Tyson Foods 2012 Annual Report Download - page 60

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The following table provides a reconciliation between the beginning and ending balance of debt securities measured at fair value on a
recurring basis in the table above that used significant unobservable inputs (Level 3) (in millions):
September 29, 2012 October 1, 2011
Balance at beginning of year $ 83 $ 73
Total realized and unrealized gains (losses):
Included in earnings 1 —
Included in other comprehensive income (loss) —(1)
Purchases 28 31
Issuances — —
Settlements (26)(20)
Balance at end of year $ 86 $ 83
Total gains (losses) for the periods included in earnings attributable to the
change in unrealized gains (losses) relating to assets and liabilities still held
at end of year $ — $ —
The following methods and assumptions were used to estimate the fair value of each class of financial instrument:
Derivative Assets and Liabilities: Our derivatives, including commodities, foreign exchange forward contracts and an interest rate
swap, primarily include exchange-traded and over-the-counter contracts which are further described in Note 11: Derivative Financial
Instruments. We record our commodity derivatives at fair value using quoted market prices adjusted for credit and non-performance
risk and internal models that use as their basis readily observable market inputs including current and forward commodity market
prices. Our foreign exchange forward contracts are recorded at fair value based on quoted prices and spot and forward currency prices
adjusted for credit and non-performance risk. Our interest rate swap is recorded at fair value based on quoted LIBOR swap rates
adjusted for credit and non-performance risk. We classify these instruments in Level 2 when quoted market prices can be corroborated
utilizing observable current and forward commodity market prices on active exchanges, observable market transactions of spot
currency rates and forward currency prices or observable benchmark market rates at commonly quoted intervals.
Available for Sale Securities: Our investments in marketable debt securities are classified as available-for-sale and are included in
Other Assets in the Consolidated Balance Sheets. These investments, which are generally long-term in nature with maturities ranging
up to 35 years, are reported at fair value based on pricing models and quoted market prices adjusted for credit and non-performance
risk. We classify our investments in U.S. government and agency debt securities as Level 2 as fair value is generally estimated using
discounted cash flow models that are primarily industry-standard models that consider various assumptions, including time value and
yield curve as well as other readily available relevant economic measures. We classify certain corporate, asset-backed and other debt
securities as Level 3 as there is limited activity or less observable inputs into valuation models, including current interest rates and
estimated prepayment, default and recovery rates on the underlying portfolio or structured investment vehicle. We also classify
privately held redeemable preferred stock securities as Level 3 as there is limited activity or less observable inputs into valuation
models, including current interest rates and credit worthiness of the underlying private issuer. Significant changes to assumptions or
unobservable inputs in the valuation of our Level 3 instruments would not have a significant impact to our consolidated financial
statements.
Additionally, we have eight million shares of Syntroleum Corporation common stock and 4.25 million warrants, which expire in June
2015, to purchase an equivalent amount of Syntroleum Corporation common stock at an average price of $2.87. We record the shares
and warrants in Other Assets in the Consolidated Balance Sheets at fair value based on quoted market prices. We classify the shares as
Level 1 as the fair value is based on unadjusted quoted prices available in active markets. We classify the warrants as Level 2 as fair
value can be corroborated based on observable market data.