FAIR VALUE MEASUREMENTS

6 Months Ended

Nov. 27, 2016

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

15.   FAIR VALUE MEASUREMENTS

FASB guidance establishes a three-level fair value hierarchy based upon the assumptions (inputs) used to price assets or liabilities. The three levels of inputs used to measure fair value are as follows:

Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities,

Level 2—Observable inputs other than those included in Level 1, such as quoted prices for similar assets and liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets, and

Level 3—Unobservable inputs reflecting Lamb Weston’s own assumptions and best estimate of what inputs market participants would use in pricing the asset or liability.

The fair values of Lamb Weston’s Level 2 derivative instruments were determined using valuation models that use market observable inputs including interest rate curves and both forward and spot prices for currencies and commodities. Derivative assets and liabilities included in Level 2 primarily represent commodity and foreign currency option and forward contracts.

The following table presents Lamb Weston’s financial assets and liabilities measured at fair value on a recurring basis based upon the level within the fair value hierarchy in which the fair value measurements fall, as of November 27, 2016 (dollars in millions):  

	As of November 27, 2016
	Level 1		Level 2		Level 3		Total
Assets:
Deferred compensation assets	$	0.7	$	—	$	—	$	0.7
Total assets		0.7		—		—		0.7
Liabilities:
Derivative liabilities		—		0.6		—		0.6
Deferred compensation liabilities		6.8		—		—		6.8
Total liabilities	$	6.8	$	0.6	$	—	$	7.4

The following table presents Lamb Weston’s financial assets and liabilities measured at fair value on a recurring basis based upon the level within the fair value hierarchy in which the fair value measurements fall, as of May 29, 2016 (dollars in millions):

	As of May 29, 2016
	Level 1		Level 2		Level 3		Total
Assets:
Derivative assets	$	1.5	$	0.6	$	—	$	2.1
Deferred compensation assets		0.7		—		—		0.7
Total assets		2.2		0.6		—		2.8
Liabilities:
Derivative liabilities		—		0.2		—		0.2
Deferred compensation liabilities		6.5		—		—		6.5
Total liabilities	$	6.5	$	0.2	$	—	$	6.7

Certain assets and liabilities, including long-lived assets, goodwill, asset retirement obligations, and cost and equity investments are measured at fair value on a non-recurring basis.

At November 27, 2016, we had $1,698.8 million of fixed-rate and $682.0 million of variable-rate long-term debt outstanding. Based on current market rates, the fair value of our fixed-rate debt at November 27, 2016 was estimated to be $1,675.9 million. Any differences between the book value and fair value are due to the difference between the period-end market interest rate and the stated rate of our fixed-rate debt. We estimated the fair value of our fixed-rate debt using quoted market prices (Level 2 inputs) within the fair value hierarchy, that is described above. The fair value of our variable-rate term debt approximates the carrying amount as our cost of borrowing is variable and approximates current market prices.