Medtronic 2010 Annual Report Download - page 75

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71
Medtronic, Inc.
consider a variety of factors, including the quality and estimated
value of the underlying credit support for the Company’s holdings
and the financial condition and credit quality of the underlying
collateral and credit support available to each of the remaining
securities in which the Company is invested, the Company
believes it has recorded all necessary other-than-temporary
impairments as the Company does not have the intent to sell nor
is it more likely than not that the Company will be required to sell
before recovery of the amortized cost.
The following table shows the credit loss portion of other-than-
temporary impairments on debt securities held by the Company
as of the dates indicated and the corresponding changes in
such amounts:
(in millions)
Balance at April 24, 2009 $ —
Credit losses remaining in retained earnings upon adoption 4
Credit losses recognized on securities previously not impaired 10
Additional credit losses recognized on securities previously impaired
4
Reductions for securities sold during the period (1)
Balance at April 30, 2010 $ 17
The April 30, 2010 balance of available-for-sale debt securities
by contractual maturity is shown in the following table at fair
value. Within the table, maturities of mortgage backed securities
have been allocated based upon timing of estimated cash flows,
assuming no change in the current interest rate environment.
Actual maturities may differ from contractual maturities because
the issuers of the securities may have the right to prepay
obligations without prepayment penalties.
(in millions)
April 30,
2010
Due in one year or less $2,639
Due after one year through five years 3,522
Due after five years through ten years 129
Due after ten years 144
Total debt securities $6,434
As of April 30, 2010 and April 24, 2009, the aggregate carrying
amount of equity and other securities without a quoted market
price and accounted for using the cost or equity method was
$542 million and $515 million, respectively. The total carrying
value of these investments is reviewed quarterly for changes in
circumstance or the occurrence of events that suggest the
Company’s investment may not be recoverable. The fair value of
cost or equity method investments is not estimated if there are
no identified events or changes in circumstances that may have a
material adverse effect on the fair value of the investment.
Gains and losses realized on trading securities and available-
for-sale debt securities are recorded in interest expense, net in the
consolidated statements of earnings. Gains and losses realized on
marketable equity securities, cost method, equity method and
other investments are recorded in other expense, net in the
consolidated statements of earnings. In addition, unrealized gains
and losses on available-for-sale debt securities are recorded in
accumulated other comprehensive loss in the consolidated balance
sheets and unrealized gains and losses on trading securities are
recorded in interest expense, net in the consolidated statements of
earnings. Gains and losses from the sale of investments are
calculated based on the specific identification method.
7. Fair Value Measurements
Under the authoritative guidance for fair value measurements, fair
value is defined as the exit price, or the amount that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants as of the measurement
date. The authoritative guidance also establishes a hierarchy for
inputs used in measuring fair value that maximizes the use of
observable inputs and minimizes the use of unobservable inputs
by requiring that the most observable inputs be used when
available. Observable inputs are inputs market participants would
use in valuing the asset or liability developed based on market
data obtained from sources independent of the Company.
Unobservable inputs are inputs that reflect the Company’s
assumptions about the factors market participants would use in
valuing the asset or liability developed based upon the best
information available in the circumstances. The categorization of
financial assets and financial liabilities within the valuation
hierarchy is based upon the lowest level of input that is significant