Fair Value Disclosures

12 Months Ended

Dec. 31, 2018

As of December 31, 2018 the carrying values of cash and cash equivalents, restricted cash, short-term investments, accounts receivable, short-term borrowings 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 following table presents the carrying value and estimated fair value of the Company’s debt obligations:



	12/31/2018				12/31/2017
	Carrying Value		Fair Value (Level 2)		Carrying Value		Fair Value (Level 2)
Securitization Notes^(a)	$	2,928	$	2,967	$	2,271	$	2,367
Subsidiary Senior Unsecured Notes^(b)	2,850		2,733		2,850		2,983
Term Loan A Facility^(b)	488		479		500		503
Term Loan B Facility^(b)	1,955		1,915		1,975		1,990
YUM Senior Unsecured Notes^(b)	1,875		1,798		2,200		2,277


(a)	We estimated the fair value of the Securitization Notes by obtaining broker quotes from two separate brokerage firms that are knowledgeable about the Company’s Securitization Notes and, at times, trade these notes. The markets in which the Securitization Notes trade are not considered active markets.


(b)	We estimated the fair value of the YUM and Subsidiary Senior Unsecured Notes, Term Loan A Facility, and Term Loan B Facility using market quotes and calculations based on market rates.

Recurring Fair Value Measurements

The Company has interest rate swaps, foreign currency contracts, an investment in Grubhub common stock and other investments, all of which are required to be measured at fair value on a recurring basis (See Note 12 for discussion regarding derivative instruments and Note 5 for discussion regarding our investment in Grubhub common stock). The following table presents 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.



		Fair Value
	Level	2018		2017		Consolidated Balance Sheet
Interest Rate Swaps - Asset	2	$	21	$	9	Prepaid expenses and other current assets
Interest Rate Swaps - Asset	2	29		40		Other assets
Interest Rate Swaps - Liability	2	23		—		Accounts payable and other current liabilities
Foreign Currency Contracts - Asset	2	5		5		Prepaid expenses and other current assets
Foreign Currency Contracts - Liability	2	24		46		Other Liabilities and deferred credits
Investment in Grubhub Common Stock	1	214		—		Other assets
Other Investments	1	27		29		Other assets

The fair value of the Company’s foreign currency contracts 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 on observable inputs. The fair value of the investment in Grubhub common stock was determined primarily based on closing market prices for the shares. The other investments include investments in mutual funds, which are used to offset fluctuations for a portion of our deferred compensation liabilities. The other investments' fair value is determined based on the closing market prices of the respective mutual funds as of December 31, 2018 and December 31, 2017.

Non-Recurring Fair Value Measurements

During the years ended December 31, 2018 and December 31, 2017, we recognized non-recurring fair value measurements of $1 million and $2 million, respectively, related to restaurant-level impairment. Restaurant-level impairment charges are recorded in Other (income) expense and resulted primarily 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 (Level 3). These amounts exclude fair value measurements made for assets that were subsequently disposed of prior to those respective year end dates. The remaining net book value of restaurant assets measured at fair value during the years ended December 31, 2018 and December 31, 2017 is insignificant.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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