Fair Value Measurements

3 Months Ended

Nov. 30, 2014

Note 10. Fair Value Measurements

The Company measures certain assets and liabilities in accordance with ASC Topic 820, Fair Value Measurements and Disclosures. ASC Topic 820 defines fair value as the price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. In addition, it establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels:

Level 1 -

Quoted prices in active markets that are accessible at the measurement date for identical assets and liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

Level 2 -

Observable inputs other than quoted prices in active markets.

Level 3 -

Unobservable inputs for which there is little or no market data available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

Assets and liabilities measured at fair value on a recurring basis were as follows (In millions):

	November 30, 2014		Level 1		Level 2		Level 3
Assets:
Money market and other cash equivalents	$	11,605	$	11,605	$	-	$	-
Interest rate swaps⁽¹⁾		26		-		26		-
Investment in AmerisourceBergen ⁽²⁾		1,044		1,044		-		-
Warrants ⁽³⁾		844		-		844		-
Liabilities:
Foreign currency forwards⁽⁴⁾		96		96		-		-

	August 31, 2014		Level 1		Level 2		Level 3
Assets:
Money market funds	$	1,879	$	1,879	$	-	$	-
Interest rate swaps⁽¹⁾		16		-		16		-
Investment in AmerisourceBergen ⁽²⁾		887		887		-		-
Warrants ⁽³⁾		553		-		553		-
Liabilities:
Forward interest rate swaps⁽⁵⁾		44		-		44		-

	November 30, 2013		Level 1		Level 2		Level 3
Assets:
Money market funds	$	360	$	360	$	-	$	-
Interest rate swaps⁽¹⁾		23		-		23		-
Investment in AmerisourceBergen ⁽²⁾		599		599		-		-
Warrants ⁽³⁾		408		-		408		-

⁽¹⁾	Interest rate swaps are valued using six-month and one-month LIBOR in arrears rates. See Note 9 for additional disclosure regarding financial instruments.

⁽²⁾	The investment in AmerisourceBergen is valued using the closing stock price of AmerisourceBergen as of the balance sheet dates. See Note 6 for additional disclosures on available-for-sale investments.

⁽³⁾

Warrants were valued using a Monte Carlo simulation. Key assumptions used in the valuation include risk-free interest rates using constant maturity treasury rates; the dividend yield for AmerisourceBergen’s common stock; AmerisourceBergen’s common stock price at the valuation date; AmerisourceBergen’s equity volatility; the number of shares of AmerisourceBergen’s common stock outstanding; the number of AmerisourceBergen employee stock options and the exercise price; and the details specific to the warrants.

⁽⁴⁾	Foreign currency forwards are valued using published exchange rates on the respective balance sheet dates.

⁽⁵⁾	Forward interest rate swaps are valued using three-month LIBOR in arrears rates. See Note 9 for additional disclosure regarding financial instruments.

The Company reports its debt instruments under the guidance of ASC Topic 825, Financial Instruments, which requires disclosure of the fair value of the Company’s debt in the footnotes to the consolidated financial statements. The fair value for all notes was determined based upon quoted market prices and therefore categorized as Level 1. See Note 8 for further details.

- Definition

Tabular disclosure of the fair value of financial instruments, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

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