Texas Instruments 2012 Annual Report Download - page 24

ANNUAL
REPORT
TEXAS INSTRUMENTS22 • 2012 ANNUAL REPORT
Fair-value considerations
We measure and report certain financial assets and liabilities at fair value on a recurring basis. Fair value is defined as the price that
would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset
or liability in an orderly transaction between market participants on the measurement date.
The three-level hierarchy discussed below indicates the extent and level of judgment used to estimate fair-value measurements.
Level 1 – Uses unadjusted quoted prices that are available in active markets for identical assets or liabilities as of the reporting date.
Level 2 – Uses inputs other than Level 1 that are either directly or indirectly observable as of the reporting date through correlation
with market data, including quoted prices for similar assets and liabilities in active markets and quoted prices in markets
that are not active. Level 2 also includes assets and liabilities that are valued using models or other pricing methodologies
that do not require significant judgment since the input assumptions used in the models, such as interest rates and
volatility factors, are corroborated by readily observable data. Our Level 2 assets consist of corporate obligations and
some U.S. government agency and Treasury securities. We utilize a third-party data service to provide Level 2 valuations,
verifying these valuations for reasonableness relative to unadjusted quotes obtained from brokers or dealers based on
observable prices for similar assets in active markets.
Level 3 – Uses inputs that are unobservable, supported by little or no market activity and reflect the use of significant management
judgment. These values are generally determined using pricing models that utilize management estimates of market
participant assumptions.
The following are our assets and liabilities that were accounted for at fair value on a recurring basis as of December 31, 2012 and
2011. These tables do not include cash on hand, assets held by our postretirement plans, or assets and liabilities that are measured at
historical cost or any basis other than fair value.
Fair Value
December 31, 2012 Level 1 Level 2 Level 3
Assets
Money market funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 211 $ 211 $ — $ —
Corporate obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 513 — 513 —
U.S. Government agency and Treasury securities . . . . . . . . . . . . . . . . . 3,019 1,145 1,874 —
Mutual funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159 159 — —
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,902 $1,515 $2,387 $ —
Liabilities
Deferred compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 174 $ 174 $ — $ —
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 174 $ 174 $ — $ —
Fair Value
December 31, 2011 Level 1 Level 2 Level 3
Assets
Money market funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 55 $ 55 $ — $ —
Corporate obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 294 — 294 —
U.S. Government agency and Treasury securities . . . . . . . . . . . . . . . . . 2,121 606 1,515 —
Auction-rate securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134 — — 134
Mutual funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169 169 — —
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,773 $ 830 $ 1,809 $ 134
Liabilities
Deferred compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 191 $ 191 $ — $ —
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 191 $ 191 $ — $ —