Fair Value Measurements

9 Months Ended

Jun. 30, 2011

Fair Value Measurements

Fair Value Measurements

NOTE 7 – FAIR VALUE MEASUREMENTS

The following table presents the Company's assets and liabilities measured at fair value on a recurring basis and the basis for that measurement according to the levels in the fair value hierarchy in ASC Topic 820:

	June 30, 2011						September 30, 2010
	Total		Level 1		Level 2		Total		Level 1		Level 2
Assets
Marketable securities	$	10.7	$	10.7	$	-	$	10.0	$	10.0	$	-
Derivative assets		2.9		-		2.9		16.7		-		16.7
Deferred compensation investment		26.1		26.1		-		22.2		22.2		-
	$	39.7	$	36.8	$	2.9	$	48.9	$	32.2	$	16.7
Liabilities
Derivative liabilities	$	16.6	$	-	$	16.6	$	2.6	$	-	$	2.6
Deferred compensation liabilities		40.6		-		40.6		31.2		-		31.2
	$	46.8	$	-	$	46.8	$	33.8	$	-	$	33.8

The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable.  Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources, while unobservable inputs reflect a reporting entity's pricing based upon their own market assumptions.  The fair value hierarchy consists of three levels:

Level 1 – Inputs are quoted prices in active markets for identical assets or liabilities.

Level 2 – Inputs are quoted prices of similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs which are derived principally from or corroborated by observable market data.

Level 3 – Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable.

The Company's marketable securities consist of U.S. Treasury Bills.  Fair value for marketable securities is measured using the market approach based on quoted prices.  The Company utilizes the income approach to measure fair value for its derivative assets and liabilities (which include commodity options and swaps, interest rate swaps, and foreign currency forward contracts).  The income approach uses pricing models that rely on market observable inputs such as yield curves, currency exchange rates, and forward prices.  The deferred compensation investment is invested primarily in mutual funds and its fair value is measured using the market approach.  This investment is in the same funds and purchased in substantially the same amounts as the participants' selected investment options (excluding Ralcorp common stock equivalents), which represent the underlying liabilities to participants in the Company's deferred compensation plans.  Deferred compensation liabilities are recorded at amounts due to participants in cash, based on the fair value of participants' selected investment options (excluding certain Ralcorp common stock equivalents to be distributed in shares) using the market approach.

The carrying amounts reported on the consolidated balance sheets for cash and cash equivalents, receivables, and accounts and notes payable approximate fair value because of the short maturities of these financial instruments.  The carrying amount of the Company's variable rate long-term debt (see Note 14) approximates fair value because the interest rates are adjusted to market frequently.  Based on the discounted amount of future cash flows, using Ralcorp's incremental rate of borrowing for similar debt, the Company's fixed rate debt (which had a carrying amount of $1,951.6 as of June 30, 2011 and $1,991.4 as of September 30, 2010) had an estimated fair value of $2,140.2 as of June 30, 2011 and $2,399.5 as of September 30, 2010.