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Medtronic, Inc.
Notes to Consolidated Financial Statements (Continued)
85
7. Fair Value Measurements
The Company adopted ASC Update No. 2011-04, Fair Value Measurement (Topic 820): Amendments to
Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs, in the
fourth quarter of fiscal year 2012, which resulted in additional fair value measurement disclosures.
The Company follows the authoritative guidance on fair value measurements and disclosures with
respect to assets and liabilities that are measured at fair value on both a recurring and non-recurring basis.
Under this guidance, fair value is defined as the exit price, or the amount that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market participants as of the
measurement date. The authoritative guidance also establishes a hierarchy for inputs used in measuring fair
value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring
that the most observable inputs be used when available. Observable inputs are inputs market participants
would use in valuing the asset or liability developed based on market data obtained from sources
independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about
the factors market participants would use in valuing the asset or liability developed based upon the best
information available in the circumstances. The categorization of financial assets and financial liabilities
within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value
measurement. The hierarchy is broken down into three levels defined as follows:
• Level 1 – Inputs are quoted prices in active markets for identical assets or liabilities.
• Level 2 – Inputs include 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 and inputs (other
than quoted prices) that are observable for the asset or liability, either directly or indirectly.
• Level 3 – Inputs are unobservable for the asset or liability.
See the section below titled Valuation Techniques for further discussion of how the Company
determines fair value for investments.
Assets and Liabilities That Are Measured at Fair Value on a Recurring Basis
The authoritative guidance is principally applied to financial assets and liabilities such as marketable
equity securities and debt securities that are classified and accounted for as trading, available-for-sale, and
derivative instruments. Derivatives include cash flow hedges, freestanding derivative forward contracts, and
interest rate swaps. These items are marked-to-market at each reporting period. The information in the
following paragraphs and tables primarily addresses matters relative to these financial assets and liabilities.
The following tables provide information by level for assets and liabilities that are measured at fair
value on a recurring basis:
Fair Value Measurements
Fair Value as of Using Inputs Considered as
__________________________________ ____________
(in millions) April 27, 2012 Level 1 Level 2 Level 3
___________ _______________ _____________ _____________ _____________
Assets:
Corporate debt securities . . . . . . . . . . . . . . . . $ 3,541 $ –$ 3,531 $ 10
Auction rate securities . . . . . . . . . . . . . . . . . . . 127 ––127
Mortgage-backed securities . . . . . . . . . . . . . . 839 – 810 29
U.S. government and agency securities . . . . . 3,084 1,511 1,573 –
Foreign government and agency securities . . 67 – 67 –
Certificates of deposit . . . . . . . . . . . . . . . . . . . 47 – 47 –
Other asset-backed securities . . . . . . . . . . . . . 537 – 531 6
Marketable equity securities . . . . . . . . . . . . . . 253 253 ––
Exchange-traded funds . . . . . . . . . . . . . . . . . . 46 46 ––
Derivative assets . . . . . . . . . . . . . . . . . . . . . . . . 254 87 167 –
_______________ _____________ _____________ _____________
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,795 $ 1,897 $ 6,726 $ 172
_______________ _____________ _____________ _____________
_______________ _____________ _____________ _____________
Liabilities:
Derivative liabilities . . . . . . . . . . . . . . . . . . . . . $ 82 $ 37 $ 45 $–
_______________ _____________ _____________ _____________
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 82 $ 37 $ 45 $–
_______________ _____________ _____________ _____________
_______________ _____________ _____________ _____________