Kroger 2014 Annual Report Download - page 133

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A-68
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
•฀ Corporate฀Bonds:฀The฀fair฀values฀of฀these฀securities฀are฀primarily฀based฀on฀observable฀market฀quotations฀
for similar bonds, valued at the closing price reported on the active market on which the individual
securities are traded. When such quoted prices are not available, the bonds are valued using a discounted
cash flow approach using current yields on similar instruments of issuers with similar credit ratings,
including adjustments for certain risks that may not be observable, such as credit and liquidity risks.
•฀ U.S.฀Government฀Securities:฀Certain฀U.S.฀Government฀securities฀are฀valued฀at฀the฀closing฀price฀reported฀
in the active market in which the security is traded. Other U.S. government securities are valued based
on yields currently available on comparable securities of issuers with similar credit ratings. When
quoted prices are not available for similar securities, the security is valued under a discounted cash flow
approach that maximizes observable inputs, such as current yields of similar instruments, but includes
adjustments for certain risks that may not be observable, such as credit and liquidity risks.
•฀ Mutual฀Funds/Collective฀Trusts:฀The฀mutual฀funds/collective฀trust฀funds฀are฀public฀investment฀vehicles฀
valued using a Net Asset Value (NAV) provided by the manager of each fund. The NAV is based on the
underlying net assets owned by the fund, divided by the number of shares outstanding. The NAV’s unit
price is quoted on a private market that is not active. However, the NAV is based on the fair value of the
underlying securities within the fund, which are traded on an active market, and valued at the closing
price reported on the active market on which those individual securities are traded.
•฀ Partnerships/Joint฀ Ventures:฀ These฀ funds฀ consist฀ primarily฀ of฀ U.S.฀ government฀ securities,฀ Corporate฀
Bonds, Corporate Stocks, and derivatives, which are valued in a manner consistent with these types of
investments, noted above.
•฀ Hedge฀Funds:฀Hedge฀funds฀are฀private฀investment฀vehicles฀valued฀using฀a฀Net฀Asset฀Value฀(NAV)฀provided฀
by the manager of each fund. The NAV is based on the underlying net assets owned by the fund, divided
by the number of shares outstanding. The NAV’s unit price is quoted on a private market that is not
active. The NAV is based on the fair value of the underlying securities within the funds, which may be
traded on an active market, and valued at the closing price reported on the active market on which those
individual securities are traded. For investments not traded on an active market, or for which a quoted
price is not publicly available, a variety of unobservable valuation methodologies, including discounted
cash flow, market multiple and cost valuation approaches, are employed by the fund manager to value
investments. Fair values of all investments are adjusted annually, if necessary, based on audits of the
Hedge Fund financial statements; such adjustments are reflected in the fair value of the plan’s assets.
•฀ Private฀Equity:฀Private฀Equity฀investments฀are฀valued฀based฀on฀the฀fair฀value฀of฀the฀underlying฀securities฀
within the fund, which include investments both traded on an active market and not traded on an active
market. For those investments that are traded on an active market, the values are based on the closing
price reported on the active market on which those individual securities are traded. For investments not
traded on an active market, or for which a quoted price is not publicly available, a variety of unobservable
valuation methodologies, including discounted cash flow, market multiple and cost valuation approaches,
are employed by the fund manager to value investments. Fair values of all investments are adjusted
annually, if necessary, based on audits of the private equity fund financial statements; such adjustments
are reflected in the fair value of the plan’s assets.
•฀ Real฀Estate:฀Real฀estate฀investments฀include฀investments฀in฀real฀estate฀funds฀managed฀by฀a฀fund฀manager.฀
These investments are valued using a variety of unobservable valuation methodologies, including
discounted cash flow, market multiple and cost valuation approaches.
The methods described above may produce a fair value calculation that may not be indicative of net
realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation
methods are appropriate and consistent with other market participants, the use of different methodologies
or assumptions to determine the fair value of certain financial instruments could result in a different fair
value measurement.