Fair Value Measurement

12 Months Ended

Oct. 03, 2015

The Company’s assets and liabilities measured at fair value are summarized in the following tables by fair value measurement Level. See Note 10 for the definitions of fair value and each Level within the fair value hierarchy.



	Fair Value Measurement at October 3, 2015
Description	Level 1		Level 2			Level 3			Total
Assets
Investments	$	36	$	—		$	—		$	36
Derivatives
Interest rate	—		101			—			101
Foreign exchange	—		910			—			910
Liabilities
Derivatives
Foreign exchange	—		(178		)	—			(178		)
Other	—		(38		)	—			(38		)
Other	—		—			(96		)	(96		)
Total recorded at fair value	$	36	$	795		$	(96	)	$	735
Fair value of borrowings	$	—	$	17,036		$	752		$	17,788



	Fair Value Measurement at September 27, 2014
Description	Level 1		Level 2			Level 3			Total
Assets
Investments	$	100	$	—		$	—		$	100
Derivatives
Interest rate	—		117			—			117
Foreign exchange	—		621			—			621
Liabilities
Derivatives
Interest rate	—		(75		)	—			(75		)
Foreign exchange	—		(121		)	—			(121		)
Other	—		—			(198		)	(198		)
Total recorded at fair value	$	100	$	542		$	(198	)	$	444
Fair value of borrowings	$	—	$	14,374		$	901		$	15,275

The fair values of Level 2 derivatives are primarily determined by internal discounted cash flow models that use observable inputs such as interest rates, yield curves and foreign currency exchange rates. Counterparty credit risk, which is mitigated by master netting agreements and collateral posting arrangements with certain counterparties, did not have a material impact on derivative fair value estimates.

Level 2 borrowings, which include commercial paper and U.S. medium-term notes, are valued based on quoted prices for similar instruments in active markets.

The fair value of the Level 3 other liabilities represents the fair value of the contingent consideration for Maker and is determined by a probability weighting of potential payouts.

Level 3 borrowings, which include International Theme Park borrowings and other foreign currency denominated borrowings, are generally valued based on historical market transactions, prevailing market interest rates and the Company’s current borrowing cost and credit risk.

The Company’s financial instruments also include cash, cash equivalents, receivables and account payable. The carrying values of these financial instruments approximate the fair values.

The Company also has assets that are required to be recorded at fair value on a non-recurring basis when the estimated future cash flows provide indicators that the asset may be impaired. In addition, we compare the carrying values of our indefinite-lived intangible assets to fair value on at least an annual basis. During fiscal 2015, the Company recorded film production cost impairment charges of $65 million. At October 3, 2015, the aggregate carrying value of the films for which we prepared the fair value analyses in fiscal 2015 was $184 million. These impairment charges are reported in "Costs of services" in the Consolidated Statements of Income. The film impairment charges reflected the excess of the unamortized cost of the impaired films over their estimated fair value using discounted cash flows, which is a Level 3 valuation technique. During fiscal 2014, radio FCC licenses with a carrying value of $117 million were written down to fair value of $71 million resulting in an impairment charge of $46 million, which was recorded in "Restructuring and impairment charges" in the Consolidated Statement of Income. The radio FCC license fair values were derived using market transactions, which is a Level 3 valuation technique, and were determined in connection with a plan to sell Radio Disney stations.

Credit Concentrations

The Company monitors its positions with, and the credit quality of, the financial institutions that are counterparties to its financial instruments on an ongoing basis and does not currently anticipate nonperformance by the counterparties.

The Company does not expect that it would realize a material loss, based on the fair value of its derivative financial instruments as of October 3, 2015, in the event of nonperformance by any single derivative counterparty. The Company generally enters into derivative transactions only with counterparties that have a credit rating of A- or better and requires collateral in the event credit ratings fall below A- or aggregate exposures exceed limits as defined by contract. In addition, the Company limits the amount of investment credit exposure with any one institution.

The Company does not have material cash and cash equivalent balances with financial institutions that have below investment grade credit ratings. As of October 3, 2015, the Company’s balances with individual financial institutions that exceeded 10% of the Company’s total cash and cash equivalents were 31% of total cash and cash equivalents compared to 43% as of September 27, 2014.

The Company’s trade receivables and financial investments do not represent a significant concentration of credit risk at October 3, 2015 due to the wide variety of customers and markets into which the Company’s products are sold, their dispersion across geographic areas and the diversification of the Company’s portfolio among issuers.

- 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.

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