Intel 2008 Annual Report Download - page 78

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Table of Contents
INTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Our financial instruments carried at fair value are detailed in the tables below, and the carrying values of our trading assets and
available-for-sale investments for 2008 and 2007 are detailed in “Note 4: Trading Assets” and “Note 5: Available-for-Sale
Investments.” The fair value of our cost basis loan participation notes approximated the carrying value as of December 27,
2008 (the fair value exceeded the carrying value by approximately $50 million as of December 29, 2007). We did not hold any
marketable equity method investments as of December 27, 2008; however, as of December 29, 2007, the fair value of our
marketable equity method investment exceeded the carrying value by $14 million. The fair value of our non-
marketable equity
investments exceeded the carrying value by approximately $300 million as of December 27, 2008 and included gross
unrealized losses of approximately $100 million, a majority of which were in a continuous unrealized loss position for less
than 12 months. The fair value of our non-marketable equity investments exceeded the carrying value by approximately
$600 million as of December 29, 2007. The fair value of these investments takes into account the movements of the equity and
venture capital markets as well as changes in the interest rate environment, and other economic variables.
The fair value of our long-term debt was approximately $280 million lower than the carrying value as of December 27, 2008
(the fair value exceeded the carrying value by approximately $65 million as of December 29, 2007). The fair value of our
long-term debt takes into consideration credit rating changes, equity price movements, interest rate changes, and other
economic variables.
Fair Value Hierarchy
SFAS No. 157 establishes three levels of inputs that may be used to measure fair value:
Level 1.
Quoted prices in active markets for identical assets or liabilities.
Level 1 assets and liabilities consist of certain of our money market fund deposits and marketable debt and equity instruments,
including equity securities offsetting deferred compensation, that are traded in an active market with sufficient volume and
frequency of transactions.
Level 2.
Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in
markets with insufficient volume or infrequent transactions (less active markets), or model-derived valuations in which all
significant inputs are observable or can be derived principally from or corroborated with observable market data for
substantially the full term of the assets or liabilities.
Level 2 assets consist of certain of our marketable debt and equity instruments with quoted market prices that are traded in less
active markets or priced using a quoted market price for similar instruments. Level 2 assets also include marketable debt
instruments priced using non-binding market consensus prices that can be corroborated with observable market data,
marketable equity securities with security-specific restrictions that would transfer to the buyer, as well as debt instruments and
derivative contracts priced using inputs that are observable in the market or can be derived principally from or corroborated
with observable market data. Marketable debt instruments in this category generally include commercial paper, bank time
deposits, municipal bonds, certain of our money market fund deposits, and a majority of floating-rate notes and corporate
bonds.
Level 3.
Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of assets
or liabilities.
Level 3 assets and liabilities include marketable debt instruments, non-marketable equity investments, derivative contracts,
and company-issued debt whose values are determined using inputs that are both unobservable and significant to the values of
the instruments being measured. Level 3 assets also include marketable debt instruments that are priced using non-binding
market consensus prices or non-binding broker quotes that we were unable to corroborate with observable market data.
Marketable debt instruments in this category generally include asset-backed securities and certain of our floating-rate notes
and corporate bonds.
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