XML 38 R27.htm IDEA: XBRL DOCUMENT v3.21.2
Financial Instruments (Tables)
 8 Months Ended
Sep. 04, 2021
Derivative [Line Items]  
Schedule of Notional Amounts of Outstanding Derivative Positions [Table Text Block]
The notional amounts of our financial instruments used to hedge the above risks as of September 4, 2021 and December 26, 2020 are as follows:
 
Notional Amounts(a)
9/4/202112/26/2020
Commodity $1.4 $1.1 
Foreign exchange $2.3 $1.9 
Interest rate$2.3 $3.0 
Net investment (b)
$2.7 $2.7 
(a)In billions.
(b)The total notional of our net investment hedge consists of non-derivative debt instruments.
Fair Values of Financial Assets and Liabilities
The fair values of our financial assets and liabilities as of September 4, 2021 and December 26, 2020 are categorized as follows:
 9/4/202112/26/2020
 
Fair Value Hierarchy Levels(a)
Assets(a)
Liabilities(a)
Assets(a)
Liabilities(a)
Index funds (b)
1$339 $— $231 $— 
Prepaid forward contracts (c)
2$19 $— $18 $— 
Deferred compensation (d)
2$— $506 $— $477 
Contingent consideration (e)
3$— $840 $— $861 
Derivatives designated as fair value hedging instruments:
Interest rate (f)
2$— $— $2 $— 
Derivatives designated as cash flow hedging instruments:
Foreign exchange (g)
2$11 $25 $9 $71 
Interest rate (g)
228 221 13 307 
Commodity (h)
280 1 32 — 
$119 $247 $54 $378 
Derivatives not designated as hedging instruments:
Foreign exchange (g)
2$5 $10 $4 $8 
Commodity (h)
248 12 19 7 
$53 $22 $23 $15 
Total derivatives at fair value (i)
$172 $269 $79 $393 
Total$530 $1,615 $328 $1,731 
(a)Fair value hierarchy levels are categorized consistently by Level 1 (quoted prices in active markets for identical assets), Level 2 (significant other observable inputs) and Level 3 (significant unobservable inputs) in both years. Unless otherwise noted, financial assets are classified on our balance sheet within prepaid expenses and other current assets and other assets. Financial liabilities are classified on our balance sheet within accounts payable and other current liabilities and other liabilities.
(b)Based on the price of index funds. These investments are classified as short-term investments and are used to manage a portion of market risk arising from our deferred compensation liability.
(c)Based primarily on the price of our common stock.
(d)Based on the fair value of investments corresponding to employees’ investment elections.
(e)In connection with our acquisition of Rockstar, we recorded a liability for tax-related contingent consideration payable over up to 15 years, with an option to accelerate all remaining payments, with estimated maximum payments of approximately $1.1 billion, using current tax rates. The fair value of the liability is estimated using probability-weighted, discounted future cash flows at current tax rates. The significant unobservable inputs (Level 3) used to estimate the fair value include the expected future tax benefits associated with the acquisition, the probability that the option to accelerate all remaining payments will be exercised and discount rates. These unobservable inputs did not materially differ from those used as of December 26, 2020. The expected annual future tax benefits range from approximately $40 million to $110 million, with an average of $70 million. The probability, in any given year, that the option to accelerate will be exercised ranges from 2 to 35 percent, with a weighted-average payment period of approximately 3 years. The discount rates range from less than 1 percent to 5 percent, with a weighted average of 4 percent. The contingent consideration measured at fair value using unobservable inputs as of September 4, 2021 is $840 million, comprised of an $861 million liability as of December
26, 2020, a fair value decrease of $19 million in the 36 weeks ended September 4, 2021, recorded in selling, general and administrative expenses, and a fair value decrease of $2 million in the 36 weeks ended September 4, 2021, recorded in goodwill as a result of the finalization of purchase price allocation.
(f)Based on London Interbank Offered Rate forward rates. The carrying amount of hedged fixed-rate debt was $0.2 billion as of September 4, 2021 and December 26, 2020, and is classified on our balance sheet within short-term debt obligations. As of September 4, 2021, fair value hedging adjustments to hedged fixed-rate debt were not material. As of December 26, 2020, the cumulative amount of fair value hedging adjustments to hedged fixed-rate debt was a $2 million gain. As of September 4, 2021, the cumulative amount of fair value hedging adjustments on discontinued hedges was a $4 million net loss, which is being amortized over the remaining life of the related debt obligations.
(g)Based on recently reported market transactions of spot and forward rates.
(h)Based on recently reported market transactions of swap arrangements.
(i)Derivative assets and liabilities are presented on a gross basis on our balance sheet. Amounts subject to enforceable master netting arrangements or similar agreements which are not offset on the balance sheet as of September 4, 2021 and December 26, 2020 were not material. Collateral received or posted against our asset or liability positions was not material. Exchange-traded commodity futures are cash-settled on a daily basis and, therefore, not included in the table.
Effective Portion Of Pre-Tax (Gains)/Losses On Derivative Instruments
Losses/(gains) on our hedging instruments are categorized as follows:
12 Weeks Ended
Fair Value/Non-
designated Hedges		Cash Flow and Net Investment Hedges
Losses/(Gains)
Recognized in
Income Statement(a)
Losses/(Gains)
Recognized in
Accumulated Other
Comprehensive Loss
Losses/(Gains)
Reclassified from
Accumulated Other
Comprehensive Loss
into Income
Statement(b)
9/4/20219/5/20209/4/20219/5/20209/4/20219/5/2020
Foreign exchange$(5)$(10)$(18)$31 $27 $(22)
Interest rate1 4 52 (117)53 (102)
Commodity(31)(37)11 (29)(66)24 
Net investment— — (63)118 — — 
Total$(35)$(43)$(18)$3 $14 $(100)
 36 Weeks Ended
 Fair Value/Non-
designated Hedges		Cash Flow and Net Investment Hedges
 
Losses/(Gains)
Recognized in
Income Statement(a)
Losses/(Gains)
Recognized in
Accumulated Other
Comprehensive Loss
Losses/(Gains)
Reclassified from
Accumulated Other
Comprehensive Loss
into Income Statement(b)
9/4/20219/5/20209/4/20219/5/20209/4/20219/5/2020
Foreign exchange $5 $(11)$20 $(47)$67 $(37)
Interest rate 2 (8)(12)(24)2 (73)
Commodity (182)120 (235)48 (109)40 
Net investment— — (71)159 — — 
Total$(175)$101 $(298)$136 $(40)$(70)
(a)Foreign exchange derivative losses/gains are primarily included in selling, general and administrative expenses. Interest rate derivative losses/gains are primarily from fair value hedges and are included in net interest expense and other. These losses/gains are substantially offset by decreases/increases in the value of the underlying debt, which are also included in net interest expense and other. Commodity derivative losses/gains are included in either cost of sales or selling, general and administrative expenses, depending on the underlying commodity.
(b)Foreign exchange derivative losses/gains are primarily included in cost of sales. Interest rate derivative losses/gains on cross-currency interest rate swaps are included in selling, general and administrative expenses. Commodity derivative losses/gains are included in either cost of sales or selling, general and administrative expenses, depending on the underlying commodity.