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Fair Value Measurements | 12 Months Ended
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Aug. 31, 2017
Fair Value Disclosures [Abstract] |
Fair Value Measurements | Fair Value Measurements ASC Topic 820, Fair Value Measurement defines fair value as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. We determine fair values of derivative instruments and certain other assets, based on the fair value hierarchy established in ASC Topic 820, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances. ASC Topic 820 describes three levels within its hierarchy that may be used to measure fair value, and our assessment of relevant instruments within those levels is as follows: Level 1: Values are based on unadjusted quoted prices in active markets for identical assets or liabilities. These assets and liabilities include exchange-traded derivative instruments, Rabbi Trust investments, deferred compensation investments and available-for-sale investments. Level 2: Values are based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. These assets and liabilities include interest rate, foreign exchange, and commodity swaps; forward commodity and freight purchase and sales contracts with a fixed price component; and other OTC derivatives whose value is determined with inputs that are based on exchange traded prices, adjusted for location specific inputs that are primarily observable in the market or can be derived principally from, or corroborated by, observable market data. Level 3: Values are generated from unobservable inputs that are supported by little or no market activity and that are a significant component of the fair value of the assets or liabilities. These unobservable inputs would reflect our own estimates of assumptions that market participants would use in pricing related assets or liabilities. Valuation techniques might include the use of pricing models, discounted cash flow models or similar techniques. The following tables present assets and liabilities, included on our Consolidated Balance Sheets, that are recognized at fair value on a recurring basis, and indicate the fair value hierarchy utilized to determine these fair values. Assets and liabilities are classified, in their entirety, based on the lowest level of input that is a significant component of the fair value measurement. The lowest level of input is considered Level 3. Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the classification of fair value assets and liabilities within the fair value hierarchy levels. Recurring fair value measurements at August 31, 2017, and 2016, are as follows:
| 2017
| Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total
| (Dollars in thousands)
Assets: |  |  |  |  |  |  |  |  |  |
Commodity and freight derivatives | $ | 48,491 |  |  | $ | 336,157 |  |  | $ | — |  |  | $ | 384,648 |
Foreign currency derivatives | — |  |  | 8,771 |  |  | — |  |  | 8,771 |
Interest rate swap derivatives | — |  |  | 9,978 |  |  | — |  |  | 9,978 |
Deferred compensation assets | 52,414 |  |  | — |  |  | — |  |  | 52,414 |
Deferred purchase price receivable | — |  |  | — |  |  | 548,602 |  |  | 548,602 |
Embedded derivative | — |  |  | 25,533 |  |  | — |  |  | 25,533 |
Other assets | 14,846 |  |  | — |  |  | — |  |  | 14,846 |
Total | $ | 115,751 |  |  | $ | 380,439 |  |  | $ | 548,602 |  |  | $ | 1,044,792 |
Liabilities: |  |  |  |  |  |  |  |  |  |
Commodity and freight derivatives | $ | 31,189 |  |  | $ | 278,573 |  |  | $ | — |  |  | $ | 309,762 |
Foreign currency derivatives | — |  |  | 19,931 |  |  | — |  |  | 19,931 |
Interest rate swap derivatives | — |  |  | 707 |  |  | — |  |  | 707 |
Total | $ | 31,189 |  |  | $ | 299,211 |  |  | $ | — |  |  | $ | 330,400 |
| 2016
| Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total
| (Dollars in thousands)
Assets: |  |  |  |  |  |  |  |  |  |
Commodity and freight derivatives | $ | 62,538 |  |  | $ | 437,654 |  |  | $ | — |  |  | $ | 500,192 |
Foreign currency derivatives | — |  |  | 21,551 |  |  | — |  |  | 21,551 |
Interest rate swap derivatives | — |  |  | 22,078 |  |  | — |  |  | 22,078 |
Deferred compensation assets | 50,099 |  |  | — |  |  | — |  |  | 50,099 |
Other assets | 12,678 |  |  | — |  |  | — |  |  | 12,678 |
Total | $ | 125,315 |  |  | $ | 481,283 |  |  | $ | — |  |  | $ | 606,598 |
Liabilities: |  |  |  |  |  |  |  |  |  |
Commodity and freight derivatives | $ | 22,331 |  |  | $ | 468,971 |  |  | $ | — |  |  | $ | 491,302 |
Foreign currency derivatives | — |  |  | 22,289 |  |  | — |  |  | 22,289 |
Interest rate swap derivatives | — |  |  | 8 |  |  | — |  |  | 8 |
Accrued liability for contingent crack spread payments related to purchase of noncontrolling interests | — |  |  | — |  |  | 15,051 |  |  | 15,051 |
Total | $ | 22,331 |  |  | $ | 491,268 |  |  | $ | 15,051 |  |  | $ | 528,650 |
Commodity, freight and foreign currency derivatives — Exchange-traded futures and options contracts are valued based on unadjusted quoted prices in active markets and are classified within Level 1. Our forward commodity purchase and sales contracts with fixed-price components, ocean freight contracts and other OTC derivatives are determined using inputs that are generally based on exchange traded prices and/or recent market bids and offers, adjusted for location specific inputs, and are classified within Level 2. The location specific inputs are generally broker or dealer quotations, or market transactions in either the listed or OTC markets. Changes in the fair values of these contracts are recognized in our Consolidated Statements of Operations as a component of cost of goods sold. Interest rate swap derivatives — Fair values of our interest rate swap derivatives are determined utilizing valuation models that are widely accepted in the market to value these OTC derivative contracts. The specific terms of the contracts, as well as market observable inputs, such as interest rates and credit risk assumptions, are factored into the models. As all significant inputs are market observable, all interest rate swaps are classified within Level 2. Changes in the fair values of contracts not designated as hedging instruments for accounting purposes are recognized in our Consolidated Statements of Operations as a component of interest expense. See Note 12, Derivative Financial Instruments and Hedging Activities for additional information about interest rates swaps designated as fair value and cash flow hedges. Deferred compensation and other assets — Our deferred compensation investments, Rabbi Trust assets and available-for-sale investments in common stock of other companies are valued based on unadjusted quoted prices on active exchanges and are classified within Level 1. Changes in the fair values of these other assets are primarily recognized in our Consolidated Statements of Operations as a component of marketing, general and administrative expenses. Embedded derivative asset — The embedded derivative asset relates to contingent payments inherent to our investment in CF Nitrogen. The inputs used in the fair value measurement include the probability of future upgrades and downgrades of CF Industries' credit rating based on historical credit rating movements of other public companies and the discount rates to be applied to potential annual payments based on applicable historical and current yield coupon rates. Based on these observable inputs, our fair value measurement is classified within Level 2. See Note 12, Derivative Financial Instruments and Hedging Activities for additional information. Deferred purchase price receivable — The fair value of the DPP receivable included in receivables, net and other assets, is determined by discounting the expected cash flows to be received. The expected cash flows are primarily based on unobservable inputs consisting of the face amount of the Receivables adjusted for anticipated credit losses. Significant changes in the anticipated credit losses could result in a significantly higher (or lower) fair value measurement. Due to the use of significant unobservable inputs in the pricing model, including management's assumptions related to anticipated credit losses, the DPP receivable is classified as a Level 3 fair value measurement. The reconciliation of the DPP receivable for the year ended August 31, 2017, is included in Note 2, Receivables. Accrued liability for contingent crack spread payments related to purchase of CHS McPherson (formerly NCRA) noncontrolling interests — The contingent period related to the CHS McPherson noncontrolling interests expired as of August 31, 2017, and no liabilities remain for future payments. Throughout the contingent period, the fair value of the contingent consideration liability was calculated utilizing an average price option model, an adjusted Black-Scholes pricing model commonly used in the energy industry to value options. The model used market observable inputs and unobservable inputs, including adjusted forward crack spread margins and quotes obtained from third party vendors. Management also took into consideration current and expected market trends and compared the liability’s fair value to hypothetical payments using known historical market data to assess reasonableness of the resulting fair value. Significant increases (decreases) in either of the inputs would have resulted in significantly higher (lower) fair value measurements. Due to significant unobservable inputs used in the pricing model, the liability was classified within Level 3. The following table represents a reconciliation of the contingent crack spread liability measured at fair value using significant unobservable inputs (Level 3) for the years ended August 31, 2017, and 2016:
|  | Level 3 Liabilities
|  | Accrued Liability for Contingent Crack Spread Payments Related to Purchase of Noncontrolling Interests
|  | 2017 |  | 2016
|  | (Dollars in thousands)
Balance - beginning of year |  | $ | 15,051 |  |  | $ | 75,982 |
Total (gains) losses included in cost of goods sold |  | (15,051 | ) |  | (60,931 | )
Balance - end of year |  | $ | — |  |  | $ | 15,051 |
There were no material transfers between Level 1, Level 2 and Level 3 assets and liabilities during the years ended August 31, 2017, and 2016.

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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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -URI http://asc.fasb.org/topic&trid=2155941 + Details
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