Fair Value Measurements

6 Months Ended

Jun. 14, 2014

FAIR VALUE MEASUREMENTS

The accounting guidance for fair value measurements prioritizes the inputs used in measuring fair value into the following hierarchy:



	Level 1		Quoted prices (unadjusted) in active markets for identical assets or liabilities;
	Level 2		Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable;
	Level 3		Unobservable inputs in which little or no market activity exists, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing.

The following table presents assets and liabilities which are measured at fair value on a recurring basis at June 14, 2014 (in millions):



	Fair Value Measurements
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents
Money market	$	1,033.2	$	1,033.2	$	—	$	—
Commercial paper	939.1		—		939.1		—
Other	0.3		—		0.3		—
Short-term investments ¹	71.2		35.9		35.3		—
Non-current investments ²	42.7		—		42.7		—
Total	$	2,086.5	$	1,069.1	$	1,017.4	$	—
Liabilities:
Contingent consideration ³	$	2.7	$	—	$	—	$	2.7
Total	$	2.7	$	—	$	—	$	2.7


(1)	Included in Prepaid Expenses and Other Current Assets on the balance sheet.


(2)	Included in Other Assets on the balance sheet.


(3)	Included in Other Accrued Liabilities and Accrued Claims and Other Liabilities on the balance sheet.

The following table presents assets and liabilities which are measured at fair value on a recurring basis at year-end 2013 (in millions):



	Fair Value Measurements
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents
Term deposits	$	2,818.0	$	—	$	2,818.0	$	—
Money market	449.0		449.0		—		—
Bankers' acceptances	309.6		—		309.6		—
Commercial paper	274.0		—		274.0		—
Short-term investments ¹	81.0		42.0		39.0		—
Non-current investments ²	38.0		—		38.0		—
Total	$	3,969.6	$	491.0	$	3,478.6	$	—
Liabilities:
Contingent consideration ³	$	2.9	$	—	$	—	$	2.9
Total	$	2.9	$	—	$	—	$	2.9


(1)	Included in Prepaid Expenses and Other Current Assets on the balance sheet.


(2)	Included in Other Assets on the balance sheet.


(3)	Included in Other Accrued Liabilities and Accrued Claims and Other Liabilities on the balance sheet.

A reconciliation of the beginning and ending balances for Level 3 liabilities for the first 24 weeks of 2014 follows (in millions):



	Contingent consideration

Balance at December 28, 2013	$	2.9
Settlements	(0.2		)
Balance at June 14, 2014	$	2.7

In determining the fair value, the Company maximizes the use of quoted market prices and minimizes the use of unobservable inputs. The Level 1 fair values are based on quoted market values for identical assets. The fair values of Level 2 are determined using prices from pricing agencies and financial institutions that develop values based on observable inputs in active markets. Level 3 fair values are determined from industry valuation models based on externally developed inputs.

Long-lived assets were measured at fair value on a nonrecurring basis using Level 3 inputs as defined in the fair value hierarchy. Fair value of long-lived assets is determined by estimating the amount and timing of net future cash flows (including rental expense for leased properties, sublease rental income, common area maintenance costs and real estate taxes) and discounting them using a risk-adjusted rate of interest. Safeway estimates future cash flows based on its experience and knowledge of the market in which the store is located and, when necessary, uses real estate brokers.

During the second quarter of 2014, long-lived assets from continuing operations with a carrying value of $24.8 million, primarily store assets, were written down to their fair value of $6.4 million, resulting in an impairment charge of $18.4 million. During the second quarter of 2013, long-lived assets with a carrying value of $10.0 million, primarily store assets, were written down to their fair value of $6.3 million, resulting in an impairment charge of $3.7 million. For the first 24 weeks of 2014, long-lived assets with a carrying value of $34.5 million, primarily stores assets, were written down to their fair value of $8.6 million, resulting in an impairment charge of $25.9 million. For the first 24 weeks of 2013, long-lived assets with a carrying value of $30.0 million, primarily store assets, were written down to their fair value of $14.7 million, resulting in an impairment charge of $15.3 million.

- 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.

+ References+ Details