Fair Value Disclosures

6 Months Ended

Jun. 16, 2012

Fair Value Disclosures [Abstract]

Fair Value Disclosures

Fair Value Disclosures

Recurring Fair Value Measurements

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 16, 2012.

	Fair Value
	Level	6/16/2012		12/31/2011
Foreign Currency Forwards, net	2	$	13	$	2
Interest Rate Swaps, net	2	28		32
Other Investments	1	16		15
Total		$	57	$	49

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 Sheets and their fair value was determined based on the closing market prices of the respective mutual funds as of June 16, 2012 and December 31, 2011.

Non-Recurring Fair Value Measurements

In the quarter and year to date ended June 16, 2012, we recorded restaurant-level impairment charges of $6 million to write down long-lived assets of certain 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 based on discounted cash flow estimates using unobservable inputs (Level 3). The $6 million impairment charge in the quarter and year to date ended June 16, 2012 was recorded in Closures and impairment (income) expenses and 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.

In the quarter ended March 24, 2012, we recorded a non-cash pre-tax impairment charge of $20 million to Refranchising (gain) loss to adjust the carrying amount of the Pizza Hut UK dine-in business asset group to fair value (Level 2) based on bids received from prospective buyers.

The remaining net book value of these assets measured at fair value during the quarter and year to date ended June 16, 2012 subsequent to these impairments is not significant.

In the quarter ended March 24, 2012 as a result of our acquisition of Little Sheep, we remeasured our previously held 27% ownership, which had a recorded value of $107 million at the date of acquisition, at fair value (Level 2) based on Little Sheep's traded share price immediately prior to our offer we made to purchase the business and recognized a non-cash gain of $74 million.

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. 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 fair value measurements used in these impairment evaluations were based on discounted cash flow estimates using unobservable inputs. 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.

In the year to date ended June 11, 2011, we recorded a $66 million impairment charge in Closure and impairment (income) expense 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 anticipated receiving from the sale of the brands (Level 2). We sold these businesses in the fourth quarter of 2011.

At June 16, 2012 the carrying values of cash and cash equivalents, short-term investments, accounts receivable and accounts payable approximated their fair values because of the short-term nature of these instruments.  The Company’s debt obligations, excluding capital leases, were estimated to have a fair value of $3.5 billion (Level 2), compared to their carrying value of $3 billion.  We estimated the fair value of debt using market quotes and calculations based on market rates.