Fair Value Measures

12 Months Ended

Oct. 31, 2011

Fair Value Measures [Abstract]

Fair Value Measures

Note 6. Fair Value Measures

ASC 820-10, Fair Value Measurements and Disclosures, defines fair value, establishes guidelines and enhances disclosure requirements for fair value measurements.

The accounting guidance requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The accounting guidance also establishes a fair value hierarchy based on the independence of the source and objective evidence of the inputs used. There are three fair value hierarchies based upon the level of inputs that are significant to fair value measurement:

Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical instruments in active markets;

Level 2—Observable inputs other than quoted prices included in Level 1 for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-driven valuations in which all significant inputs and significant value drivers are observable in active markets; and

Level 3—Unobservable inputs to the valuation derived from fair valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

On a recurring basis, the Company measures the fair value of certain of its assets and liabilities, which include cash equivalents, short-term investments, non-qualified deferred compensation plan assets, foreign currency derivative contracts and contingent consideration associated with business combinations.

The Company's cash equivalents and short-term investments are classified within Level 1 or Level 2 because they are valued using quoted market prices in an active market or alternative independent pricing sources and models utilizing market observable inputs.

The Company's non-qualified deferred compensation plan assets consist of money market and mutual funds invested in domestic and international marketable securities that are directly observable in active markets and are therefore classified within Level 1.

The Company's foreign currency derivative contracts are classified within Level 2 because these contracts are not actively traded and the valuation inputs are based on quoted prices and market observable data of similar instruments.

During fiscal 2010, the Company recorded a liability for contingent consideration of $7.8 million arising from a business combination which is payable over three years upon achievement of certain milestones. The fair value of the contingent consideration was determined at the acquisition date using the income approach based on the net present value of estimated payments and is re-measured at the end of each reporting period. The contingent consideration was classified within Level 3 as management assumptions for the valuation included discount rates and estimated probabilities of achievement of certain technical milestones which are unobservable in the market. Changes in fair value of the contingent consideration due to revisions to the estimated probabilities of achievement of technical milestones are recorded as operating expenses while changes due to time value are recorded in other income (expense), net. The Company recorded a reduction of $3.8 million during the year, in research and development expenses due to the change in fair value of the liability for the contingent consideration. As of October 31, 2011, the fair value of the liability for contingent consideration was estimated at $4.3 million.

Assets/Liabilities Measured at Fair Value on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are summarized below as of October 31, 2011:

			Fair Value Measurement Using
Description	Total		Quoted Prices in Active Markets for Identical Assets (Level  1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in thousands)
Assets
Cash equivalents:
Money market funds	$	543,770	$	543,770	$	—	$	—
Short-term investments:
Municipal securities		148,997		—		148,997		—
Prepaid and other current assets:
Foreign currency derivative contracts		2,161		—		2,161		—
Other long-term assets:
Deferred compensation plan assets		90,060		90,060		—		—
Total assets	$	784,988	$	633,830	$	151,158	$	—
Liabilities
Accounts payable and accrued liabilities:
Foreign currency derivative contracts	$	16,856	$	—	$	16,856	$	—
Contingent consideration		2,096		—		—		2,096
Other long-term liabilities:
Contingent consideration		2,200		—		—		2,200
Total liabilities	$	21,152	$	—	$	16,856	$	4,296

Assets and liabilities measured at fair value on a recurring basis are summarized below as of October 31, 2010:

Description	Total		Fair Value Measurement Using
			Quoted Prices in Active Markets for Identical Assets (Level  1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in thousands)
Assets
Cash equivalents:
Money market funds	$	487,199	$	487,199	$	—	$	—
Short-term investments:
Municipal securities		163,154		—		163,154		—
Other current assets:
Foreign currency derivative contracts		5,680		—		5,680		—
Other long-term assets:
Deferred compensation plan assets		83,330		83,330		—		—
Total assets	$	739,363	$	570,529	$	168,834	$	—
Liabilities
Account payable and accrued liabilities:
Foreign currency derivative contracts	$	13,180	$	—	$	13,180	$	—
Contingent consideration		3,121		—		—		3,121
Other long-term liabilities:
Contingent consideration		4,935		—		—		4,935
Total liabilities	$	21,236	$	—	$	13,180	$	8,056

Equity investments in privately-held companies are accounted for under the cost method of accounting. These equity investments (also called non-marketable equity securities) are classified within Level 3 as they are valued using significant unobservable inputs or data in an inactive market, and the valuation requires management judgment due to the absence of market price and inherent lack of liquidity. The non-marketable equity securities are measured and recorded at fair value when an event or circumstance which impacts the fair value of these securities indicates an other-than-temporary decline in value has occurred. As a result of the fair value measurement using the income approach, the Company recorded $1.0 million, $0.5 million, and $7.2 million of other-than-temporary impairments during fiscal 2011, 2010 and 2009, respectively. During fiscal 2011, an equity investment with a cost basis of $2.4 million was sold for $3.2 million resulting in a $0.8 million gain. This sale does not include a $1.5 million potential earn out receivable if certain milestones are met by this former investee. The carrying value of equity investments was $4.0 million and $7.4 million as of October 31, 2011 and of October 31, 2010, respectively.

The following tables present the non-marketable equity securities that were measured and recorded at fair value within long-term assets and the loss recorded during the following periods:

	Balance as of October 31, 2011		Significant Unobservable Inputs (Level 3)		Total (losses) for Fiscal 2011
	(in thousands)
Non-marketable equity securities	$	92	$	92	$	(999	)
	Balance as of October 31, 2010		Significant Unobservable Inputs (Level 3)		Total (losses) for Fiscal 2010
	(in thousands)
Non-marketable equity securities	$	452	$	452	$	(468)