Fair Value Measurements

6 Months Ended

Mar. 30, 2013

Fair Value Measurements

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 tables by type of inputs applicable to the fair value measurements:

	Fair Value Measurement at March 30, 2013
	Level 1		Level 2			Level 3		Total
Assets
Investments	$	122	$	—		$	—	$	122
Derivatives (1)
Interest rate	—		215			—		215
Foreign exchange	—		502			—		502
Liabilities
Derivatives (1)
Interest rate	—		(23		)	—		(23		)
Foreign exchange	—		(117		)	—		(117		)
Total recorded at fair value	$	122	$	577		$	—	$	699
Fair value of borrowings	$	—	$	15,981		$	1,574	$	17,555

	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 $122 million and $153 million have been netted against contracts in an asset position in the Condensed Consolidated Balance Sheets at March 30, 2013 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 generally valued based on historical market transactions, prevailing market interest rates and the Company's current borrowing cost and credit risk.

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.

The Company also has assets and liabilities that are required to be recorded at fair value on a non-recurring basis when certain circumstances occur. During the prior-year six months ended March 31, 2012, the Company recorded impairment charges of $117 million on film productions. These impairment charges are reported in “Costs and expenses” in the Condensed Consolidated Statements of Income. The film impairment charges reflected the excess of the unamortized cost of the films over the estimated fair value using discounted cash flows. The discounted cash flow analysis is a level 3 valuation technique. The aggregate carrying value of the films for which we prepared the fair value analyses was $119 million as of March 31, 2012.