NOTE 6. MARKETABLE SECURITIES
A summary of marketable securities, all of which are classified as current, was as follows:
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October 2, 2016 |
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December 31, 2015 |
In millions |
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Cost |
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Gross unrealized
gains/(losses) |
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Estimated
fair value |
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Cost |
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Gross unrealized
gains/(losses) |
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Estimated
fair value |
Available-for-sale |
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Level 2(1)
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Bank debentures |
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$ |
118 |
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$ |
— |
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$ |
118 |
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$ |
— |
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$ |
— |
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$ |
— |
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Debt mutual funds |
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118 |
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— |
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118 |
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88 |
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— |
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88 |
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Equity mutual funds |
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12 |
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— |
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12 |
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11 |
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(1 |
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10 |
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Government debt securities |
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2 |
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— |
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2 |
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2 |
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— |
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2 |
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Total marketable securities |
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$ |
250 |
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$ |
— |
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$ |
250 |
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$ |
101 |
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$ |
(1 |
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$ |
100 |
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(1) The fair value of Level 2 securities is estimated using actively quoted prices for similar instruments from brokers and observable inputs where available, including market transactions and third-party pricing services, or net asset values provided to investors. We do not currently have any Level 3 securities and there were no transfers between Level 2 or 3 during the first nine months of 2016 or for the year ended December 31, 2015.
A description of the valuation techniques and inputs used for our Level 2 fair value measures was as follows:
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Bank debentures— These investments provide us with a contractual rate of return and generally range in maturity from three months to one year. The counter-parties to these investments are reputable financial institutions with investment grade credit ratings. Since these instruments are not tradable and must be settled directly by us with the respective financial institution, our fair value measure is the financial institutions’ month-end statement.
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Debt mutual funds— The fair value measure for these investments is the daily net asset value published on a regulated governmental website. Daily quoted prices are available from the issuing brokerage and are used on a test basis to corroborate this Level 2 input.
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Equity mutual funds— The fair value measure for these investments is the net asset value published by the issuing brokerage. Daily quoted prices are available from reputable third party pricing services and are used on a test basis to corroborate this Level 2 input measure.
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Government debt securities-non-U.S.— The fair value measure for these securities is broker quotes received from reputable firms. These securities are infrequently traded on a national stock exchange and these values are used on a test basis to corroborate our Level 2 input measure.
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The proceeds from sales and maturities of marketable securities and gross realized gains and losses from the sale of available-for-sale securities were as follows:
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Three months ended |
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Nine months ended |
In millions |
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October 2,
2016 |
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September 27,
2015 |
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October 2,
2016 |
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September 27,
2015 |
Proceeds from sales and maturities of marketable securities |
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$ |
54 |
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$ |
73 |
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$ |
291 |
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$ |
228 |
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Gross realized gains from the sale of marketable securities(1)
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— |
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— |
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— |
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1 |
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(1) Gross realized losses from the sale of available-for-sale securities were immaterial.
At October 2, 2016, the fair value of available-for-sale investments in debt securities that utilize a Level 2 fair value measure is shown by contractual maturity below:
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Contractual Maturity |
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(In millions) |
1 year or less |
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$ |
237 |
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5 - 10 years |
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1 |
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Total |
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$ |
238 |
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