Annual report pursuant to Section 13 and 15(d)

Note 2. Fair Value Measurements

 v2.3.0.11
Note 2. Fair Value Measurements
 12 Months Ended
Jun. 30, 2011
Fair Value Measurements [Abstract]  
Fair Value Measurements
FAIR VALUE MEASUREMENTS
The Company’s financial assets and liabilities are measured and recorded at fair value, except for equity investments in privately-held companies. These equity investments are generally accounted for under the cost method of accounting and are periodically assessed for other-than-temporary impairment when an event or circumstance indicates that an other-than-temporary decline in value may have occurred. The Company’s non-financial assets, such as goodwill, intangible assets, and property, plant and equipment, are recorded at cost and are assessed for impairment when an event or circumstance indicates that an other-than-temporary decline in value may have occurred.
Fair Value Hierarchy. The authoritative guidance for fair value measurements establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:
Level 1
  
Valuations based on quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.
 
 
Level 2
  
Valuations based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.
 
 
Level 3
  
Valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
All of the Company’s financial instruments were classified within Level 1 or Level 2 of the fair value hierarchy as of June 30, 2011, because they were valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. The types of instruments valued based on quoted market prices in active markets include money market funds, U.S. Government agency securities and U.S. Treasury securities. Such instruments are generally classified within Level 1 of the fair value hierarchy.
The types of instruments valued based on other observable inputs include U.S. Government agency securities, commercial paper, corporate debt securities, municipal securities and sovereign securities. The market inputs used to value these instruments generally consist of market yields, reported trades and broker/dealer quotes. Such instruments are generally classified within Level 2 of the fair value hierarchy.
The principal market in which the Company executes its foreign currency contracts is the institutional market in an over-the-counter environment with a relatively high level of price transparency. The market participants usually are large commercial banks. The Company's foreign currency contracts’ valuation inputs are based on quoted prices and quoted pricing intervals from public data sources and do not involve management judgment. These contracts are typically classified within Level 2 of the fair value hierarchy.
The types of instruments valued based on unobservable inputs included the auction rate securities that were held by the Company as of and prior to June 30, 2010. Such instruments were classified within Level 3 of the fair value hierarchy. The Company estimated the fair value of these auction rate securities using a discounted cash flow model incorporating assumptions that market participants would use in their estimates of fair value. Some of these assumptions included estimates for interest rates, timing and amount of cash flows and expected holding periods of the auction rate securities.
 
Financial assets (excluding cash held in operating accounts and time deposits) and liabilities measured at fair value on a recurring basis as of June 30, 2011 were as follows: 
(In thousands)
Total
 
Quoted Prices in
Active Markets
for Identical
Assets (Level  1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable Inputs
(Level 3)
U.S. Treasury securities
$
58,896

 
$
52,396

 
$
6,500

 
$
—

U.S. Government agency securities
320,183

 
320,183

 
—

 
—

Municipal securities
38,957

 
—

 
38,957

 
—

Corporate debt securities
875,385

 
—

 
875,385

 
—

Money market and other
481,770

 
481,770

 
—

 
—

Sovereign securities
32,086

 
14,696

 
17,390

 
—

Total marketable securities and cash equivalents(1)
1,807,277

 
869,045

 
938,232

 
—

Executive Deferred Savings Plan:
 
 
 
 
 
 
 
Money market and other
1,806

 
1,806

 
—

 
—

Mutual funds
126,227

 
95,971

 
30,256

 
—

Executive Deferred Savings Plan total
128,033

 
97,777

 
30,256

 
—

Derivative assets
1,970

 
—

 
1,970

 
—

Total financial assets(1)
$
1,937,280

 
$
966,822

 
$
970,458

 
$
—

Derivative liabilities
$
(2,127
)
 
$
—

 
$
(2,127
)
 
$
—

Total financial liabilities
$
(2,127
)
 
$
—

 
$
(2,127
)
 
$
—

__________________ 
(1) Excludes cash of $165.9 million held in operating accounts and time deposits of $65.4 million as of June 30, 2011.
Financial assets (excluding cash held in operating accounts and time deposits) and liabilities measured at fair value on a recurring basis as of June 30, 2010 were as follows: 
(In thousands)
Total
 
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable Inputs
(Level 3)
U.S. Treasury securities
$
42,293

 
$
35,194

 
$
7,099

 
$
—

U.S. Government agency securities
250,280

 
243,144

 
7,136

 
—

Municipal securities
55,459

 
—

 
55,459

 
—

Corporate debt securities
603,156

 
—

 
603,156

 
—

Money market and other
334,674

 
334,663

 
11

 
—

Sovereign securities
39,355

 
10,500

 
28,855

 
—

Auction rate securities
16,825

 
—

 
—

 
16,825

Total marketable securities and cash equivalents(1)
1,342,042

 
623,501

 
701,716

 
16,825

Executive Deferred Savings Plan:
 
 
 
 
 
 
 
Money market and other
4

 
4

 
—

 
—

Mutual funds
109,226

 
85,254

 
23,972

 
—

Executive Deferred Savings Plan total
109,230

 
85,258

 
23,972

 
—

Derivative assets
$
296

 
$
—

 
$
296

 
$
—

Total financial assets(1)
$
1,451,568

 
$
708,759

 
$
725,984

 
$
16,825

Derivative liabilities
$
(5,824
)
 
$
—

 
$
(5,824
)
 
$
—

Total financial liabilities
$
(5,824
)
 
$
—

 
$
(5,824
)
 
$
—


__________________ 
(1) Excludes cash of $153.6 million held in operating accounts and time deposits of $38.4 million as of June 30, 2010. 
Financial assets (excluding cash held in operating accounts and time deposits) and liabilities measured at fair value on a recurring basis were presented in the Company’s Consolidated Balance Sheet as of June 30, 2011 as follows:
 
(In thousands)
Total
 
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable Inputs
(Level 3)
Cash equivalents
$
514,162

 
$
487,780

 
$
26,382

 
$
—

Marketable securities
1,293,115

 
381,265

 
911,850

 
—

Other current assets
1,970

 
—

 
1,970

 
—

Other non-current assets
128,033

 
97,777

 
30,256

 
—

Total financial assets(1)
$
1,937,280

 
$
966,822

 
$
970,458

 
$
—

Other current liabilities
$
(2,127
)
 
$
—

 
$
(2,127
)
 
$
—

Total financial liabilities
$
(2,127
)
 
$
—

 
$
(2,127
)
 
$
—

__________________ 
(1) Excludes cash of $165.9 million held in operating accounts and time deposits of $65.4 million as of June 30, 2011.
Financial assets (excluding cash held in operating accounts and time deposits) and liabilities measured at fair value on a recurring basis were presented in the Company’s Consolidated Balance Sheet as of June 30, 2010 as follows: 
(In thousands)
Total
 
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable Inputs
(Level 3)
Cash equivalents
$
363,623

 
$
343,524

 
$
20,099

 
$
—

Marketable securities
978,419

 
279,977

 
681,617

 
16,825

Other current assets
296

 
—

 
296

 
—

Other non-current assets
109,230

 
85,258

 
23,972

 
—

Total financial assets(1)
$
1,451,568

 
$
708,759

 
$
725,984

 
$
16,825

Other current liabilities
$
(5,824
)
 
$
—

 
$
(5,824
)
 
$
—

Total financial liabilities
$
(5,824
)
 
$
—

 
$
(5,824
)
 
$
—

__________________ 
(1) Excludes cash of $153.6 million held in operating accounts and time deposits of $38.4 million as of June 30, 2010. 
Changes in the Company's Level 3 securities for the fiscal years ended June 30, 2011 and 2010 were as follows: 
 
2011
 
2010
Beginning aggregate estimated fair value of Level 3 securities
$
16,825

 
$
40,584

Unrealized gain included in income
—

 
66

Net settlements
(16,825
)
 
(23,825
)
Ending aggregate estimated fair value of Level 3 securities
$
—

 
$
16,825