Retirement Benefits (Tables)

12 Months Ended

Aug. 31, 2016

Schedule of Percentage of Defined Benefit Pension Plan Assets

Defined benefit pension plan assets were invested in the following classes of securities as of August 31:

Percentage of Fair Market Value	2016		2015
Equity securities		8.9%		9.5%
Debt securities		78.8%		81.5%
Real estate		4.3%		5.6%
Other		8.0%		3.4%

Schedule of Defined Benefit Plans Using Fair Value Hierarchy

The following table presents defined benefit pension plan assets using the fair value hierarchy as of August 31, 2016 (in millions).

	August 31, 2016		Level 1		Level 2		Level 3
Equity securities:
Equity securities ⁽¹⁾	$	834	$	-	$	834	$	-

Debt securities:
Fixed interest government bonds ⁽²⁾		265		-		265		-
Index linked government bonds⁽²⁾		3,502		-		3,502		-
Corporate bonds⁽³⁾		3,663		-		3,663		-

Real estate:
Real estate⁽⁴⁾		411		-		-		411

Other:
Other investments⁽⁵⁾		753		38		713		2

Total	$	9,428	$	38	$	8,977	$	413

	August 31, 2015		Level 1		Level 2		Level 3
Equity securities:
Equity securities ⁽¹⁾	$	852	$	-	$	852	$	-

Debt securities:
Fixed interest government bonds ⁽²⁾		267		-		267		-
Index linked government bonds⁽²⁾		1,006		-		1,006		-
Corporate bonds⁽³⁾		5,535		-		5,535		-
Other bonds⁽⁶⁾		472		-		472		-

Real estate:
Real estate⁽⁴⁾		502		-		-		502

Other:
Other investments⁽⁵⁾		302		25		275		2

Total	$	8,936	$	25	$	8,407	$	504

⁽¹⁾

Equity securities, which mainly comprise investments in comingled funds, are valued based on quoted prices and are primarily exchange-traded. Securities for which official close or last trade pricing on an active exchange is available are classified as Level 1 investments. If closing prices are not available, securities are valued at the last quoted bid price and typically are categorized as Level 2 investments.

⁽²⁾

Debt securities: government bonds comprise fixed interest and index linked bonds issued by central governments, and are valued based on quotes received from independent pricing services or from dealers who make markets in such securities. Pricing services utilize pricing which considers readily available inputs such as the yield or price of bonds of comparable quality, coupon, maturity, and type, as well as dealer-supplied prices. Debt securities: government bonds are categorized as Level 2 investments.

⁽³⁾

Debt securities: corporate bonds comprise bonds issued by corporations and are valued using recently executed transactions, or quoted market prices for similar assets and liabilities in active markets, or for identical assets and liabilities in markets that are not active. If there have been no market transactions in a particular fixed income security, its fair value is calculated by pricing models that benchmark the security against other securities with actual market prices. Debt securities: corporate bonds are categorized as Level 2 investments.

⁽⁴⁾

Real estate comprises investments in certain property funds which themselves are valued based on the value of the underlying properties. These properties are valued using a number of standard industry techniques such as cost, discounted cash flows, independent appraisals and market based comparable data. Real estate investments are categorized as Level 3 investments. Change in Level 3 investments driven primarily by currency fluctuations.

⁽⁵⁾

Other investments mainly comprise cash and cash equivalents and derivatives. Cash is categorized as a Level 1 investment. Cash equivalents are valued using observable yield curves, discounting and interest rates and are categorized as Level 2 investments. Derivatives which are exchange-traded and for which market quotations are readily available are valued at the last reported sale price or official closing price as reported by an independent pricing service on the primary market, or exchange on which they are traded, and are categorized as Level 1 investments. Over-the-counter derivatives typically are valued by independent pricing services and are categorized as Level 2 investments.

⁽⁶⁾

Debt securities: other bonds comprise agency and mortgage-backed securities. These are valued using recently executed transactions and quoted market prices for similar assets and liabilities in active markets, or for identical assets and liabilities in markets that are not active. If there have been no market transactions in a particular fixed income security, its fair value is calculated by pricing models that benchmark the security against other securities with actual market prices. Debt securities: other bonds are categorized as Level 2 investments.

Components of Net Periodic Benefit Costs

Components of net periodic pension costs for the defined benefit pension plans (in millions):

	Boots and Other Pension Plans
	2016			2015⁽¹⁾
Service costs	$	4		$	3
Interest costs		308			214
Expected returns on plan assets		(247	)		(173	)
Curtailments		(2	)		(2	)
Total net periodic pension costs	$	63		$	42

Accumulated and Projected Benefit Obligations

Change in benefit obligations for the defined benefit pension plans (in millions):

	2016			2015⁽¹⁾
Benefit obligation at beginning of year	$	8,635		$	8,827
Service costs		4			3
Interest costs		308			214
Amendments		(2	)		(2	)
Net actuarial (gain) loss		2,272			(103	)
Benefits paid		(277	)		(186	)
Currency translation adjustments		(1,477	)		(118	)
Benefit obligation at end of year	$	9,463		$	8,635

Changes in Fair Value of Plan Assets

Change in plan assets for the defined benefit pension plans (in millions):

	2016			2015⁽¹⁾
Plan assets at fair value at beginning of year	$	8,936		$	8,987
Employer contributions		75			152
Benefits paid		(277	)		(186	)
Return on assets		2,216			91
Currency translation adjustments		(1,522	)		(108	)
Plan assets at fair value at end of year	$	9,428		$	8,936

Amounts Recognized in Balance Sheet

Amounts recognized in the Consolidated Balance Sheets (in millions):

	2016			2015
Other non-current assets	$	155		$	468
Accrued expenses and other liabilities		(6	)		(1	)
Other non-current liabilities		(184	)		(166	)
Net (liability) asset recognized at end of year	$	(35	)	$	301

Pre-tax Amounts Recognized in Accumulated Other Comprehensive (Income) Loss

Pre-tax amounts recognized in accumulated other comprehensive (income) loss (in millions):

		2016				2015 ⁽¹⁾
Net actuarial (gain) loss			(258	)			21

⁽¹⁾	Fiscal 2015 represents change in pension benefit obligation and plan assets from December 31, 2014 to August 31, 2015.

Amounts in Accumulated Other Comprehensive Income (Loss) to be Recognized over Next Fiscal Year

The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for all pension plans including accumulated benefit obligations in excess of plan assets at August 31, 2016 were as follows (in millions):

	2016		2015
Projected benefit obligation	$	9,463	$	8,635
Accumulated benefit obligation		9,457		8,624
Fair value of plan assets		9,428		8,936

Estimated Future Benefit Payments

Estimated future benefit payments from defined benefit pension plans to participants are as follows (in millions):

	Estimated Future Benefit Payments
2017	$	264
2018		237
2019		248
2020		266
2021		279
2022-2026		1,641

Schedule of Assumptions Used

The assumptions used in accounting for the defined benefit pension plans were as follows:

	2016			2015
Weighted-average assumptions used to determine benefit obligations
Discount rate		2.17	%		3.87	%
Rate of compensation increase		2.44	%		2.55	%

Weighted-average assumptions used to determine net periodic benefit cost
Discount rate		3.87	%		3.77	%
Expected long-term return on plan assets		3.05	%		2.99	%
Rate of compensation increase		2.55	%		2.66	%