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Fair Value Measurements

12 Months Ended

Aug. 02, 2020

We 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, which are valued based on our 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, we use unadjusted quoted market prices to measure the fair value and classify such items as Level 1. If quoted market prices are not available, we base 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 our financial assets and liabilities that are measured at fair value on a recurring basis as of August 2, 2020, and July 28, 2019, consistent with the fair value hierarchy:


	Fair Value as of August 2, 2020		Fair Value Measurements at August 2, 2020 Using Fair Value Hierarchy										Fair Value as of July 28, 2019		Fair Value Measurements at July 28, 2019 Using Fair Value Hierarchy
					Level 1		Level 2		Level 3						Level 1		Level 2	Level 3
Assets


Foreign exchange forward contracts⁽¹⁾	$	1	$	—	$	1	$	—	$	1	$	—	$	1	$	—
Commodity derivative contracts⁽²⁾	7		3		2		2		3		2		1		—

Deferred compensation derivative contracts⁽³⁾	4		—		4		—		1		—		1		—
Deferred compensation investments⁽⁴⁾	3		3		—		—		4		4		—		—
Fair value option investments⁽⁵⁾	—		—		—		—		76		—		—		76
Total assets at fair value	$	15	$	6	$	7	$	2	$	85	$	6	$	3	$	76


	Fair Value as of August 2, 2020		Fair Value Measurements at August 2, 2020 Using Fair Value Hierarchy														Fair Value as of July 28, 2019		Fair Value Measurements at July 28, 2019 Using Fair Value Hierarchy
					Level 1			Level 2			Level 3					Level 1			Level 2		Level 3
Liabilities

Foreign exchange forward contracts⁽¹⁾	$	2	$	—		$	2		$	—		$	4	$	—		$	4	$	—
Commodity derivative contracts⁽²⁾	9		5			4			—			6		3			3		—


Deferred compensation obligation⁽⁴⁾	92		92			—			—			95		95			—		—
Total liabilities at fair value	$	103	$	97		$	6		$	—		$	105	$	98		$	7	$	—

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⁽¹⁾Based on observable market transactions of spot currency rates and forward rates.

⁽²⁾Level 1 and 2 are based on quoted futures exchanges and on observable prices of futures and options transactions in the marketplace. Level 3 is based on unobservable inputs in which there is little or no market data, which requires management’s own assumptions within an internally developed model.

⁽³⁾Based on LIBOR and equity index swap rates.

⁽⁴⁾Based on the fair value of the participants’ investments.

⁽⁵⁾Primarily represented investments in equity securities that were not readily marketable and were accounted for under the fair value option. The investments were funded by Acre. Fair value was based on analyzing recent transactions and transactions of comparable companies, and the discounted cash flow method. In addition, allocation methods, including the option pricing method, were used in distributing fair value among various equity holders according to rights and preferences. We entered into an agreement to sell our interest in Acre on April 26, 2020, and completed the sale on May 8, 2020. See Note 16 for additional information.

The following table summarizes the changes in fair value of Level 3 investments for the years ended August 2, 2020, and July 28, 2019:


	2020		2019
Fair value at beginning of year	$	76	$	77
Gains (losses)	(45)		(1)
Purchases	1		—
Sales	(29)		—
Settlements	(1)		—
Fair value at end of year	$	2	$	76

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, we are also required to measure certain items at fair value on a nonrecurring basis.

We recognized impairment charges on goodwill, trademarks, other intangible assets and plant assets in connection with interim and annual assessments in recent years. See also Notes 3 and 6 for additional information on the impairment charges.

Fair value was determined based on unobservable Level 3 inputs. The fair value of plant assets was determined based on cash flows associated with the asset group that include significant management assumptions, including expected proceeds. The fair values of trademarks 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 fair value in testing goodwill was determined based on discounted cash flow analyses that include significant management assumptions such as revenue growth rates, operating margins, weighted average costs of capital, and future economic and market conditions.

The following table presents fair value measurements:


	Impairment Charges										Fair Value
	Plant Assets		Amortizable Intangibles		Trademark		Plant Assets		Amortizable Intangibles			Trademark




Discontinued Operations
January 27, 2019
Bolthouse Farms carrot and carrot ingredients	$	104	$	55	$	18	$	102	$	25		$	30
Bolthouse Farms refrigerated beverages and salad dressings	$	9	$	22	$	74	$	100	$	12		$	76
Garden Fresh Gourmet	$	2	$	39	$	23	$	25	$	—		$	—
October 28, 2018
Refrigerated soup	$	14					$	38

In the fourth quarter of 2019, we recorded an impairment charge of $16 on customer relationships intangible assets within the European chips business. The carrying value was not material.

In the fourth quarter of 2019, as part of our annual review of intangible assets, we recognized an impairment charge of $7 on a trademark and $10 on goodwill in discontinued operations on Kelsen due to a lower long-term outlook for sales and the pending sale of the business.

Fair Value of Financial Instruments

The carrying values of cash and cash equivalents, accounts receivable and accounts payable approximate fair value.

Cash equivalents were $157 at August 2, 2020. At July 28, 2019, discontinued operations included cash equivalents of $19. Cash equivalents 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 short- and long-term debt was $6,995 at August 2, 2020, and $8,642 at July 28, 2019. The carrying value was $6,196 at August 2, 2020, and $8,474 at July 28, 2019. The fair value and carrying value of short- and long-term debt of discontinued operations was $238 at July 28, 2019. 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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