(4) Financial Instruments

Hasbro's financial instruments include cash and cash equivalents, accounts receivable, short-term borrowings, accounts payable and certain accrued liabilities. At June 30, 2013, July 1, 2012 and December 30, 2012, the carrying cost of these instruments approximated their fair value. The Company's financial instruments at June 30, 2013, July 1, 2012 and December 30, 2012 also include certain assets and liabilities measured at fair value (see Notes 6 and 8) as well as long-term borrowings. The carrying costs and fair values of the Company's long-term borrowings as of June 30, 2013, July 1, 2012 and December 30, 2012 are as follows:

	June 30, 2013				July 1, 2012				December 30, 2012
	Carrying Cost		Fair Value		Carrying Cost		Fair Value		Carrying Cost		Fair Value
6.35% Notes Due 2040	$	500,000		548,600		500,000		582,250		500,000		615,650
6.125% Notes Due 2014		432,458		443,445		439,662		460,020		436,526		455,175
6.30% Notes Due 2017		350,000		401,520		350,000		400,015		350,000		399,700
6.60% Debentures Due 2028		109,895		124,049		109,895		123,038		109,895		129,687
Total long-term debt		1,392,353		1,517,614		1,399,557		1,565,323		1,396,421		1,600,212
Less: Current portion		432,458		443,445		-		-		-		-
Long-term debt excluding current portion	$	959,895		1,074,169		1,399,557		1,565,323		1,396,421		1,600,212

The carrying cost of the 6.125% Notes Due 2014 includes principal amounts of $425,000 as well as fair value adjustments of $7,458, $14,662, and $11,526 at June 30, 2013, July 1, 2012 and December 30, 2012, respectively, related to interest rate swaps.

The interest rate swaps were terminated in November 2012 and the fair value adjustment at June 30, 2013 and December 30, 2012 represent the unamortized portions of the fair value of the interest rate swaps at the date of termination. At June 30, 2013 the principal amount and fair value adjustment associated with the 6.125% Notes Due 2014, totaling $432,458, were included in the current portion of long-term debt. All other carrying costs represent principal amounts and were included in long-term debt excluding the current portion at June 30, 2013. The total principal amount of long-term debt, including the current portion, at June 30, 2013, July 1, 2012 and December 30, 2012 was $1,384,895.

The fair values of the Company's long-term debt are considered Level 3 fair values (see Note 6 for further discussion of the fair value hierarchy) and are measured using the discounted future cash flows method. In addition to the debt terms, the valuation methodology includes an assumption of a discount rate that approximates the current yield on a similar debt security. This assumption is considered an unobservable input in that it reflects the Company's own assumptions about the inputs that market participants would use in pricing the asset or liability. The Company believes that this is the best information available for use in the fair value measurement.

The Company was party to a series of interest rate swap agreements to adjust the amount of debt that is subject to fixed interest rates. The interest rate swaps were matched with a portion of the 6.125% Notes Due 2014 and accounted for as fair value hedges of those notes. The interest rate swaps had a total notional amount of $400,000 with maturities in 2014 which matched the maturity date of the related notes. In each of the contracts, the Company received payments based upon a fixed interest rate of 6.125%, which matched the interest rate of the notes being hedged, and made payments based upon a floating rate based on Libor. These contracts were designated and effective as hedges of the changes in the fair value of the associated debt. In November 2012, these interest rate swap agreements were terminated. The fair value was recorded as an adjustment to long-term debt and is being amortized through the statement of operations over the life of the related debt using a straight-line method. At June 30, 2013 and December 30, 2012, this adjustment to total long-term debt was $7,458 and $11,526, respectively. At July 1, 2012, the fair value of these contracts was an asset of $14,662 which was recorded in other assets with a corresponding fair value adjustment to increase long-term debt. The Company recorded losses of $1,385 and $1,315 for the quarter and six-month periods ended July 1, 2012, respectively, on these instruments in other (income) expense, net relating to the change in fair value of such derivatives, wholly offsetting (gains) losses from the change in fair value of the associated long-term debt, also included in other (income) expense.