Fair Value Disclosures

6 Months Ended

Jun. 11, 2011

Fair Value Disclosures [Abstract]

Fair Value Disclosures

Fair Value Disclosures

The following table presents the fair values for those assets and liabilities measured at fair value on a recurring basis and the level within the fair value hierarchy in which the measurements fall.  No transfers among the levels within the fair value hierarchy occurred during the year to date ended June 11, 2011.

	Fair Value
	Level	6/11/2011			12/25/2010
Foreign Currency Forwards, net	2	$	(12	)	$	4
Interest Rate Swaps, net	2	35			41
Other Investments	1	15			14
Total		$	38		$	59

The fair value of the Company’s foreign currency forwards and interest rate swaps were determined based on the present value of expected future cash flows considering the risks involved, including nonperformance risk, and using discount rates appropriate for the duration based upon observable inputs.  The other investments include investments in mutual funds, which are used to offset fluctuations in deferred compensation liabilities where employees have chosen to invest in phantom shares of a Stock Index Fund or Bond Index Fund.  The other investments are classified as trading securities and their fair value is determined based on the closing market prices of the respective mutual funds as of June 11, 2011 and December 25, 2010.

In the quarter and year to date ended June 11, 2011, we recorded impairment charges of $22 million to write down long-lived assets of certain restaurants or groups of restaurants to their estimated fair values. The long-lived assets of these restaurants were deemed to be impaired on a held for use basis. The fair value measurements used in these impairment evaluations were made using significant unobservable inputs (Level 3). Of the $22 million impairment charge recorded in the quarter and year to date ended June 11, 2011, $15 million was recorded in Closures and impairment (income) expenses and $7 million was recorded in Refranchising (gain) loss.

The $15 million of impairment charges in Closures and impairment (income) expenses recorded in both the quarter and year to date ended June 11, 2011 resulted from our semi-annual impairment evaluation of long-lived assets of individual restaurants that were being operated at the time of impairment and had not been offered for refranchising. The $7 million of impairment charges in Refranchising (gain) loss recorded in both the quarter and year to date ended June 11, 2011 related to writing down the assets of restaurants or restaurant groups offered for refranchising and deemed to be impaired on a held for use basis. The fair value measurements used in our impairment evaluation were based on estimates of the sales prices we anticipated receiving from a franchisee for the restaurant or restaurant groups. See Note 4 for further discussion of impairment related to our offer to refranchise a substantial portion of our Company operated KFCs in the U.S.

In the year to date ended June 11, 2011, we recorded an impairment charge of $66 million in Closures and impairment (income) expenses to write down the trademarks and franchise contract rights of A&W and LJS as a result of our decision to sell those brands. The asset groups comprising these brands were deemed impaired on a held for use basis and the fair value measurements used in our impairment evaluations included an estimate of the sales prices we anticipate receiving from the sale of the brands.

In the quarter and year to date ended June 12, 2010, we recorded impairment charges of $10 million and $87 million, respectively, to write down long-lived assets of certain restaurants or groups of restaurants to their estimated fair values. The long-lived assets of these restaurants were deemed to be impaired on a held for use basis. The fair value measurements used in these impairment evaluations were made using significant unobservable inputs (Level 3). The $10 million impairment charge in the quarter ended June 12, 2010 was recorded in Closures and impairment (income) expenses. Of the $87 million impairment charge recorded in the year to date June 12, 2010, $10 million was recorded in Closures and impairment (income) expenses and $77 million was recorded in Refranchising (gain) loss.

The $10 million of impairment charges in Closures and impairment (income) expenses recorded in both the quarter and year to date ended June 12, 2010 resulted from our semi-annual impairment evaluation of long-lived assets of individual restaurants that were being operated at the time of impairment and had not been offered for refranchising. The $77 million of impairment charges in Refranchising (gain) loss recorded in the year to date ended June 12, 2010 related to writing down the assets of restaurants or restaurant groups offered for refranchising and deemed to be impaired on a held for use basis. The fair value measurements used in our impairment evaluation were based on estimates of the sales prices we anticipated receiving from a franchisee for the restaurant or restaurant groups. See Note 4 for further discussion of impairment related to our offer to refranchise a substantial portion of our Company operated KFCs in the U.S.

At June 11, 2011 the carrying values of cash and cash equivalents, accounts receivable and accounts payable approximated their fair values because of the short-term nature of these instruments.  The fair value of notes receivable net of allowances and lease guarantees less subsequent amortization approximates their carrying value.  The Company’s debt obligations, excluding capital leases, were estimated to have a fair value of $3.3 billion, compared to their carrying value of $3 billion.  We estimated the fair value of debt using market quotes and calculations based on market rates.