Fair Value Measurements

6 Months Ended

Jan. 26, 2014

Financial assets and liabilities are categorized 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, which are valued based on the company's estimates of assumptions that market participants would use in pricing the asset or liability.

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 January 26, 2014, and July 28, 2013, consistent with the fair value hierarchy:



	Fair Value as of January 26, 2014		Fair Value Measurements at January 26, 2014 Using Fair Value Hierarchy						Fair Value as of July 28, 2013		Fair Value Measurements at July 28, 2013 Using Fair Value Hierarchy
	Fair Value as of January 26, 2014		Level 1		Level 2		Level 3		Fair Value as of July 28, 2013		Level 1		Level 2		Level 3
Assets
Interest rate swaps⁽¹⁾	$	—	$	—	$	—	$	—	$	1	$	—	$	1	$	—
Forward starting interest rate swaps⁽¹⁾	21		—		21		—		23		—		23		—
Foreign exchange forward contracts⁽²⁾	7		—		7		—		4		—		4		—
Cross-currency swap contracts⁽³⁾	21		—		21		—		—		—		—		—
Commodity derivative contracts⁽⁴⁾	3		3		—		—		2		2		—		—
Deferred compensation derivative contracts⁽⁵⁾	—		—		—		—		2		—		2		—
Total assets at fair value	$	52	$	3	$	49	$	—	$	32	$	2	$	30	$	—



	Fair Value as of January 26, 2014		Fair Value Measurements at January 26, 2014 Using Fair Value Hierarchy						Fair Value as of July 28, 2013		Fair Value Measurements at July 28, 2013 Using Fair Value Hierarchy
	Fair Value as of January 26, 2014		Level 1		Level 2		Level 3		Fair Value as of July 28, 2013		Level 1		Level 2		Level 3
Liabilities
Foreign exchange forward contracts⁽²⁾	$	2	$	—	$	2	$	—	$	6	$	—	$	6	$	—
Cross-currency swap contracts⁽³⁾	—		—		—		—		24		—		24		—
Commodity derivative contracts⁽⁴⁾	6		6		—		—		6		5		1		—
Deferred compensation obligation⁽⁶⁾	132		132		—		—		123		123		—		—
Total liabilities at fair value	$	140	$	138	$	2	$	—	$	159	$	128	$	31	$	—

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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 quoted futures exchanges and on observable prices of futures and options transactions in the marketplace.


⁽⁵⁾	Based on LIBOR and equity index swap rates.


⁽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 the three-month period ended January 26, 2014, the company recognized an impairment charge of $11 on plant assets associated with the initiative to restructure manufacturing and streamline operations for its soup and broth business in China. See also Note 8. The carrying value was reduced to estimated fair value based on expected proceeds. The carrying value at January 26, 2014 was not material.

Fair Value of Financial Instruments

The carrying values of cash and cash equivalents, accounts receivable, accounts payable and short-term borrowings, excluding the current portion of long-term debt, approximate fair value. Cash equivalents of $139 at January 26, 2014 and $4 at July 28, 2013 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 $2,972 at January 26, 2014 and $3,299 at July 28, 2013. The carrying value was $2,956 at January 26, 2014 and $3,244 at July 28, 2013. 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.

- 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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