Fair Value Disclosures

9 Months Ended

Sep. 03, 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 September 3, 2011.

	Fair Value
	Level	9/3/2011			12/25/2010
Foreign Currency Forwards, net	2	$	(15	)	$	4
Interest Rate Swaps, net	2	38			41
Other Investments	1	14			14
Total		$	37		$	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 in Other assets in our Condensed Consolidated Balance Sheet and their fair value is determined based on the closing market prices of the respective mutual funds as of September 3, 2011 and December 25, 2010.

In the quarter and year to date ended September 3, 2011, we recorded impairment charges of $100 million and $122 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). Of the $100 million impairment charge recorded in the quarter ended September 3, 2011, $6 million was recorded in Closures and impairment (income) expenses and $94 million was recorded in Refranchising (gain) loss. Of the $122 million impairment charge recorded in the year to date ended September 3, 2011, $21 million was recorded in Closures and impairment (income) expenses and $101 million was recorded in Refranchising (gain) loss.

The $6 million and $21 million of impairment charges in Closures and impairment (income) expenses recorded in the quarter and year to date ended September 3, 2011, respectively, resulted from our 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 $94 million and $101 million of impairment charges in Refranchising (gain) loss recorded in the quarter and year to date ended September 3, 2011, respectively, 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 restaurants 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. and all of our Company operated Pizza Hut dine-in restaurants in the UK market.

In the quarter and year to date ended September 3, 2011, we recorded impairment charges of $16 million and $82 million, respectively, in Closures and impairment (income) expenses to write down the trademarks and franchise contract rights of LJS and A&W as a result of our decision to sell those brands. As of September 3, 2011, the disposal groups comprising these brands were deemed held for sale and fair value measurements reflected an estimate of the sales prices, less costs to dispose.

In the quarter and year to date ended September 4, 2010, we recorded impairment charges of $3 million and $90 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). Of the $3 million impairment charge in the quarter ended September 4, 2010, $2 million was recorded in Closures and impairment (income) expenses and $1 million was recorded in Refranchising (gain) loss. Of the $90 million impairment charge recorded in the year to date ended September 4, 2010, $12 million was recorded in Closures and impairment (income) expenses and $78 million was recorded in Refranchising (gain) loss.

The $2 million and $12 million of impairment charges in Closures and impairment (income) expenses recorded in the quarter and year to date ended September 4, 2010, respectively, resulted from our 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 $1 million and $78 million of impairment charges in Refranchising (gain) loss recorded in the quarter and year to date ended September 4, 2010, respectively, 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 restaurants 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 September 3, 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 $3.5 billion, compared to their carrying value of $3.0 billion.  We estimated the fair value of debt using market quotes and calculations based on market rates.