Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis (in millions):



			Fair Value Measurements at Reporting Date Using
	Balance at Jul 2, 2017		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash and cash equivalents	$	2,716.2	$	2,716.2	$	—	$	—
Short-term investments:
Available-for-sale securities
Agency obligations	3.3		—		3.3		—
Commercial paper	14.9		—		14.9		—
Corporate debt securities	71.7		—		71.7		—
Foreign government obligations	5.1		—		5.1		—
U.S. government treasury securities	97.0		97.0		—		—
Mortgage and other asset-backed securities	12.1		—		12.1		—
Certificates of deposit	12.3		—		12.3		—
Total available-for-sale securities	216.4		97.0		119.4		—
Trading securities	73.5		73.5		—		—
Total short-term investments	289.9		170.5		119.4		—
Prepaid expenses and other current assets:
Derivative assets	20.9		—		20.9		—
Long-term investments:
Available-for-sale securities
Agency obligations	28.2		—		28.2		—
Corporate debt securities	284.6		—		284.6		—
Auction rate securities	5.8		—		—		5.8
Foreign government obligations	37.7		—		37.7		—
U.S. government treasury securities	151.3		151.3		—		—
State and local government obligations	7.4		—		7.4		—
Mortgage and other asset-backed securities	193.3		—		193.3		—
Total long-term investments	708.3		151.3		551.2		5.8
Other long-term assets:
Derivative assets	26.2		—		26.2		—
Total assets	$	3,761.5	$	3,038.0	$	717.7	$	5.8
Liabilities:
Accrued liabilities:
Derivative liabilities	$	20.7	$	6.8	$	13.9	$	—
Other long-term liabilities:
Derivative liabilities	19.9		—		19.9		—
Total liabilities	$	40.6	$	6.8	$	33.8	$	—



			Fair Value Measurements at Reporting Date Using
	Balance at Oct 2, 2016		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash and cash equivalents	$	2,128.8	$	2,128.8	$	—	$	—
Short-term investments:
Available-for-sale securities
Agency obligations	1.3		—		1.3		—
Commercial paper	2.6		—		2.6		—
Corporate debt securities	34.2		—		34.2		—
Foreign government obligations	5.5		—		5.5		—
U.S. government treasury securities	15.8		15.8		—		—
State and local government obligations	0.5		—		0.5		—
Certificates of deposit	5.8		—		5.8		—
Total available-for-sale securities	65.7		15.8		49.9		—
Trading securities	68.7		68.7		—		—
Total short-term investments	134.4		84.5		49.9		—
Prepaid expenses and other current assets:
Derivative assets	27.7		3.1		24.6		—
Long-term investments:
Available-for-sale securities
Agency obligations	44.4		—		44.4		—
Corporate debt securities	459.3		—		459.3		—
Auction rate securities	5.7		—		—		5.7
Foreign government obligations	46.7		—		46.7		—
U.S. government treasury securities	358.2		358.2		—		—
State and local government obligations	57.5		—		57.5		—
Mortgage and other asset-backed securities	169.9		—		169.9		—
Total long-term investments	1,141.7		358.2		777.8		5.7
Other long-term assets:
Derivative assets	6.4		—		6.4		—
Total assets	$	3,439.0	$	2,574.6	$	858.7	$	5.7
Liabilities:
Accrued liabilities:
Derivative liabilities	$	18.0	$	1.7	$	16.3	$	—
Other long-term liabilities:
Derivative liabilities	71.6		—		71.6		—
Total	$	89.6	$	1.7	$	87.9	$	—

There were no transfers between levels, and there was no significant activity within Level 3 instruments during the periods presented. The fair values of any financial instruments presented above exclude the impact of netting assets and liabilities when a legally enforceable master netting agreement exists.

Gross unrealized holding gains and losses on investments were not material as of July 2, 2017 and October 2, 2016.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Assets and liabilities recognized or disclosed at fair value on the condensed consolidated financial statements on a nonrecurring basis include items such as property, plant and equipment, goodwill and other intangible assets, equity and cost method investments, and other assets. These assets are measured at fair value if determined to be impaired.

During the third quarter of fiscal 2017, management finalized its long-term strategy for the Teavana reporting unit. The plan emphasizes sales of premium Teavana^® tea products at Starbucks branded stores and, to a lesser extent, consumer product channels. The existing portfolio of Teavana-branded retail stores are expected to be closed over the next several quarters. This change in strategic direction triggered an impairment test first of the retail store assets and then an impairment test of the goodwill asset, which also coincided with our annual goodwill testing process. The retail store assets were determined to be fully impaired, which resulted in a charge of $33.0 million. For goodwill, we utilized a combination of income and market approaches to determine the implied fair value of the reporting unit. These approaches used primarily unobservable inputs, including discount, sales growth and royalty rates and valuation multiples of a selection of similar publicly traded companies, which are considered Level 3 fair value measurements. We then compared the implied fair value with the carrying value and recognized a goodwill impairment charge of $69.3 million, thus reducing goodwill of the Teavana reporting unit to $398.3 million as of July 2, 2017. The remaining intangible assets for the Teavana reporting unit of $117.2 million, consisting primarily of the indefinite-lived tradename and definite-lived tea recipes, were also tested, and no impairment losses were recorded.

The ongoing impact of the macro economic challenges we have experienced in our EMEA company-owned markets and the continued strength of the Swiss franc, when compared to the relatively inexpensive euro in surrounding countries, have posed strong headwinds to our Switzerland retail reporting unit. Our latest mitigation efforts incorporated into our Level 3 fair value calculation for our Switzerland retail business are not expected to fully recover the reporting unit’s carrying value given the sustained nature of these and other external factors on consumer behavior and tourism. As a result, we have recorded a goodwill impairment charge of $17.9 million, and, as of July 2, 2017, we had approximately $37.0 million of goodwill remaining on our condensed consolidated balance sheet associated with this reporting unit.

The estimated fair value of our long-term debt based on the quoted market price (Level 2) is included at Note 7, Debt. Other than the aforementioned fair value adjustments, there were no other material fair value adjustments during the quarter and three quarters ended July 2, 2017 and June 26, 2016.