Medtronic 2009 Annual Report Download - page 76

72 Medtronic, Inc.
Notes to Consolidated Financial Statements
(continued)
The following table provides information by level for assets and
liabilities that are measured at fair value, as defined by SFAS No.
157, on a recurring basis.
Fair Value at
Fair Value Measurements
Using Inputs Considered as
(in millions) April 24, 2009 Level 1Level 2Level 3
Assets:
Corporate debt
securities $ 805 $ 8 $ 771 $ 26
Auction rate securities 119 — — 119
Mortgage backed
securities 746 — 709 37
Government and
agency securities 697 174 523 —
Certificates of deposit 2—2—
Other asset backed
securities 278 — 255 23
Marketable equity
securities 12 12 — —
Derivative assets 436 436 — —
Total assets $3,095 $630 $2,260 $205
Liabilities:
Derivative liabilities $ 31 $ 31 $ — $ —
Total liabilities $ 31 $ 31 $ — $ —
Level 3 Valuation Techniques Financial assets are considered Level
3 when their fair values are determined using pricing models,
discounted cash flow methodologies or similar techniques and at
least one significant model assumption or input is unobservable.
Level 3 financial assets also include certain investment securities
for which there is limited market activity such that the
determination of fair value requires significant judgment or
estimation. Level 3 investment securities primarily include certain
corporate debt securities, auction rate securities, certain mortgage
backed securities and certain asset backed securities for which
there was a decrease in the observability of market pricing for
these investments. At April 24, 2009, these securities were valued
primarily using broker pricing models that incorporate transaction
details such as contractual terms, maturity, timing and amount of
future cash flows, as well as assumptions about liquidity and
credit valuation adjustments of marketplace participants at April
24, 2009.
The following table provides a reconciliation of the beginning
and ending balances of items measured at fair value on a recurring
basis in the table above that used significant unobservable inputs
(Level 3).
(in millions)
Balance at April 26, 2008 $ 448
Total realized losses and other-than-temporary impairment
losses included in earnings (38)
Total unrealized losses included in other comprehensive income (84)
Net purchases, issuances, and settlements (209)
Net transfers in (out) of Level 3 88
Balance at April 24, 2009 $ 205
Realized gains or losses included in earnings are included in
interest expense/(income), net in the consolidated statement of
earnings.
Assets and Liabilities That Are Measured at Fair Value on a
Nonrecurring Basis The Company had no financial assets or
liabilities that are measured on a nonrecurring basis subsequent
to their initial recognition during fiscal year 2009.
The aspects of SFAS No. 157 for which the effective date was
deferred under FSP No. 157-2 until fiscal year 2010 relate to
nonfinancial assets and liabilities that are measured at fair value,
but are recognized or disclosed at fair value on a nonrecurring
basis. This deferral applies to such items as nonfinancial assets
and liabilities initially measured at fair value in a business
combination (but not measured at fair value in subsequent
periods) or nonfinancial long-lived asset groups measured at fair
value for an impairment assessment.
7. Goodwill and Other Intangible Assets
The changes in the carrying amount of goodwill for fiscal years
2009 and 2008 are as follows:
Fiscal Year
(in millions) 2009 2008
Beginning balance $ 7,519 $ 4,327
Goodwill as a result of acquisitions 731 3,178
Purchase accounting adjustments, net (40) (10)
Currency adjustment, net (15) 24
Ending balance $ 8,195 $ 7,519
The Company completed its impairment test of all goodwill for
fiscal years ended April 24, 2009, April 25, 2008 and April 27, 2007
and concluded there were no impairments.