our short- and long-term investments at December 31, 2013 and 2012 (tables in millions):



	December 31, 2013
	Amortized Cost		Unrealized Gains		Unrealized (Losses)			Aggregate Fair Value
U.S. government and agency obligations	$	3,726	$	4	$	(3	)	$	3,727
U.S. corporate debt securities	2,260		8		(2		)	2,266
High yield corporate debt securities	515		19		(3		)	531
Asset-backed securities	—		—		—			—
Municipal obligations	860		3		—			863
Auction rate securities	63		—		(3		)	60
Foreign debt securities	2,152		6		(3		)	2,155
Total fixed income securities	9,576		40		(14		)	9,602
Publicly traded equity securities	72		24		(1		)	95
Total	$	9,648	$	64	$	(15	)	$	9,697

We held approximately $2,155 million in foreign debt securities at December 31, 2013. These securities have an average credit rating of A+, and approximately 4% of these securities are deemed sovereign debt with an average credit rating of AAA. None of the securities deemed sovereign debt are from Greece, Italy, Ireland, Portugal, Spain or Cyprus.



	December 31, 2012
	Amortized Cost		Unrealized Gains		Unrealized (Losses)			Aggregate Fair Value
U.S. government and agency obligations	$	2,191	$	10	$	(1	)	$	2,200
U.S. corporate debt securities	1,480		10		—			1,490
High yield corporate debt securities	486		34		(1		)	519
Asset-backed securities	2		—		—			2
Municipal obligations	1,032		3		—			1,035
Auction rate securities	74		—		(4		)	70
Foreign debt securities	1,270		9		—			1,279
Total fixed income securities	6,535		66		(6		)	6,595
Publicly traded equity securities	47		41		(1		)	87
Total	$	6,582	$	107	$	(7	)	$	6,682

Fair Value Hierarchy For Financial Assets and Liabilities Measured at Fair Value

The following tables represent our fair value hierarchy for our financial assets and liabilities measured at fair value as of December 31, 2013 and 2012 (in millions):



	December 31, 2013
	Level 1		Level 2			Level 3		Total
Cash	$	1,725	$	—		$	—	$	1,725
Cash equivalents	5,674		492			—		6,166
U.S. government and agency obligations	1,797		1,930			—		3,727
U.S. corporate debt securities	—		2,266			—		2,266
High yield corporate debt securities	—		531			—		531
Municipal obligations	—		863			—		863
Auction rate securities	—		—			60		60
Foreign debt securities	—		2,155			—		2,155
Publicly traded equity securities	95		—			—		95
Total cash and investments	$	9,291	$	8,237		$	60	$	17,588
Other items:
Strategic investments held at cost	$	—	$	—		$	379	$	379
Investment in joint venture	—		—			35		35
Long-term debt carried at discounted issuance cost	—		(5,419		)	—		(5,419		)
Foreign exchange derivative assets	—		31			—		31
Foreign exchange derivative liabilities	—		(20		)	—		(20		)
Commodity derivative assets	—		4			—		4



	December 31, 2012
	Level 1		Level 2			Level 3		Total
Cash	$	1,454	$	—		$	—	$	1,454
Cash equivalents	2,898		362			—		3,260
U.S. government and agency obligations	1,327		873			—		2,200
U.S. corporate debt securities	—		1,490			—		1,490
High yield corporate debt securities	—		519			—		519
Asset-backed securities	—		2			—		2
Municipal obligations	—		1,035			—		1,035
Auction rate securities	—		—			70		70
Foreign debt securities	—		1,279			—		1,279
Publicly traded equity securities	87		—			—		87
Total cash and investments	$	5,766	$	5,560		$	70	$	11,396
Other items:
Strategic investments held at cost	$	—	$	—		$	364	$	364
Investment in joint venture	—		—			33		33
Convertible debt carried at discounted issuance cost	—		(2,666		)	—		(2,666		)
Foreign exchange derivative assets	—		30			—		30
Foreign exchange derivative liabilities	—		(35		)	—		(35		)
Commodity derivative liabilities	—		(1		)	—		(1		)

Changes in Fair Value of Level 3 Financial Assets

The following table provides a summary of changes in fair value of our Level 3 auction rate securities for the years ended December 31, 2013 and 2012 (table in millions):



	2013			2012
Balance, beginning of the period	$	70		$	75
Sales	(8		)	—
Calls at par value	(1		)	(7		)
Other-than-temporary impairment loss	(1		)	(3		)
Decrease in previously recognized unrealized losses included in other comprehensive income	—			5
Balance, end of the period	$	60		$	70

The following table provides a summary of changes in fair value of our LenovoEMC joint venture for the years ended December 31, 2013 and 2012 (table in millions):



	2013		2012
Balance, beginning of the period	$	33	$	—
Realized gain included in other income (expense), net	2		33
Balance, end of period	$	35	$	33

Unrealized Losses on Investments by Investment Category and Length of Time in Continuous Unrealized Loss Position

Unrealized losses on investments at December 31, 2013 and 2012 by investment category and length of time the investment has been in a continuous unrealized loss position are as follows (table in millions):



December 31, 2013	Less Than 12 Months					12 Months or Greater					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
U.S. government and agency obligations	$	1,161	$	(3	)	$	20	$	—		$	1,181	$	(3	)
U.S. corporate debt securities	532		(2		)	17		—			549		(2		)
High yield corporate debt securities	120		(3		)	—		—			120		(3		)
Municipal obligations	51		—			—		—			51		—
Auction rate securities	—		—			60		(3		)	60		(3		)
Foreign debt securities	695		(3		)	6		—			701		(3		)
Publicly traded equity securities	—		—			25		(1		)	25		(1		)
Total	$	2,559	$	(11	)	$	128	$	(4	)	$	2,687	$	(15	)



December 31, 2012	Less Than 12 Months					12 Months or Greater					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
U.S. government and agency obligations	$	188	$	(1	)	$	12	$	—		$	200	$	(1	)
U.S. corporate debt securities	266		—			—		—			266		—
High yield corporate debt securities	21		—			1		(1		)	22		(1		)
Municipal obligations	258		—			12		—			270		—
Auction rate securities	—		—			70		(4		)	70		(4		)
Foreign debt securities	178		—			2		—			180		—
Publicly traded equity securities	1		(1		)	—		—			1		(1		)
Total	$	912	$	(2	)	$	97	$	(5	)	$	1,009	$	(7	)

Contractual Maturities of Investments

The contractual maturities of fixed income securities held at December 31, 2013 are as follows (table in millions):



	December 31, 2013
	Amortized Cost Basis		Aggregate Fair Value
Due within one year	$	2,695	$	2,697
Due after 1 year through 5 years	5,855		5,871
Due after 5 years through 10 years	519		531
Due after 10 years	507		503
Total	$	9,576	$	9,602

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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