Fair Value Measurements

3 Months Ended

Dec. 29, 2012


12.	Fair Value Measurements

Fair value is defined as the amount that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants. Assets and liabilities measured at fair value are classified in the following three categories:

Level 1 - Quoted prices for identical instruments in active markets

Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets

Level 3 - Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable

The Company’s assets and liabilities measured at fair value are summarized in the following table by type of inputs applicable to the fair value measurements:



	Fair Value Measurement at December 29, 2012
	Level 1		Level 2			Level 3		Total
Assets
Investments	$	121	$	—		$	—	$	121
Derivatives ⁽¹⁾
Interest rate	—		239			—		239
Foreign exchange	—		350			—		350
Liabilities
Derivatives ⁽¹⁾
Interest rate	—		(9		)	—		(9		)
Foreign exchange	—		(204		)	—		(204		)
Total recorded at fair value	$	121	$	376		$	—	$	497
Fair value of borrowings	$	—	$	16,539		$	1,683	$	18,222



	Fair Value Measurement at September 29, 2012
	Level 1		Level 2			Level 3		Total
Assets
Investments	$	86	$	—		$	—	$	86
Derivatives ⁽¹⁾
Interest rate	—		239			—		239
Foreign exchange	—		390			—		390
Liabilities
Derivatives ⁽¹⁾
Foreign exchange	—		(235		)	—		(235		)
Total recorded at fair value	$	86	$	394		$	—	$	480
Fair value of borrowings	$	—	$	13,493		$	1,653	$	15,146


⁽¹⁾	The Company has master netting arrangements by counterparty with respect to certain derivative contracts. Contracts in a liability position totaling $173 million and $153 million have been netted against contracts in an asset position in the Condensed Consolidated Balance Sheets at December 29, 2012 and September 29, 2012, respectively.

The fair values of Level 2 derivatives are primarily determined based on the present value of future cash flows using internal models that use observable inputs such as interest rates, yield curves and foreign currency exchange rates. Counterparty credit risk, which is mitigated by master netting agreements and collateral posting arrangements with certain counterparties, did not have a material impact on derivative fair value estimates.

Level 2 borrowings, which include commercial paper and U.S. medium-term notes, are valued based on quoted prices for similar instruments in active markets.

Level 3 borrowings, which include Hong Kong Disneyland borrowings and other foreign currency denominated borrowings, are valued based on historical market transactions, interest rates, credit risk and market liquidity.

The Company’s financial instruments also include cash, cash equivalents, receivables and accounts payable. The carrying values of these financial instruments approximate the fair values.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References

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