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FAIR VALUE MEASUREMENTS | 12 Months Ended
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Feb. 02, 2019
FAIR VALUE MEASUREMENTS |
FAIR VALUE MEASUREMENTS | 8.FAIR VALUE MEASUREMENTS GAAP establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The three levels of the fair value hierarchy defined in the standards are as follows: Level 1 - Quoted prices are available in active markets for identical assets or liabilities; Level 2 - Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable; Level 3 - Unobservable pricing inputs in which little or no market activity exists, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing an asset or liability. For items carried at (or adjusted to) fair value in the consolidated financial statements, the following tables summarize the fair value of these instruments at February 2, 2019 and February 3, 2018: February 2, 2019 Fair Value Measurements Using
|  | Quoted Prices in |  |  |  |  |  |  |  |  |  |
|  | Active Markets |  |  |  |  | Significant |  |  |  |
|  | for Identical |  | Significant Other |  | Unobservable |  |  |  |
|  | Assets |  | Observable Inputs |  | Inputs |  |  |  |
|  | (Level 1) |  | (Level 2) |  | (Level 3) |  | Total |
Trading Securities |  | $ | 671 |  | $ | — |  | $ | — |  | $ | 671 |
Other Investment |  |  | — |  |  | — |  |  | 22 |  |  | 22 |
Interest Rate Hedges |  |  | — |  |  | 33 |  |  | — |  |  | 33 |
Total |  | $ | 671 |  | $ | 33 |  | $ | 22 |  | $ | 726 |
February 3, 2018 Fair Value Measurements Using
|  | Quoted Prices in |  |  |  |  |  |  |  |  |  |
|  | Active Markets |  |  |  |  | Significant |  |  |  |
|  | for Identical |  | Significant Other |  | Unobservable |  |  |  |
|  | Assets |  | Observable Inputs |  | Inputs |  |  |  |
|  | (Level 1) |  | (Level 2) |  | (Level 3) |  | Total |
Trading Securities |  | $ | 64 |  | $ | — |  | $ | — |  | $ | 64 |
Available-For-Sale Securities |  |  | 25 |  |  | — |  |  | — |  |  | 25 |
Interest Rate Hedges |  |  | — |  |  | 102 |  |  | — |  |  | 102 |
Total |  | $ | 89 |  | $ | 102 |  | $ | — |  | $ | 191 |
In 2018, realized gains on Level 1, available-for-sale securities totaled $5. The Company values interest rate hedges using observable forward yield curves. These forward yield curves are classified as Level 2 inputs. Fair value measurements of non-financial assets and non-financial liabilities are primarily used in the impairment analysis of goodwill, other intangible assets, long-lived assets and in the valuation of store lease exit costs. The Company reviews goodwill and indefinite-lived intangible assets for impairment annually, during the fourth quarter of each fiscal year, and as circumstances indicate the possibility of impairment. See Note 3 for further discussion related to the Company’s carrying value of goodwill. Long-lived assets and store lease exit costs were measured at fair value on a nonrecurring basis using Level 3 inputs as defined in the fair value hierarchy. See Note 1 for further discussion of the Company’s policies and recorded amounts for impairments of long-lived assets and valuation of store lease exit costs. In 2018, long-lived assets with a carrying amount of $85 were written down to their fair value of $29, resulting in an impairment charge of $56. In 2017, long-lived assets with a carrying amount of $98 were written down to their fair value of $27, resulting in an impairment charge of $71. In 2018, the Company entered into an agreement with a third party. As part of the consideration for entering the agreement, the Company received a financial instrument of $22. Mergers are accounted for using the acquisition method of accounting, which requires that the purchase price paid for a merger be allocated to the assets and liabilities acquired based on their estimated fair values as of the effective date of the merger, with the excess of the purchase price over the net assets being recorded as goodwill. See Note 2 for further discussion related to accounting for mergers. Fair Value of Other Financial Instruments Current and Long-term Debt The fair value of the Company’s long-term debt, including current maturities, was estimated based on the quoted market prices for the same or similar issues adjusted for illiquidity based on available market evidence. If quoted market prices were not available, the fair value was based upon the net present value of the future cash flow using the forward interest rate yield curve in effect at respective year-ends. At February 2, 2019, the fair value of total debt was $14,190 compared to a carrying value of $14,351. At February 3, 2018, the fair value of total debt was $15,167 compared to a carrying value of $14,787. Contingent Consideration As a result of the Home Chef merger, the Company recognized a contingent liability of $91 on the acquisition date. The contingent consideration was measured using unobservable (Level 3) inputs and is included in “Other long-term liabilities” within the Consolidated Balance Sheet. The liability is remeasured to fair value at each reporting period, and the change in fair value, including accretion for the passage of time, is recognized in net earnings until the contingency is resolved. In 2018, an adjustment to increase the contingent consideration liability as of year-end 2018 was recorded for $33 in OG&A expense. Cash and Temporary Cash Investments, Store Deposits In-Transit, Receivables, Prepaid and Other Current Assets, Trade Accounts Payable, Accrued Salaries and Wages and Other Current Liabilities The carrying amounts of these items approximated fair value. Other Assets In 2016, the Company entered into agreements with a third party. As part of the consideration for entering these agreements, the Company received a financial instrument that derives its value from the third party’s business operations. The Company used the Monte-Carlo simulation method to determine the fair value of this financial instrument. The Monte-Carlo simulation is a generally accepted statistical technique used to generate a defined number of valuation paths in order to develop a reasonable estimate of the fair value of this financial instrument. The assumptions used in the Monte-Carlo simulation are classified as Level 3 inputs. The financial instrument was valued at $335 and recorded in “Other assets” within the Consolidated Balance Sheets. As the financial instrument was obtained in exchange for certain obligations, the Company also recognized offsetting deferred revenue liabilities in “Other current liabilities” and “Other long-term liabilities” within the Consolidated Balance Sheets. The deferred revenue will be amortized to “Sales” within the Consolidated Statements of Operations over the term of the agreements. Post inception, the Company received a distribution of $58, which was recorded as a reduction of the cost method investment. In the fourth quarter of 2018, a transaction occurred that resulted in the settlement of the financial instrument. As a result of the settlement, the Company received cash proceeds of $235. The Company recognized an impairment of financial instrument of $42 in OG&A in the fourth quarter of 2018. The fair values of certain investments recorded in “other assets” within the Consolidated Balance Sheets were estimated based on quoted market prices for those or similar investments, or estimated cash flows, if appropriate. At February 2, 2019 and February 3, 2018, the carrying and fair value of long-term investments for which fair value is determinable was $155 and $176, respectively. At February 2, 2019 and February 3, 2018, the carrying value of notes receivable for which fair value is determinable was $146 and $170, respectively.

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- 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. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -URI http://asc.fasb.org/topic&trid=2155941 + Details
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