Starbucks 2009 Annual Report Download - page 66

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis (in millions):
Sep 27, 2009 Level 1 Level 2 Level 3
Assets:
Trading securities ............................... $ 44.8 $44.8 $ — $ —
Available-for-sale securities ....................... 92.7 19.0 18.0 55.7
Derivatives.................................... 13.2 — 13.2 —
Total ........................................ $150.7 $63.8 $31.2 $55.7
Liabilities:
Derivatives.................................... $ 33.2 $ — $33.2 $ —
Trading securities include equity mutual funds and exchange-traded funds. For these securities, the Company uses
quoted prices in active markets for identical assets to determine their fair value, thus they are considered to be
Level 1 instruments.
Available-for-sale securities include government treasury securities, corporate bonds and ARS. For government
treasury securities, the Company uses quoted prices in active markets for identical assets to determine their fair
value, thus they are considered to be Level 1 instruments. The Company uses observable direct and indirect inputs
for corporate bonds, which are considered Level 2 instruments. Level 3 instruments are comprised solely of ARS,
all of which are considered to be illiquid due to the auction failures that began in February 2008. The Company
values ARS using an internally developed valuation model, whose inputs include interest rate curves, credit and
liquidity spreads, and effective maturity.
Derivative assets and liabilities include foreign currency forward contracts, commodity swaps and futures contracts.
Where applicable, the Company uses quoted prices in an active market for identical derivative assets and liabilities
that are traded on exchanges. These derivative assets and liabilities are coffee and dairy futures contracts, and are
included in Level 1. Derivative assets and liabilities included in Level 2 are over-the-counter currency forward
contracts and commodity swaps whose fair values are estimated using industry-standard valuation models. Such
models project future cash flows and discount the future amounts to a present value using market-based observable
inputs, including interest rate curves and forward and spot prices for currencies and commodities.
Changes in Level 3 Instruments Measured at Fair Value on a Recurring Basis (in millions):
ARS
Beginning balance, September 28, 2008 ........................................ $59.8
Total reduction in unrealized losses included in other comprehensive income............. 3.9
Purchases, sales, issuances, and settlements ..................................... (8.0)
Transfers in (out) of Level 3 ................................................ —
Ending balance, September 27, 2009 .......................................... $55.7
Financial Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
The Company measures certain financial assets, including its cost and equity method investments, at fair value on a
nonrecurring basis. These assets are recognized at fair value when they are deemed to be other-than-temporarily
impaired.
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