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FAIR VALUE | 9 Months Ended
--- | ---
May 31, 2023
Fair Value Disclosures [Abstract] |
Fair value | NOTE 10. FAIR VALUE The Company has established a fair value hierarchy which prioritizes the inputs to the valuation techniques used to measure fair value into three levels. These levels are determined based on the lowest level input that is significant to the fair value measurement. Levels within the hierarchy are defined within Note 1, Nature of Operations and Summary of Significant Accounting Policies, to the consolidated financial statements in the 2022 Form 10-K. The following table summarizes information regarding the Company's financial assets and financial liabilities that were measured at fair value on a recurring basis:
|  |  |  | Fair Value Measurements at Reporting Date Using
(in thousands) |  | Total |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3)
As of May 31, 2023: |  |  |  |  |  |  |  |
Assets: |  |  |  |  |  |  |  |
Investment deposit accounts (1) |  | $ | 389,688 |  |  | $ | 389,688 |  |  | $ | — |  |  | $ | — |
Commodity derivative assets (2) |  | 285,148 |  |  | 4,863 |  |  | — |  |  | 280,285 |
Foreign exchange derivative assets (2) |  | 4,275 |  |  | — |  |  | 4,275 |  |  | — |
Liabilities: |  |  |  |  |  |  |  |
Commodity derivative liabilities (2) |  | 5,491 |  |  | 5,491 |  |  | — |  |  | — |
Foreign exchange derivative liabilities (2) |  | 6,730 |  |  | — |  |  | 6,730 |  |  | — |
As of August 31, 2022: |  |  |  |  |  |  |  |
Assets: |  |  |  |  |  |  |  |
Investment deposit accounts (1) |  | $ | 572,384 |  |  | $ | 572,384 |  |  | $ | — |  |  | $ | — |
Commodity derivative assets (2) |  | 160,847 |  |  | 17,347 |  |  | — |  |  | 143,500 |
Foreign exchange derivative assets (2) |  | 1,296 |  |  | — |  |  | 1,296 |  |  | — |
Liabilities: |  |  |  |  |  |  |  |
Commodity derivative liabilities (2) |  | 1,260 |  |  | 1,260 |  |  | — |  |  | — |
Foreign exchange derivative liabilities (2) |  | 3,126 |  |  | — |  |  | 3,126 |  |  | — |
__________________________________ (1) Investment deposit accounts are short-term in nature, and the value is determined by principal plus interest. The investment portfolio mix can change each period based on the Company's assessment of investment options. (2) Derivative assets and liabilities classified as Level 1 are commodity futures contracts valued based on quoted market prices in the London Metal Exchange or New York Mercantile Exchange. Amounts in Level 2 are based on broker quotes in the over-the-counter market. Derivatives classified as Level 3 are described below. Further discussion regarding the Company's use of derivative instruments is included in Note 9, Derivatives. As of August 31, 2022, the Company had one Level 3 commodity derivative. The Company entered into its second and third Level 3 commodity derivatives in September 2022 and January 2023, respectively, with the same counterparty as the first Level 3 commodity derivative. Both the second and third Level 3 commodity derivatives will begin to settle in January 2025. The fair value estimates of the Level 3 commodity derivatives are based on internally developed discounted cash flow models primarily utilizing unobservable inputs for which there is little or no market data. The Company forecasts future energy rates using a range of historical prices (the "floating rate"). The floating rate is the only significant unobservable input used in the Company's discounted cash flow models. Significantly higher or lower floating rates could have resulted in a material difference in our fair value measurement. The following table summarizes the floating rates used to measure the fair value of the Level 3 commodity derivatives at May 31, 2023 and August 31, 2022, which are applied uniformly across each of our Level 3 commodity derivatives:
|  | Floating rate (PLN)
|  | Low |  | High |  | Average
May 31, 2023 |  | 479.70 |  |  | 1,298.53 |  |  | 770.93 |
August 31, 2022 |  | 460.11 |  |  | 1,298.53 |  |  | 717.22 |
Below is a reconciliation of the beginning and ending balances of the Level 3 commodity derivatives recognized in the condensed consolidated statements of comprehensive income. The fluctuation in energy rates over time causes volatility in the fair value estimates and is the primary reason for unrealized gains included in other comprehensive income ("OCI") in the three and nine months ended May 31, 2023 and 2022.
(in thousands) |  | Three Months Ended May 31, 2023
Balance, March 1, 2023 |  | $ | 280,842 |
Total gains, realized and unrealized: |  |
Unrealized holding gain before reclassification (1) |  | 1,526 |
Reclassification for gain included in net earnings (2) |  | (2,083) |
Balance, May 31, 2023 |  | $ | 280,285 |
(in thousands) |  | Nine Months Ended May 31, 2023
Balance, September 1, 2022 |  | $ | 143,500 |
Total gains, realized and unrealized: |  |
Unrealized holding gain before reclassification (1) |  | 145,808 |
Reclassification for gain included in net earnings (2) |  | (9,023) |
Balance, May 31, 2023 |  | $ | 280,285 |
(in thousands) |  | Three Months Ended May 31, 2022
Balance, March 1, 2022 |  | $ | 78,879 |
Total gains, realized and unrealized: |  |
Unrealized holding gain before reclassification (1) |  | 19,201 |
Reclassification for gain included in net earnings (2) |  | (4,760) |
Balance, May 31, 2022 |  | $ | 93,320 |
(in thousands) |  | Nine Months Ended May 31, 2022
Balance, September 1, 2021 |  | $ | 26,413 |
Total gains, realized and unrealized: |  |
Unrealized holding gain before reclassification (1) |  | 81,039 |
Reclassification for gain included in net earnings (2) |  | (14,132) |
Balance, May 31, 2022 |  | $ | 93,320 |
__________________________________ (1) Unrealized holding gains, net of foreign currency translation, less amounts reclassified are included in net unrealized gain (loss) on derivatives in the condensed consolidated statements of comprehensive income. (2) Gains included in net earnings are recorded in cost of goods sold in the condensed consolidated statements of earnings. No material, non-recurring fair value remeasurements occurred during the three or nine months ended May 31, 2023 or 2022. The carrying values of the Company's short-term items, including documentary letters of credit and notes payable, approximate fair value. The carrying value and fair value of the Company's long-term debt, including current maturities, was $1.0 billion and $905.9 million, respectively, at May 31, 2023, and $1.4 billion and $1.2 billion, respectively at August 31, 2022. The fair value of the Company's long-term debt, including current maturities, was estimated based on Level 2 of the fair value hierarchy using indicated market values. The Company's other borrowings contain variable interest rates, and as a result, their carrying values approximate fair values.

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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://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI https://asc.fasb.org/extlink&oid=126976982&loc=d3e19207-110258 + Details
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