Medtronic 2010 Annual Report Download - page 73

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Medtronic, Inc.
undiscounted potential contingent consideration for each of its
acquisitions with an outstanding potential obligation. At April 30,
2010, the estimated maximum potential amount of undiscounted
future contingent consideration that the Company is expected to
make associated with all business combinations or purchases of
intellectual property is approximately $375 million. The milestones
associated with the contingent consideration must be reached in
future periods ranging from fiscal years 2011 to 2016 in order for
the consideration to be paid.
6. Investments
In April 2009, the FASB issued new authoritative guidance for the
recognition and presentation of other-than-temporary impairments,
which amended the existing guidance on determining whether
an impairment for investments in debt securities is other-than-
temporary as well as requiring additional annual and interim
disclosures. Under the new guidance, impairment on debt
securities will be considered other-than-temporary if the Company
(1) intends to sell the security, (2) more likely than not will be
required to sell the security before recovering its costs or (3) does
not expect to recover the security’s fair value versus its amortized
cost basis. The new guidance further indicates that, depending on
which of the above factor(s) causes the impairment to be
considered other-than-temporary, (1) the entire shortfall of the
security’s fair value versus its amortized cost basis or (2) only the
credit loss portion would be recognized in earnings while the
remaining shortfall would be recognized in other comprehensive
income. The new guidance requires the Company to initially apply
the provisions of the standard to previously other-than-temporary
impaired debt securities existing as of the date of initial adoption
by making a cumulative-effect adjustment to the opening balance
of retained earnings in the period of adoption. The cumulative-
effect adjustment reclassifies the non-credit portion of a previously
other-than-temporarily impaired debt security held as of the date
of initial adoption from retained earnings to accumulated other
comprehensive loss. The new guidance was effective for the
Company in the first quarter of fiscal year 2010 and resulted in a
cumulative-effect adjustment of $3 million as of the beginning of
fiscal year 2010.
The carrying amounts of cash and cash equivalents approximate
fair value due to their short maturities.
Information regarding the Company’s short-term and long-term
investments at April 30, 2010 is as follows:
(in millions) Cost
Unrealized
Gains
Unrealized
Losses
Fair
Value
Available-for-sale
securities:
Corporate debt securities $2,130 $16 $(12) $2,134
Auction rate securities 194 — (52) 142
Mortgage backed
securities 724 8 (15) 717
U.S. government and
agency securities 2,745 9 (1) 2,753
Foreign government
and agency securities 118 1 — 119
Certificates of deposit 256 — — 256
Other asset backed
securities 315 1 (3) 313
Marketable equity
securities 1 — — 1
Trading securities:
Exchange-traded funds 29 1 — 30
Cost method, equity
method and other
investments 542 — — 542
Total short-term and
long-term investments $ 7,054 $36 $(83) $ 7,007
Information regarding the Company’s short-term and long-term
investments at April 24, 2009 is as follows:
(in millions) Cost
Unrealized
Gains
Unrealized
Losses
Fair
Value
Available-for-sale
securities:
Corporate debt securities $ 817 $ 8 $ (20) $ 805
Auction rate securities 199 — (80) 119
Mortgage backed
securities 789 9 (52) 746
U.S. government and
agency securities 680 5 (1) 684
Foreign government and
agency securities 13 — — 13
Certificates of deposit 2 — — 2
Other asset backed
securities 297 3 (22) 278
Marketable equity
securities 12 — — 12
Cost method, equity
method and other
investments 515 — — 515
Total short-term and
long-term investments $ 3,324 $25 $(175) $ 3,174