Fair Value Measurements
The accounting guidance for fair value measurements prioritizes the inputs used in measuring fair value into the following hierarchy:
|
| | |
Level 1 | | Quoted prices (unadjusted) in active markets for identical assets or liabilities; |
Level 2 | | Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable; |
Level 3 | | Unobservable inputs in which little or no market activity exists, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing. |
The following table presents assets and liabilities which are measured at fair value on a recurring basis at December 28, 2013 (in millions):
|
| | | | | | | | | | | | | | | |
| Fair Value Measurements |
Assets: | Total | | Quoted prices in active markets for identical assets (Level 1) | | Significant observable inputs (Level 2) | | Significant unobservable inputs (Level 3) |
Cash equivalents: | | | | | | | |
Term deposits | $ | 2,818.0 |
| | $ | — |
| | $ | 2,818.0 |
| | $ | — |
|
Money market | 449.0 |
| | 449.0 |
| | — |
| | — |
|
Bankers' acceptances | 309.6 |
| | — |
| | 309.6 |
| | — |
|
Commercial paper | 274.0 |
| | — |
| | 274.0 |
| | — |
|
Short-term investments (1) | 81.0 |
| | 42.0 |
| | 39.0 |
| | — |
|
Non-current investments (2) | 38.0 |
| | — |
| | 38.0 |
| | — |
|
Total | $ | 3,969.6 |
| | $ | 491.0 |
| | $ | 3,478.6 |
| | $ | — |
|
Liabilities: | | | | | | | |
Contingent consideration (3) | $ | 2.9 |
| | $ | — |
| | $ | — |
| | $ | 2.9 |
|
Total | $ | 2.9 |
| | $ | — |
| | $ | — |
| | $ | 2.9 |
|
| |
(1) | Included in Prepaid Expenses and Other Current Assets on the balance sheet. |
| |
(2) | Included in Other Assets on the balance sheet. |
| |
(3) | Included in Other Accrued Liabilities and Accrued Claims and Other Liabilities on the balance sheet. |
A reconciliation of the beginning and ending balances for Level 3 liabilities for the year ended December 28, 2013 follows (in millions):
|
| | | |
| Contingent consideration |
Balance, beginning of year | $ | 21.8 |
|
Settlements | (4.2 | ) |
Gains | (14.7 | ) |
Balance, end of year | $ | 2.9 |
|
The following table presents assets and liabilities which are measured at fair value on a recurring basis at December 29, 2012 (in millions):
|
| | | | | | | | | | | | | | | |
| Fair Value Measurements |
Assets: | Total | | Quoted prices in active markets for identical assets (Level 1) | | Significant observable inputs (Level 2) | | Significant unobservable inputs (Level 3) |
Cash equivalents | $ | 96.5 |
| | $ | 91.0 |
| | $ | 5.5 |
| | $ | — |
|
Short-term investments (1) | 44.2 |
| | 14.5 |
| | 29.7 |
| | — |
|
Non-current investments (2) | 33.9 |
| | — |
| | 33.9 |
| | — |
|
Total | $ | 174.6 |
| | $ | 105.5 |
| | $ | 69.1 |
| | $ | — |
|
Liabilities: | | | | | | | |
Contingent consideration (3) | $ | 21.8 |
| | $ | — |
| | $ | — |
| | $ | 21.8 |
|
Total | $ | 21.8 |
| | $ | — |
| | $ | — |
| | $ | 21.8 |
|
| |
(1) | Included in Prepaid Expenses and Other Current Assets on the balance sheet. |
| |
(2) | Included in Other Assets on the balance sheet. |
| |
(3) | Included in Accrued Claims and Other Liabilities on the balance sheet. |
A reconciliation of the beginning and ending balances for Level 3 liabilities for the year ended December 29, 2012 follows (in millions):
|
| | | |
| Contingent consideration |
Balance, beginning of year | $ | 26.3 |
|
Settlements | (1.5 | ) |
Unrealized gains | (3.0 | ) |
Balance, end of year | $ | 21.8 |
|
In determining the fair value of assets and liabilities, the Company maximizes the use of quoted market prices and minimizes the use of unobservable inputs. The Level 1 fair values are based on quoted market values for identical assets. The fair values of Level 2 assets and liabilities are determined using prices from pricing agencies and financial institutions that develop values based on observable inputs in active markets. Level 3 fair values are determined from industry valuation models based on externally developed inputs.
In connection with the Company’s evaluation of long-lived assets for impairment, certain long-lived assets were measured at fair value on a nonrecurring basis using Level 3 inputs as defined in the fair value hierarchy. Fair value of long-lived assets is determined by estimating the amount and timing of net future cash flows (including rental expense for leased properties, sublease rental income, common area maintenance costs and real estate taxes) and discounting them using a risk-adjusted rate of interest. Safeway estimates future cash flows based on its experience and knowledge of the market in which the store is located and, when necessary, uses real estate brokers. During fiscal 2013, long-lived assets with a carrying value of $63.5 million were written down to their estimated fair value of $27.9 million, resulting in an impairment charge of $35.6 million. During fiscal 2012, long-lived assets with a carrying value of $51.8 million were written down to their estimated fair value of $18.2 million, resulting in an impairment charge of $33.6 million.
