Crucial 2011 Annual Report Download - page 72

For 2011 , we recognized $ 49 million of net derivative gains in other comprehensive income from the effective portion of cash flow
hedges. The ineffective and excluded portions of cash flow hedges recognized in other operating income (expense) were not material in
2011. Amounts in accumulated other comprehensive income are amortized to manufacturing cost over the useful life of the underlying hedged
equipment and reclassified to earnings when inventory is sold.
Fair Value Measurements
Accounting standards establish three levels of inputs that may be used to measure fair value: quoted prices in active markets for identical
assets or liabilities (referred to as Level 1), observable inputs other than Level 1 that are observable for the asset or liability either directly or
indirectly (referred to as Level 2) and unobservable inputs to the valuation methodology that are significant to the measurement of fair value of
assets or liabilities (referred to as Level 3).
Fair Value Measurements on a Recurring Basis
Assets measured at fair value on a recurring basis were as follows:
Certificates of deposit : Certificates of deposit assets were valued using observable inputs in active markets for similar assets (Level 2).
Marketable equity investments : All marketable equity investments were classified as available-for-sale. As of September 1, 2011,
accumulated other comprehensive income included gross gains of $32 million and gross losses of $7 million from our available-for-
sale securities.
As of September 1, 2011, available-for-sale securities with a fair value of $15 million had unrealized losses of $7 million and been unrealized for
less than three months. Gross realized gains and gross realized losses on sales of our marketable equity investments were not material for 2011,
2010 or 2009. Marketable equity investments as of September 1, 2011 included approximately 20 million ordinary shares of Tower received in
connection with our sale of the Japan Fab, which were valued using quoted market prices in an active market and discounted using a protective put
model for our resale restriction (Level 2).
Assets held for sale
: Assets held for sale primarily included semiconductor equipment and facilities. Fair value for semiconductor equipment
is based on quotations obtained from equipment dealers, which consider the remaining useful life and configuration of the equipment, and fair
value of facilities is determined based on sales of similar facilities and properties in comparable markets (Level 3). Losses recognized in 2011
and
2010 due to fair value measurements using Level 3 inputs were not material .
Fair Value Measurements on a Nonrecurring Basis
We hold strategic investments in equity securities which are accounted for under the cost method. As of September 1, 2011, the aggregate
carrying amount of all cost method investments was $12 million .
69
2011 2010
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Money market
(1)
$
1,462
— —
$
1,462
$
2,170
—
—
$
2,170
Certificates of deposit
(2)
—
155
—
155
—
705
—
705
Marketable equity
investments
(3)
37
15
—
52
19
—
—
19
Assets held for sale
(3)
— —
35
35
—
—
56
56
$
1,499
$
170
$
35
$
1,704
$
2,189
$
705
$
56
$
2,950
(1)
Included in cash
and equivalents.
(2)
Amounts as of
September 1, 2011 were included in cash and equivalents. As of September 2, 2010 , $ 371 million was included in cash and
equivalents and $ 334 million was included in restricted cash.
(3)
Included in other noncurrent assets.