Kroger 2014 Annual Report Download - page 119

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A-54
NO T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S , CO N T I N U E D
further discussion related to the Company’s carrying value of goodwill. Long-lived assets and store lease exit
costs were measured at fair value on a nonrecurring basis using Level 3 inputs as defined in the fair value
hierarchy. See Note 1 for further discussion of the Company’s policies and recorded amounts for impairments
of long-lived assets and valuation of store lease exit costs. In 2014, long-lived assets with a carrying amount of
$59 were written down to their fair value of $22, resulting in an impairment charge of $37. In 2013, long-lived
assets with a carrying amount of $68 were written down to their fair value of $29, resulting in an impairment
charge of $39.
Mergers are accounted for using the acquisition method of accounting, which requires that the purchase
price paid for an acquisition be allocated to the assets and liabilities acquired based on their estimated fair
values as of the effective date of the acquisition, with the excess of the purchase price over the net assets being
recorded as goodwill. Harris Teeter assets and liabilities were valued as of January 28, 2014 and Vitacost.com
assets and liabilities were valued as of August 18, 2014. Harris Teeter was excluded in the above table for
February 1, 2014 due to all acquired assets and assumed liabilities in the Harris Teeter merger being recorded
at fair value as of January 28, 2014. See Note 2 for further discussion related to the mergers with Harris Teeter
and Vitacost.com.
FA I R VA L U E O F O T H E R F I N A N C I A L I N S T R U M E N T S
Current and Long-term Debt
The fair value of the Company’s long-term debt, including current maturities, was estimated based on the
quoted market prices for the same or similar issues adjusted for illiquidity based on available market evidence.
If quoted market prices were not available, the fair value was based upon the net present value of the future
cash flow using the forward interest rate yield curve in effect at respective year-ends. At January 31, 2015, the
fair value of total debt was $12,378 compared to a carrying value of $11,085. At February 1, 2014, the fair value
of total debt was $11,547 compared to a carrying value of $10,780.
Cash and Temporary Cash Investments, Store Deposits In-Transit, Receivables, Prepaid and Other
Current Assets, Trade Accounts Payable, Accrued Salaries and Wages and Other Current Liabilities
The carrying amounts of these items approximated fair value.
Other Assets
The fair values of these investments were estimated based on quoted market prices for those or similar
investments, or estimated cash flows, if appropriate. At January 31, 2015 and February 1, 2014, the carrying
and fair value of long-term investments for which fair value is determinable was $133 and $51, respectively.
The increase in fair value of long-term investments for which fair value is determinable is mainly due to the
Company’s merger with Harris Teeter. At January 31, 2015 and February 1, 2014, the carrying value of notes
receivable for which fair value is determinable was $98 and $87, respectively.