This excerpt taken from the SWY 10-Q filed May 1, 2009.
NOTE KFAIR VALUE MEASUREMENTS
The Company adopted SFAS No. 157 for financial assets and financial liabilities beginning in fiscal 2008 and for nonfinancial assets and liabilities beginning in fiscal 2009.
SFAS No. 157 prioritizes the inputs used in measuring fair value into the following hierarchy:
As of March 28, 2009, Safeway held various short-term investments with a fair value of $33.0 million measured at Level 1 in the fair value hierarchy.
The Company maintains a rabbi trust to fund a deferred compensation plan. Investments in the trust are included in other long-term assets at fair value and categorized as Level 2 in the hierarchy. As of March 28, 2009, the fair value of these investments was approximately $17.0 million.
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. Fair value of long-lived assets and store lease exit costs are determined by estimating the amount and timing of net future cash flows (including rental expense for leased properties, sublease rental income, common area maintenance costs and real estate taxes) and discounting them using a risk-adjusted rate of interest. Safeway estimates future cash flows based on its experience and knowledge of the market in which the store is located and, when necessary, uses real estate brokers.
In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, certain long-lived assets with a carrying value of $18.2 million were written down to their fair value of $7.1 million, resulting in an impairment charge of $11.1 million. This impairment charge was included in operating and administrative expense.
In accordance with SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, the liability for store lease exits costs with a carrying value of $95.0 million was written down to its fair value of approximately $100.0 million, resulting in a charge of $5.0 million. This charge was included in operating and administrative expense.
SAFEWAY INC. AND SUBSIDIARIES