Fair Value of Financial Assets and Liabilities (Tables)

9 Months Ended

Sep. 30, 2014

The following tables summarize the composition of our short- and long-term investments at September 30, 2014 and December 31, 2013 (tables in millions):



	September 30, 2014
	Amortized Cost		Unrealized Gains		Unrealized (Losses)			Aggregate Fair Value
U.S. government and agency obligations	$	2,321	$	3	$	(2	)	$	2,322
U.S. corporate debt securities	2,285		3		(3		)	2,285
High yield corporate debt securities	559		11		(9		)	561
Asset-backed securities	31		—		—			31
Municipal obligations	984		3		—			987
Auction rate securities	56		—		(4		)	52
Foreign debt securities	2,746		3		(2		)	2,747
Total fixed income securities	8,982		23		(20		)	8,985
Publicly traded equity securities	152		197		(9		)	340
Total	$	9,134	$	220	$	(29	)	$	9,325



	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
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

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 September 30, 2014 and December 31, 2013 (tables in millions):



	September 30, 2014
	Level 1		Level 2			Level 3		Total
Cash	$	1,590	$	—		$	—	$	1,590
Cash equivalents	3,965		500			—		4,465
U.S. government and agency obligations	1,316		1,006			—		2,322
U.S. corporate debt securities	—		2,285			—		2,285
High yield corporate debt securities	—		561			—		561
Asset-backed securities	—		31			—		31
Municipal obligations	—		987			—		987
Auction rate securities	—		—			52		52
Foreign debt securities	—		2,747			—		2,747
Publicly traded equity securities	340		—			—		340
Total cash and investments	$	7,211	$	8,117		$	52	$	15,380
Other items:
Strategic investments held at cost	$	—	$	—		$	312	$	312
Investment in joint venture	—		—			36		36
Long-term debt carried at discounted cost	—		(5,475		)	—		(5,475		)
Foreign exchange derivative assets	—		74			—		74
Foreign exchange derivative liabilities	—		(105		)	—		(105		)
Commodity derivative assets	—		2			—		2



	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
Convertible debt carried at discounted cost	—		(5,419		)	—		(5,419		)
Foreign exchange derivative assets	—		31			—		31
Foreign exchange derivative liabilities	—		(20		)	—		(20		)
Commodity derivative assets	—		4			—		4

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 three and nine months ended September 30, 2014 and 2013 (table in millions):



	For the Three Months Ended						For the Nine Months Ended
	September 30, 2014			September 30, 2013			September 30, 2014			September 30, 2013
Balance, beginning of the period	$	59		$	68		$	60		$	70
Calls at par value	(7		)	—			(7		)	(1		)
Other-than-temporary impairment loss	—			—			—			(1		)
(Increase) decrease in previously recognized unrealized losses included in other comprehensive income	—			(1		)	(1		)	(1		)
Balance, end of the period	$	52		$	67		$	52		$	67

The following table provides a summary of changes in fair value of our LenovoEMC joint venture for the three and nine months ended September 30, 2014 and 2013 (table in millions):



	For the Three Months Ended				For the Nine Months Ended
	September 30, 2014		September 30, 2013		September 30, 2014		September 30, 2013
Balance, beginning of the period	$	36	$	34	$	35	$	33
Realized gain included in other expense, net	—		—		1		1
Balance, end of period	$	36	$	34	$	36	$	34

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

Unrealized losses on investments at September 30, 2014 by investment category and length of time the investment has been in a continuous unrealized loss position are as follows (table in millions):



	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	$	938	$	(2	)	$	—	$	—		$	938	$	(2	)
U.S. corporate debt securities	986		(3		)	—		—			986		(3		)
High yield corporate debt securities	264		(9		)	—		—			264		(9		)
Auction rate securities	—		—			52		(4		)	52		(4		)
Foreign debt securities	1,159		(2		)	—		—			1,159		(2		)
Publicly traded equity securities	21		(8		)	—		(1		)	21		(9		)
Total	$	3,368	$	(24	)	$	52	$	(5	)	$	3,420	$	(29	)

Contractual Maturities of Investments

The contractual maturities of fixed income securities held at September 30, 2014 are as follows (table in millions):



	September 30, 2014
	Amortized Cost Basis		Aggregate Fair Value
Due within one year	$	2,039	$	2,041
Due after 1 year through 5 years	5,974		5,978
Due after 5 years through 10 years	550		550
Due after 10 years	419		416
Total	$	8,982	$	8,985

- 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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