Fair Value Measurements

6 Months Ended

Feb. 28, 2017

The Company measures certain assets and liabilities in accordance with ASC Topic 820, Fair Value Measurements and Disclosures, which 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 are as follows (in millions):



	February 28, 2017		Level 1		Level 2		Level 3
Assets:
Restricted cash ⁽¹⁾	$	170	$	170	$	—	$	—
Money market funds ⁽²⁾	10,106		10,106		—		—
Available-for-sale investments ⁽³⁾	28		28		—		—
Foreign currency forwards ⁽⁴⁾	2		—		2
Liabilities:
Foreign currency forwards ⁽⁴⁾	11		—		11		—
Basis swaps ⁽⁴⁾	1		—		1		—
Interest rate swaps ⁽⁵⁾	1		—		1		—



	August 31, 2016		Level 1		Level 2		Level 3
Assets:
Restricted cash ⁽¹⁾	$	185	$	185	$	—	$	—
Money market funds ⁽²⁾	9,133		9,133		—		—
Available-for-sale investments ⁽³⁾	32		32		—		—
Interest rate swaps ⁽⁵⁾	3		—		3		—
Foreign currency forwards ⁽⁴⁾	16		—		16		—
Liabilities:
Basis swaps ⁽⁴⁾	1		—		1		—


⁽¹⁾	Restricted cash consists of deposits restricted under agency agreements and cash restricted by law and other obligations.


⁽²⁾	Money market funds are valued at the closing price reported by the fund sponsor.


⁽³⁾	Fair values of quoted investments are based on current bid prices as of the balance sheet dates.


⁽⁴⁾	The fair value of basis swaps and forward currency contracts is estimated by discounting the difference between the contractual forward price and the current available forward price for the residual maturity of the contract using observable market rates.


⁽⁵⁾	The fair value of interest rate swaps is calculated by discounting the estimated future cash flows based on the applicable observable yield curves. See Note 7, Financial Instruments for additional information.

There were no transfers between levels for the three and six months ended February 28, 2017.

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. Unless otherwise noted, the fair value for all notes was determined based upon quoted market prices and therefore categorized as Level 1. See Note 6, Borrowings for further information. The carrying values of accounts receivable and trade accounts payable approximated their respective fair values due to their short-term nature.

- 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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