FAIR VALUE MEASUREMENTS

9 Months Ended

Feb. 28, 2021

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

14. FAIR VALUE MEASUREMENTS

FASB guidance establishes a three-level fair value hierarchy based upon the assumptions (inputs) used to price assets or liabilities. The three levels of inputs used to measure fair value are as follows:

Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities,

Level 2 — Observable inputs other than those included in Level 1, such as quoted prices for similar assets and liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets, and

Level 3 — Unobservable inputs reflecting our own assumptions and best estimate of what inputs market participants would use in pricing the asset or liability.

The fair values of our Level 2 derivative instruments were determined using valuation models that use market observable inputs including interest rate curves and both forward and spot prices for currencies and commodities. Derivative assets and liabilities included in Level 2 primarily represent commodity and foreign currency option and forward contracts and cross-currency swaps.

The following table presents our financial assets and liabilities measured at fair value on a recurring basis, based upon the level within the fair value hierarchy in which the fair value measurements fall, as of February 28, 2021:

	Level 1		Level 2		Level 3		Net Value
Assets:
Derivative assets	$	5.6	$	3.2	$	—	$	8.8
Marketable securities		7.2		—		—		7.2
Deferred compensation assets		8.5		—		—		8.5
Total assets	$	21.3	$	3.2	$	—	$	24.5
Liabilities:
Derivative liabilities	$	—	$	3.5	$	—	$	3.5
Deferred compensation liabilities		77.6		—		—		77.6
Total liabilities	$	77.6	$	3.5	$	—	$	81.1

The following table presents our financial assets and liabilities measured at fair value on a recurring basis, based upon the level within the fair value hierarchy in which the fair value measurements fall, as of May 31, 2020:

	Level 1		Level 2		Level 3		Net Value
Assets:
Derivative assets	$	2.8	$	5.2	$	—	$	8.0
Marketable securities		8.1		—		—		8.1
Deferred compensation assets		8.6		—		—		8.6
Total assets	$	19.5	$	5.2	$	—	$	24.7
Liabilities:
Derivative liabilities	$	—	$	0.4	$	—	$	0.4
Deferred compensation liabilities		68.0		—		—		68.0
Total liabilities	$	68.0	$	0.4	$	—	$	68.4

Certain assets and liabilities, including long-lived assets, goodwill, asset retirement obligations, and cost and equity investments, are measured at fair value on a nonrecurring basis using Level 3 inputs.

In the third quarter of fiscal 2021, we updated our cost estimates associated with certain asset retirement obligations at several manufacturing facilities largely due to recent experience of physically closing a wastewater lagoon. This change in estimate resulted in a non-cash increase to our long-lived assets in the amount of $27.4 million and will result in additional depreciation in future periods generally ranging from 15-25 years. The fair value of our asset retirement obligations was measured using cost estimates to settle our future obligations (including an estimate of inflation) and discounted to present value using a credit-adjusted risk-free rate.

In the first quarter of fiscal 2021, we recognized charges totaling $3.0 million in our Grocery & Snacks segment for the impairment of certain long-lived assets. In the third quarter of fiscal 2020, we recognized charges totaling $3.8 million in the Refrigerated & Frozen segment for the impairment of certain long-lived assets. The impairments were measured based upon the estimated sales price of the assets and have been included in restructuring activities.

In the first quarter of fiscal 2020, we recognized charges for the impairment of certain indefinite-lived brands. The fair values of these brands were estimated using the "relief from royalty" method (see Note 5). Impairments in our Grocery & Snacks and Refrigerated & Frozen segments totaled $3.5 million and $15.8 million, respectively.  

In the first half of fiscal 2020, we recognized impairment charges in our Grocery & Snacks segment totaling $54.4 million. In the second quarter of fiscal 2020, we recognized impairment charges in our Refrigerated & Frozen segment of $27.6 million. The impairments were measured based upon the estimated sales price of the disposal groups (see Note 2).

In the first half of fiscal 2020, we recognized charges of $2.9 million in general corporate expenses related to the impairments of lease right-of-use assets. The impairments were measured based upon a discounted cash flow approach and have been included in restructuring activities.

The carrying amount of long-term debt (including current installments) was $8.50 billion and $9.75 billion as of February 28, 2021 and May 31, 2020, respectively. Based on current market rates, the fair value of this debt (level 2 liabilities) at February 28, 2021 and May 31, 2020, was estimated at $9.99 billion and $11.35 billion, respectively.