FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., an exit price). The accounting guidance includes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The three levels of the fair value hierarchy are as follows:


•	Level 1 – Unadjusted quoted prices for identical assets or liabilities in active markets;


•	Level 2 – Inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly for substantially the full term of the asset or liability; and


•	Level 3 – Unobservable inputs for the asset or liability, which include management’s own assumption about the assumptions market participants would use in pricing the asset or liability, including assumptions about risk.

Sysco’s policy is to invest in only high-quality investments. Cash equivalents primarily include time deposits, certificates of deposit, commercial paper, high-quality money market funds and all highly liquid instruments with original maturities of three months or less.

The following is a description of the valuation methodologies used for assets and liabilities measured at fair value:


•	Time deposits and commercial paper included in cash equivalents are valued at amortized cost, which approximates fair value. These are included within cash equivalents as a Level 2 measurement in the tables below.


•	Money market funds are valued at the closing price reported by the fund sponsor from an actively traded exchange. These are included within cash equivalents as Level 1 measurements in the tables below.


•	The interest rate swap agreements are valued using a swap valuation model that utilizes an income approach using observable market inputs including interest rates, LIBOR swap rates and credit default swap rates. These are included as Level 2 measurements in the tables below.


•	The foreign currency swap agreements, including cross-currency swaps, are valued using a swap valuation model that utilizes an income approach applying observable market inputs including interest rates, LIBOR swap rates for U.S. dollars, pound sterling and Euro currencies, and credit default swap rates. These are included as Level 2 measurements in the tables below.


•	Foreign currency forwards are valued based on exchange rates quoted by domestic and foreign banks for similar instruments. These are included as Level 2 measurements in the tables below.


•	Fuel swap contracts are valued based on observable market transactions of forward commodity prices. These are included as Level 2 measurements in the tables below.

The following tables present the company’s assets and liabilities measured at fair value on a recurring basis as of September 30, 2017, July 1, 2017 and October 1, 2016:



	Assets and Liabilities Measured at Fair Value as of Sep. 30, 2017
	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Cash and cash equivalents
Cash equivalents	$	287,203	$	43,191	$	—	$	330,394
Other current assets:
Interest rate swaps	—		223		—		223
Foreign currency forwards	—		461		—		461
Fuel swaps	—		4,743		—		4,743
Other assets:
Foreign currency swaps	—		5,912		—		5,912
Total assets at fair value	$	287,203	$	54,530	$	—	$	341,733

Liabilities:
Other current liabilities:
Foreign currency forwards	$	—	$	118	$	—	$	118
Other long-term liabilities:
Interest rate swaps	—		22,653		—		22,653
Cross-currency swaps	—		15,115		—		15,115
Foreign currency swaps	—		34,114		—		34,114
Total liabilities at fair value	$	—	$	72,000	$	—	$	72,000



	Assets and Liabilities Measured at Fair Value as of Jul. 1, 2017
	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Cash and cash equivalents
Cash equivalents	$	238,954	$	49,430	$	—	$	288,384
Other current assets:
Fuel swaps	—		717		—		717
Other assets:
Interest rate swaps	—		707		—		707
Total assets at fair value	$	238,954	$	50,854	$	—	$	289,808

Liabilities:
Other current liabilities:
Fuel swaps	$	—	$	6,320	$	—	$	6,320
Foreign currency forwards	—		154		—		154
Other long-term liabilities:
Interest rate swaps	—		21,390		—		21,390
Cross-currency swaps	—		5,816		—		5,816
Foreign currency swaps	—		12,308		—		12,308
Total liabilities at fair value	$	—	$	45,988	$	—	$	45,988



	Assets and Liabilities Measured at Fair Value as of Oct. 1, 2016
	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Cash and cash equivalents
Cash equivalents	$	9,176	$	43,270	$	—	$	52,446
Other current assets:
Foreign currency forwards	—		873		—		873
Other assets
Interest rate swap agreement	—		18,935		—		18,935
Foreign currency swaps	—		3,979		—		3,979
Total assets at fair value	$	9,176	$	67,057	$	—	$	76,233

Liabilities:
Other current liabilities:
Fuel hedges	$	—	$	618	$	—	$	618
Other long-term liabilities
Cross-currency swaps	—		3,184		—		3,184
Foreign currency swaps	—		10,695		—		10,695
Total liabilities at fair value	$	—	$	14,497	$	—	$	14,497

The carrying values of accounts receivable and accounts payable approximated their respective fair values due to their short-term maturities. The fair value of Sysco’s total debt is estimated based on the quoted market prices for the same or similar issues or on the current rates offered to the company for new debt with the same maturities as existing debt, and is considered a Level 2 measurement. The fair value of total debt was approximately $9.4 billion, $8.6 billion and $8.4 billion as of September 30, 2017, July 1, 2017 and October 1, 2016, respectively. The carrying value of total debt was $9.0 billion, $8.2 billion and $7.8 billion as of September 30, 2017, July 1, 2017 and October 1, 2016, respectively.