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NOTE 6 — FAIR VALUE MEASUREMENTS

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables present the fair value of our financial instruments that are measured at fair value on a recurring basis:

(In millions)	Level 1		Level 2		Level 3		Gross Fair Value		Netting (a)		Net Fair Value
June 30, 2011
Assets
Mutual funds	$        1,752		$              0		$          0		$        1,752		$        0		$        1,752
Commercial paper	0		639		0		639		0		639
Certificates of deposit	0		598		0		598		0		598
U.S. government and agency securities	23,591		10,175		0		33,766		0		33,766
Foreign government bonds	303		367		0		670		0		670
Mortgage-backed securities	0		2,428		0		2,428		0		2,428
Corporate notes and bonds	0		10,600		58		10,658		0		10,658
Municipal securities	0		454		0		454		0		454
Common and preferred stock	9,821		55		5		9,881		0		9,881
Derivatives	8		388		20		416		(204 )		212
Total	$      35,475		$      25,704		$        83		$      61,262		$    (204 )		$      61,058
Liabilities
Derivatives and other	$           109		$           257		$          0		$           366		$    (203 )		$           163
(In millions)	Level 1		Level 2		Level 3		Gross Fair Value		Netting (a)		Net Fair Value
June 30, 2010
Assets
Mutual funds	$        1,120		$              0		$          0		$        1,120		$        0		$        1,120
Commercial paper	0		172		0		172		0		172
Certificates of deposit	0		348		0		348		0		348
U.S. government and agency securities	16,473		4,756		0		21,229		0		21,229
Foreign government bonds	239		294		0		533		0		533
Mortgage-backed securities	0		3,264		0		3,264		0		3,264
Corporate notes and bonds	0		7,460		167		7,627		0		7,627
Municipal securities	0		747		0		747		0		747
Common and preferred stock	6,988		43		5		7,036		0		7,036
Derivatives	22		745		9		776		(207 )		569
Total	$      24,842		$      17,829		$      181		$      42,852		$     (207 )		$      42,645
Liabilities
Derivatives and other	$             85		$           137		$          0		$           222		$     (205 )		$             17

(a)     These amounts represent the impact of netting derivative assets and derivative liabilities when a legally enforceable master netting agreement exists and fair value adjustments related to our own credit risk and counterparty credit risk.

The table below reconciles the total Net Fair Value of assets above to the balance sheet presentation of these same assets in Note 4 – Investments for June 30, 2011 and 2010.

(In millions)
June 30,	2011		2010
Net fair value of assets measured at fair value on a recurring basis	$      61,058		$      42,645
Cash	1,648		1,661
Common and preferred stock measured at fair value on a nonrecurring basis	334		216
Other investments measured at fair value on a nonrecurring basis	650		502
Less derivative assets classified as other current assets	(54 )		(544 )
Other	1		62
Recorded basis of investment components	$      63,637		$      44,542

Changes in Financial Instruments Measured at Level 3 Fair Value on a Recurring Basis

The following tables present the changes during the fiscal years 2011 and 2010 in our Level 3 financial instruments that are measured at fair value on a recurring basis. The majority of these instruments consist of investment securities classified as available-for-sale with changes in fair value included in OCI.

(In millions)	Corporate Notes and Bonds		Common and Preferred Stock		Derivative Assets		Total
Year Ended June 30, 2011
Balance, beginning of period	$          167		$            5		$             9		$      181
Total realized and unrealized gains (losses):
Included in other income (expense)	39		0		11		50
Included in other comprehensive income	(63 )		0		0		(63 )
Purchases, issuances and settlements	(85 )		0		0		(85 )
Balance, end of period	$            58		$            5		$            20		$        83
Change in unrealized gains (losses) included in other income        (expense) related to assets held as of June 30, 2011	$             6		$            0		$            11		$        17
(In millions)	Corporate Notes and Bonds		Common and Preferred Stock		Derivative Assets		Total
Year Ended June 30, 2010
Balance, beginning of period	$          253		$            5		$             5		$      263
Total realized and unrealized gains (losses):
Included in other income (expense)	6		0		4		10
Included in other comprehensive income	(92 )		0		0		(92 )
Balance, end of period	$          167		$            5		$             9		$      181
Change in unrealized gains (losses) included in other income        (expense) related to assets held as of June 30, 2010	$             6		$            0		$             4		$        10

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

During fiscal years 2011 and 2010, impairment charges of $2 million and $5 million, respectively, were recognized for certain investments measured at fair value on a nonrecurring basis, as the decline in their respective fair values below their cost was determined to be other than temporary in all instances. At June 30, 2011 and 2010, we held no common and preferred stocks that were required to be measured at fair value on a nonrecurring basis.