MICRON TECHNOLOGY INC - 10-Q filing on 2013-07-08

Fair Value Measurements

9 Months Ended

May 30, 2013

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), 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

All marketable debt and equity investments are classified as available-for-sale and are carried at fair value. Assets measured at fair value on a recurring basis were as follows:



As of	May 30, 2013								August 30, 2012
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	2,018	$	—	$	—	$	2,018	$	2,159	$	—	$	—	$	2,159
Commercial paper	—		54		—		54		—		29		—		29
Certificates of deposit	—		32		—		32		—		27		—		27
Government securities	—		—		—		—		—		5		—		5
	2,018		86		—		2,104		2,159		61		—		2,220
Short-term investments:
Corporate bonds	—		45		—		45		—		31		—		31
Government securities	—		41		—		41		—		51		—		51
Commercial paper	—		25		—		25		—		10		—		10
Certificates of deposit	—		1		—		1		—		4		—		4
Asset-backed securities	—		—		—		—		—		4		—		4
	—		112		—		112		—		100		—		100
Long-term marketable investments:
Corporate bonds	—		211		—		211		—		203		—		203
Asset-backed securities	—		72		—		72		—		73		—		73
Government securities	—		55		—		55		—		88		—		88
Marketable equity securities	7		2		—		9		5		5		—		10
	7		340		—		347		5		369		—		374

	$	2,025	$	538	$	—	$	2,563	$	2,164	$	530	$	—	$	2,694

Government securities consist of securities issued directly by or deemed to be guaranteed by government entities such as U.S. and non-U.S. agency securities, government bonds and treasury securities. Level 2 securities are valued using information obtained from pricing services, which obtain quoted market prices for similar instruments, non-binding market consensus prices that are corroborated by observable market data, or various other methodologies, to determine the appropriate value at the measurement date. We perform supplemental analysis to validate information obtained from our pricing services. As of May 30, 2013, no adjustments were made to such pricing information.

Fair Value Measurements on a Nonrecurring Basis

During the third quarter of 2012, we identified events and circumstances that significantly impacted the fair value of our equity investment in Transform. As a result, we measured the fair value of our investment in Transform based on liquidation values of its assets and liabilities using unobservable inputs. For the third quarter of 2012, we recognized an other than temporary impairment charge of $69 million which reduced the carrying value of our investment in Transform to zero. (Also see "Restructure and Asset Impairments" note.)

Fair Value of Financial Instruments

Amounts reported as cash and equivalents, receivables, and accounts payable and accrued expenses approximate fair value. The estimated fair value and carrying value of debt instruments (carrying value excludes the equity components of our convertible notes classified in equity) were as follows:



As of	May 30, 2013				August 30, 2012
	Fair Value		Carrying Value		Fair Value		Carrying Value
Convertible notes	$	3,825	$	2,484	$	2,669	$	2,321
Other notes	220		228		56		58

The fair values of our convertible debt instruments were determined based on inputs that are observable in the market or that could be derived from, or corroborated with, observable market data, including our stock price and interest rates based on similar debt issued by parties with credit ratings similar to ours (Level 2). The fair value of our other debt instruments was estimated based on discounted cash flows using inputs that are observable in the market or that could be derived from, or corroborated with, observable market data, including interest rates based on similar debt issued by parties with credit ratings similar to ours (Level 2).