v2.4.0.6
Fair Value Measurements
 12 Months Ended
May 31, 2012
Fair Value Measurements

NOTE 6 — Fair Value Measurements

The following table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis as of May 31, 2012 and 2011 and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value. Refer to Note 1 – Summary of Significant Accounting Policies for additional detail regarding the Company’s fair value measurement methodology.

 

    May 31, 2012
   

Fair Value

Measurements Using

     Assets/Liabilities
at Fair Value		      
(In millions)   Level 1     Level 2     Level 3       Balance Sheet Classification
ASSETS                                    
Derivatives:                                    

Foreign exchange forwards and options

   $ 0      $ 265      $ 0      $ 265      Other current assets and other long-term assets

Embedded derivatives

     0        1        0        1      Other current assets

Interest rate swap contracts

     0        15        0        15      Other current assets and other long-term assets
Total derivatives     0        281        0        281       
Available-for-sale securities:                                    

U.S. Treasury securities

     226        0        0        226      Cash and equivalents

U.S. Agency securities

     0        254        0        254      Cash and equivalents

Commercial paper and bonds

     0        159        0        159      Cash and equivalents

Money market funds

     0        770        0        770      Cash and equivalents

U.S. Treasury securities

     927        0        0        927      Short-term investments

U.S. Agency securities

     0        230        0        230      Short-term investments

Commercial paper and bonds

     0        283        0        283      Short-term investments

Non-marketable preferred stock

     0        0        3        3      Other long-term assets
Total available-for-sale securities     1,153        1,696        3        2,852       
TOTAL ASSETS   $   1,153      $   1,977      $ 3      $ 3,133       
LIABILITIES                                    
Derivatives:                                    
Foreign exchange forwards and options   $ 0      $ 55      $ 0      $ 55      Accrued liabilities and other long-term liabilities
TOTAL LIABILITIES   $ 0      $ 55      $ 0      $ 55       

 

    May 31, 2011  
   

Fair Value

Measurements Using

     Assets / Liabilities
at Fair Value		        
(In millions)     Level 1       Level 2       Level 3       Balance Sheet Classification  

ASSETS

                                        
Derivatives:          

Foreign exchange forwards and options

   $ 0      $ 38      $ 0      $ 38        Other current assets and other long-term assets   

Interest rate swap contracts

     0        15        0        15        Other current assets and other long-term assets   
Total derivatives     0        53        0        53     
Available-for-sale securities:          

U.S. Treasury securities

     125        0        0        125        Cash and equivalents   

Commercial paper and bonds

     0        157        0        157        Cash and equivalents   

Money market funds

     0        780        0        780        Cash and equivalents   

U.S. Treasury securities

     1,473        0        0        1,473        Short-term investments   

U.S. Agency securities

     0        308        0        308        Short-term investments   

Commercial paper and bonds

     0        802        0        802        Short-term investments   
Total available-for-sale securities     1,598        2,047        0        3,645           
TOTAL ASSETS   $ 1,598      $ 2,100      $ —      $ 3,698           
LIABILITIES          
Derivatives:          

Foreign exchange forwards and options

   $ 0      $ 197      $ 0      $ 197        Accrued liabilities and other long-term liabilities   
TOTAL LIABILITIES   $ 0      $ 197      $ 0      $ 197           

 

Derivative financial instruments include foreign exchange forwards, embedded derivatives and interest rate swap contracts. The fair value of derivative contracts is determined using observable market inputs such as the daily market foreign currency rates, forward pricing curves, currency volatilities, currency correlations and interest rates, and considers nonperformance risk of the Company and that of its counterparties. Adjustments relating to these nonperformance risks were not material at May 31, 2012 or 2011. Refer to Note 16 — Risk Management and Derivatives for additional detail.

Available-for-sale securities are comprised of investments in U.S. Treasury and agency securities, money market funds, corporate commercial paper and bonds. These securities are valued using market prices on both active markets (Level 1) and less active markets (Level 2). Pricing vendors are utilized for certain Level 1 or Level 2 investments. These vendors either provide a quoted market price in an active market or use observable inputs without applying significant adjustments in their pricing. Observable inputs include broker quotes, interest rates and yield curves observable at commonly quoted intervals, volatilities and credit risks.

The Company’s Level 3 assets are comprised of investments in certain non-marketable preferred stock. These investments are valued using internally developed models with unobservable inputs. These Level 3 investments are an immaterial portion of our portfolio. Changes in Level 3 investment assets were immaterial during the year ended May 31, 2012. As of May 31, 2011, the Company had no Level 3 assets and liabilities.

No transfers among the levels within the fair value hierarchy occurred during the years ended May 31, 2012 or 2011.

As of May 31, 2012 and 2011, the Company had no assets or liabilities that were required to be measured at fair value on a non-recurring basis.

Short-Term Investments

As of May 31, 2012 and 2011, short-term investments consisted of available-for-sale securities. As of May 31, 2012, the Company held $1,129 million of available-for-sale securities with maturity dates within one year from purchase date and $311 million with maturity dates over one year and less than five years from purchase date within short-term investments. As of May 31, 2011, the Company held $2,253 million of available-for-sale securities with maturity dates within one year from purchase date and $330 million with maturity dates over one year and less than five years from purchase date within short-term investments.

 

 

Short-term investments classified as available-for-sale consist of the following at fair value:

 

    As of May 31,  
(In millions)                            2012                              2011  
Available-for-sale investments:          

U.S. treasury and agencies

   $ 1,157      $ 1,781   

Commercial paper and bonds

     283        802   
TOTAL AVAILABLE-FOR-SALE INVESTMENTS   $ 1,440      $ 2,583   

 

Included in interest expense, net was interest income of $30 million for each of the years ended May 31, 2012, 2011, and 2010, related to cash and equivalents and short-term investments.

For fair value information regarding notes payable and long-term debt, refer to Note 7 — Short-Term Borrowings and Credit Lines and Note 8 — Long-Term Debt.