Intel 2012 Annual Report Download - page 65

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Financial Instruments Not Recorded at Fair Value on a Recurring Basis
We measure the fair value of our non-marketable cost method investments, indebtedness carried at amortized cost, cost
method loans receivable, and reverse repurchase agreements with original maturities greater than approximately three
months quarterly; however, the assets are recorded at fair value only when an impairment charge is recognized. The
carrying amounts and fair values of certain financial instruments not recorded at fair value on a recurring basis as of
December 29, 2012 and December 31, 2011 were as follows:
2012
Fair Value Measured Using
(In Millions)
Carrying
Amount
Level 1
Level 2
Level 3
Fair Value
Non-marketable cost method investments ............................
$ 1,202
$ —
$ —
$ 1,766
$ 1,766
Loans receivable ...................................................................
$ 199
$ —
$ 150
$ 48
$ 198
Reverse repurchase agreements ..........................................
$ 50
$ —
$ 50
$ —
$ 50
Long-term debt ......................................................................
$ 13,136
$ 11,442
$ 2,926
$ —
$ 14,368
Short-term debt......................................................................
$ 48
$ —
$ 48
$ —
$ 48
NVIDIA Corporation cross-license agreement liability...........
$ 875
$ —
$ 890
$ —
$ 890
2011
Fair Value Measured Using
(In Millions)
Carrying
Amount
Level 1
Level 2
Level 3
Fair Value
Non-marketable cost method investments ............................
$ 1,129
$ —
$ —
$ 1,861
$ 1,861
Loans receivable ...................................................................
$ 132
$ —
$ 132
$ —
$ 132
Long-term debt ......................................................................
$ 6,953
$ 5,287
$ 2,448
$ —
$ 7,735
Short-term debt......................................................................
$ 200
$ —
$ 200
$ —
$ 200
NVIDIA Corporation cross-license agreement liability...........
$ 1,156
$ —
$ 1,174
$ —
$ 1,174
As of December 29, 2012 and December 31, 2011, the unrealized loss position of our non-marketable cost method
investments was insignificant.
Our non-marketable cost method investments are valued using the market and income approaches. The market approach
includes the use of financial metrics and ratios of comparable public companies. The selection of comparable companies
requires management judgment and is based on a number of relevant factors, including comparable companies’ sizes,
growth rates, industries, and development stages. The income approach includes the use of a discounted cash flow
model, which requires significant estimates for investees’ revenue, costs, and discount rates based on the risk profile of
comparable companies. Estimates of revenues and costs are developed using available market, historical, and forecast
data. The valuation of these non-marketable cost method investments also takes into account variables such as
conditions reflected in the capital markets, recent financing activities by the investees, the investees’ capital structure, the
terms of the investees’ issued interests, and the lack of marketability of the investments.
The carrying amount and fair value of loans receivable exclude loans measured and recorded at a fair value of $780
million as of December 29, 2012 ($748 million as of December 31, 2011). The carrying amount and fair value of long-term
debt exclude long-term debt measured and recorded at a fair value of $131 million as of December 31, 2011. Short-term
debt includes our commercial paper outstanding as of December 31, 2011, and the carrying amount and fair value
exclude drafts payable.
The fair value of our loans receivable and reverse repurchase agreements, including those held at fair value, is
determined using a discounted cash flow model, with all significant inputs derived from or corroborated with observable
market data, such as LIBOR-based yield curves, currency spot and forward rates, and credit ratings. The credit quality of
these assets remains high, with credit ratings of A/A2 or better for most of our loans receivable and all of our reverse
repurchase agreements as of December 29, 2012. Our long-term debt recognized at amortized cost comprises our senior
notes and our convertible debentures. The fair value of our senior notes is determined using active market prices, and it is
therefore classified as Level 1. The fair value of our convertible long-term debt is determined using discounted cash flow
models with observable market inputs, and it takes into consideration variables such as interest rate changes, comparable
securities, subordination discount, and credit-rating changes.
The NVIDIA Corporation cross-license agreement liability in the preceding table was incurred as a result of entering into a
long-term patent cross-license agreement with NVIDIA in January 2011. We agreed to make payments to NVIDIA over six
years. As of December 29, 2012 and December 31, 2011, the carrying amount of the liability arising from the agreement
was classified within other accrued liabilities and other long-term liabilities, as applicable. The fair value is determined
using a discounted cash flow model, which discounts future cash flows using our incremental borrowing rates.