CHS 2014 Annual Report Download - page 60

5NOV201416072206
Fair Value Measurements
ASC Topic 820, Fair Value Measurement defines fair and liabilities include marketable inventories, interest
value as the price that would be received for an asset or rate swaps, forward commodity and freight purchase
paid to transfer a liability (an exit price) in the principal and sales contracts, flat price or basis fixed derivative
or most advantageous market for the asset or liability in contracts and other OTC derivatives whose value is
an orderly transaction between market participants on determined with inputs that are based on exchange
the measurement date. traded prices, adjusted for location specific inputs that
are primarily observable in the market or can be derived
We determine fair values of readily marketable invento- principally from, or corroborated by, observable market
ries, derivative contracts and certain other assets, based data.
on the fair value hierarchy established in ASC Topic 820,
which requires an entity to maximize the use of observ- Level 3: Values are generated from unobservable inputs
able inputs and minimize the use of unobservable inputs that are supported by little or no market activity and
when measuring fair value. Observable inputs are inputs that are a significant component of the fair value of the
that reflect the assumptions market participants would assets or liabilities. These unobservable inputs would
use in pricing the asset or liability based on the best reflect our own estimates of assumptions that market
information available in the circumstances. ASC participants would use in pricing related assets or liabili-
Topic 820 describes three levels within its hierarchy that ties. Valuation techniques might include the use of
may be used to measure fair value, and our assessment pricing models, discounted cash flow models or similar
of relevant instruments within those levels is as follows: techniques.
Level 1: Values are based on unadjusted quoted prices The following table presents assets and liabilities,
in active markets for identical assets or liabilities. These included on our Consolidated Balance Sheets, that are
assets and liabilities include exchange traded derivative recognized at fair value on a recurring basis, and indi-
contracts, Rabbi Trust investments, deferred compensa- cates the fair value hierarchy utilized to determine such
tion investments and available-for-sale investments. fair value. Assets and liabilities are classified, in their
entirety, based on the lowest level of input that is a sig-
Level 2: Values are based on quoted prices for similar nificant component of the fair value measurement. The
assets or liabilities in active markets, quoted prices for lowest level of input is considered Level 3. Our assess-
identical or similar assets or liabilities in markets that are ment of the significance of a particular input to the fair
not active, or other inputs that are observable or can be value measurement requires judgment, and may affect
corroborated by observable market data for substan- the classification of fair value assets and liabilities within
tially the full term of the assets or liabilities. These assets the fair value hierarchy levels.
58 CHS 2014