Medtronic 2012 Annual Report Download - page 104

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Medtronic, Inc.
Notes to Consolidated Financial Statements (Continued)
87
The following table represents the range of the unobservable inputs utilized in the fair value
measurement of the auction rate securities classified as Level 3 as of April 27, 2012:
Valuation Range
($ in millions) Technique Unobservable Input (Weighted Average)
Auction rate securities Discounted cash flow Years to principal recovery 2 yrs - 12 yrs (3 yrs)
Illiquidity premium 6%
The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the ability
to observe valuation inputs may result in a reclassification of levels for certain securities within the fair
value hierarchy. The Company’s policy is to recognize transfers into and out of levels within the fair value
hierarchy at the end of the fiscal quarter in which the actual event or change in circumstances that caused
the transfer occurs. There were no transfers between Level 1, Level 2, or Level 3 during the fiscal years
ended April 27, 2012 or April 29, 2011. When a determination is made to classify an asset or liability within
Level 3, the determination is based upon the significance of the unobservable inputs to the overall fair value
measurement. The following table provides a reconciliation of the beginning and ending balances of items
measured at fair value on a recurring basis that used significant unobservable inputs (Level 3):
Total Level 3 Corporate debt Auction rate Mortgage- Other asset-
(in millions) Investments securities securities backed securities backed securities
___________ ________________ ________________ ________________ ________________ ________________
Balance as of April 29, 2011 . . . . . $ 191 $ 17 $ 133 $ 35 $6
Total realized losses and
other-than-temporary
impairment losses included
in earnings . . . . . . . . . . . . . . . . . . . (3) (1) – (1) (1)
Total unrealized gains/(losses)
included in other
comprehensive income . . . . . . . . 918(1) 1
Settlements . . . . . . . . . . . . . . . . . . . (25) (7) (14) (4) –
________________ ________________ ________________ ________________ ________________
Balance as of April 27, 2012 . . . . . $ 172 $ 10 $ 127 $ 29 $ 6
________________ ________________ ________________ ________________ ________________
________________ ________________ ________________ ________________ ________________
Total Level 3 Corporate debt Auction rate Mortgage- Other asset-
(in millions) Investments securities securities backed securities backed securities
___________ ________________ ________________ ________________ ________________ ________________
Balance as of April 30, 2010 . . . . . $ 213 $ 16 $ 142 $ 39 $ 16
Total realized losses and
other-than-temporary
impairment losses included
in earnings . . . . . . . . . . . . . . . . . . . (6) (2) _ (4) _
Total unrealized gains/(losses)
included in other
comprehensive income . . . . . . . . 27 4 20 3_
Settlements . . . . . . . . . . . . . . . . . . . (43) (1) (29) (3) (10)
________________ ________________ ________________ ________________ ________________
Balance as of April 29, 2011 . . . . . $ 191 $ 17 $ 133 $ 35 $6
________________ ________________ ________________ ________________ ________________
________________ ________________ ________________ ________________ ________________
Assets and Liabilities That Are Measured at Fair Value on a Nonrecurring Basis
Non-financial assets such as equity and other securities that are accounted for using the cost or
equity method, goodwill and IPR&D, intangible assets, and property, plant, and equipment are measured
at fair value when there is an indicator of impairment and recorded at fair value only when an impairment
is recognized.
The Company holds investments in equity and other securities that are accounted for using the cost or
equity method, which are classified as long-term investments in the consolidated balance sheets. The
aggregate carrying amount of these investments was $508 million as of April 27, 2012 and $652 million as of
April 29, 2011. These cost or equity method investments are measured at fair value on a nonrecurring basis.
The fair value of the Company’s cost or equity method investments is not estimated if there are no identified
events or changes in circumstance that may have a significant adverse effect on the fair value of these
investments. During fiscal years 2012, 2011, and 2010, the Company determined that the fair values of certain