Fair Value Measurements

12 Months Ended

Jul. 29, 2012

Fair Value, by Balance Sheet Grouping, Methodology and Assumptions [Abstract]

Fair Value Measurements

Fair Value Measurements

The company is required to categorize financial assets and liabilities based on the following fair value hierarchy:

• Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

• Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability through corroboration with observable market data.

• Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.

Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. When available, the company uses unadjusted quoted market prices to measure the fair value and classifies such items as Level 1. If quoted market prices are not available, the company bases fair value upon internally developed models that use current market-based or independently sourced market parameters such as interest rates and currency rates. Included in the fair value of derivative instruments is an adjustment for credit and nonperformance risk.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents the company’s financial assets and liabilities that are measured at fair value on a recurring basis as of July 29, 2012, and July 31, 2011, consistent with the fair value hierarchy:

	Fair Value as of July 29, 2012		Fair Value Measurements at July 29, 2012 Using Fair Value Hierarchy						Fair Value as of July 31, 2011		Fair Value Measurements at July 31, 2011 Using Fair Value Hierarchy
			Level 1		Level 2		Level 3				Level 1		Level 2		Level 3
Assets
Interest rate swaps(1)	$	13	$	—	$	13	$	—	$	33	$	—	$	33	$	—
Forward starting interest rate swaps(1)	2		—		2		—		—		—		—		—
Foreign exchange forward contracts(2)	2		—		2		—		—		—		—		—
Cross-currency swap contracts(3)	19		—		19		—		1		—		1		—
Commodity derivative contracts(5)	8		8		—		—		3		3		—		—
Deferred compensation derivative contracts(4)	1		—		1		—		—		—		—		—
Total assets at fair value	$	45	$	8	$	37	$	—	$	37	$	3	$	34	$	—

	Fair Value as of July 29, 2012		Fair Value Measurements at July 29, 2012 Using Fair Value Hierarchy						Fair Value as of July 31, 2011		Fair Value Measurements at July 31, 2011 Using Fair Value Hierarchy
			Level 1		Level 2		Level 3				Level 1		Level 2		Level 3
Liabilities
Foreign exchange forward contracts(2)	$	—	$	—	$	—	$	—	$	9	$	—	$	9	$	—
Cross-currency swap contracts(3)	79		—		79		—		129		—		129		—
Deferred compensation derivative contracts(4)	—		—		—		—		3		—		3		—
Commodity derivative contracts(5)	4		4		—		—		2		2		—		—
Deferred compensation obligation(6)	109		109		—		—		144		97		47		—
Total liabilities at fair value	$	192	$	113	$	79	$	—	$	287	$	99	$	188	$	—

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(1) Based on LIBOR swap rates.

(2) Based on observable market transactions of spot currency rates and forward rates.

(3) Based on observable local benchmarks for currency and interest rates.

(4) Based on LIBOR and equity index swap rates.

(5) Based on quoted futures exchanges.

(6) Based on the fair value of the participants’ investments.

Items Measured at Fair Value on a Nonrecurring Basis

In addition to assets and liabilities that are measured at fair value on a recurring basis, the company is also required to measure certain items at fair value on a nonrecurring basis. In 2012 and 2011, as part of the company's annual review of intangible assets, an impairment charge of $3 was recognized on trademarks used in the International Simple Meals and Beverages segment. Fair value was determined based on unobservable Level 3 inputs. Fair value was determined based on discounted cash flow analyses that include significant management assumptions such as revenue growth rates, weighted average costs of capital, and assumed royalty rates.

The following table presents the company’s fair value measurements of intangible assets that were recognized in the years ended July 29, 2012, and July 31, 2011, respectively, consistent with the fair value hierarchy:

	2012				2011
	Impairment		Fair Value		Impairment		Fair Value
Intangible assets
Blå Band	$	3	$	20	$	—	$	—
Heisse Tasse	$	—	$	—	$	3	$	11

The company also recognized $22 of asset impairment/accelerated depreciation in 2011 associated with the restructuring initiatives described in Note 6. The carrying value of the assets was reduced to estimated fair value, which was not material.

Fair Value of Financial Instruments

Financial instruments, other than those presented in the disclosures above, include cash, cash equivalents, accounts receivable, accounts payable, and short- and long-term borrowings. The carrying value of cash, accounts receivable, accounts payable and short-term borrowings, excluding the current portion of long-term debt, approximate fair value.

Cash equivalents of $80 at July 29, 2012 and $35 at July 31, 2011 represent fair value as these highly liquid investments have an original maturity of three months or less. Fair value of cash equivalents is based on Level 2 inputs.

The fair value of long-term debt, including the current portion of long-term debt in Short-term borrowings, was $2,663 at July 29, 2012 and $2,603 at July 31, 2011. The carrying value was $2,408 at July 29, 2012 and $2,427 at July 31, 2011. The fair value of long-term debt is principally estimated using Level 2 inputs based on quoted market prices or pricing models using current market rates.