Cracker Barrel 2015 Annual Report Download - page 37

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Inventory
In July 2015, the FASB issued accounting guidance which
requires companies to measure certain inventory at the lower
of cost and net realizable value.is accounting guidance
does not apply to inventories measured by using either the
last-in, rst-out method or the retail inventory method.is
accounting guidance is eective for scal yearsbeginning
aer December 15, 2016, and interim periods within those
years on a prospective basis. Early application is permied.
e Companyis currently evaluating the impact of adopting
this accounting guidance in the rstperiod of 2018.
3FAIR VALUEMEASUREMENTS
Fair value for certain of the Company’s assets and liabilities is
dened as the price that would be received to sellan asset
or paid to transfer a liability in an orderly transaction between
marketparticipantsat the measurement date.In determining
fair value, a three levelhierarchy for inputs is used.ese
levelsare:
•Quoted Prices in Active Markets for Identical Assets
(“Level1”) – quoted prices (unadjusted)for an identical
asset or liability in an active market.
•Signicant Other Observable Inputs (“Level 2”) – quoted
prices for a similarasset or liability in an active market or
model-derived valuations in which all signicant inputs are
observablefor substantially the full term of the asset or
liability.
•Signicant UnobservableInputs (“Level 3”) – unobserv-
able and signicant to the fair value measurement of the
asset or liability.
e Company’s assets and liabilities measured at fair value
on a recurring basis at July 31, 2015 were as follows:
Level 1Level 2Level 3Fair Value
Cash equivalents* $191,084 $—$—$191,084
Interest rate swap asset
(see Note 6) —3,759 —3,759
Deferred compensation
planassets** 26,947 — — 26,947
Total assets at fair value $218,031 $3,759 $—$221,790
Interest rate swap liability
(see Note 6) $—$9,821 $—$9,821
Total liabilities at fair value $—$9,821 $—$9,821
e Company’s assets and liabilities measured at fair value
on a recurring basis at August 1, 2014 were as follows:
Level 1Level 2Level 3Fair Value
Cash equivalents* $63,068 $—$—$63,068
Interest rate swap asset
(see Note 6) —240 —240
Deferred compensation
planassets** 25,322 — — 25,322
Total assets at fair value $88,390 $240 $—$88,630
Interest rate swap liability
(see Note 6) $—$7,943 $—$7,943
Total liabilities at fair value $—$7,943 $—$7,943
*Consists of moneymarket fund investments.
**Representsplan assets investedin mutual funds establishedunder a Rabbi
Trust forthe Company’snon-qualied savings plan andis included in the
ConsolidatedBalance Sheets as otherassets (see Note 12).
e Company’s money market fund investments and
deferred compensation plan assets are measured at fair value
using quoted marketprices.e fair values of the Company’s
interest rate swap asset and liabilities are determined based
on the present value of expected future cash ows. Since the
Company’sinterest rate swap values are based on the LIBOR
forwardcurve,which is observable at commonly quoted
intervals for the fulltermsof the swaps, it is considered a
Level 2 input. Nonperformance riskis reected in determin-
ing the fair value of the interest rate swapsby using the
Company’screditspread less the risk-free interest rate, both
of which are observable at commonly quoted intervals for
the terms of the swaps. us, the adjustment for nonperfor-
mance risk is also considered a Level2 input.
e fair values of accountsreceivable and accountspayable
at July 31, 2015 and August 1, 2014, approximate their
carrying amounts because of their short duration. e fair
value of the Company’s variablerate debt, based on
quoted market prices, which are considered Level 1 inputs,
approximates its carrying amounts at July 31, 2015 and
August 1, 2014.