Fair Values (Tables)

9 Months Ended

Sep. 28, 2014

Fair Value of Derivative Instruments on Condensed Consolidated Balance Sheet

Financial assets and liabilities measured at fair value



	As at
	September 28, 2014				December 29, 2013
	Fair value hierarchy	Fair value asset (liability)⁽¹⁾			Fair value hierarchy	Fair value asset (liability)⁽¹⁾
Derivatives
Forward currency contracts⁽²⁾	Level 2	$	4,264		Level 2	$	4,181
Interest rate swap⁽³⁾	Level 2	(163		)	Level 2	(49		)
Interest rate forwards⁽⁴⁾	n/a	—			Level 2	285
Total return swaps (“TRS”)⁽⁵⁾	Level 2	47,902			Level 2	21,393
Total Derivatives		$	52,003			$	25,810

________________


⁽¹⁾	The Company values its derivatives using valuations that are calibrated to the initial trade prices. Subsequent valuations are based on observable inputs to the valuation model.


⁽²⁾	The fair value of forward currency contracts is determined using prevailing exchange rates.


⁽³⁾	The fair value is estimated using discounted cash flows and market-based observable inputs, including interest rate yield curves and discount rates.


⁽⁴⁾	The interest rate forwards were settled as part of the issuance of the Series 3 Notes (see note 7).


⁽⁵⁾	The fair value of the TRS is determined using the Company’s common share closing price on the last business day of the fiscal period, as quoted on the Toronto Stock Exchange.

Fair Value and Carrying Value of Other Financial Assets and Liabilities

The following table summarizes the fair value and carrying value of other financial assets and liabilities that are not recognized at fair value on a recurring basis on the Condensed Consolidated Balance Sheet:



	As at
	September 28, 2014							December 29, 2013
	Fair value hierarchy	Fair value asset (liability)			Carrying value			Fair value hierarchy	Fair value asset (liability)			Carrying value
Bearer deposit notes⁽¹⁾	Level 2	$	42,520		$	42,520		Level 2	$	41,403		$	41,403
Notes receivable, net⁽²⁾	Level 3	$	7,054		$	7,054		Level 3	$	9,114		$	9,114
Series 1 Notes⁽³⁾	Level 2	$	(306,768	)	$	(300,934	)	Level 2	$	(315,519	)	$	(301,196	)
Series 2 Notes⁽³⁾	Level 2	$	(458,325	)	$	(449,901	)	Level 2	$	(445,419	)	$	(449,892	)
Series 3 Notes⁽³⁾	Level 2	$	(452,435	)	$	(449,887	)	n/a	$	—		$	—
Advertising fund term debt⁽⁴⁾	Level 3	$	(26,415	)	$	(26,415	)	Level 3	$	(30,189	)	$	(30,189	)
Other debt⁽⁵⁾	Level 3	$	(141,995	)	$	(75,651	)	Level 3	$	(126,548	)	$	(69,794	)

________________


⁽¹⁾	The Company holds these notes as collateral to reduce the carrying costs of the TRS. The interest rate on these notes resets every 90 days; therefore, the fair value of these notes, using a market approach, approximates the carrying value.


⁽²⁾	Management generally estimates the current value of notes receivable, using a cost approach, based primarily on the estimated depreciated replacement cost of the underlying equipment held as collateral.


⁽³⁾	The fair value of the senior unsecured notes, using a market approach, is based on publicly disclosed trades between arm’s length institutions as documented on Bloomberg L.P.


⁽⁴⁾	Management estimates the fair value of this variable rate debt using a market approach, based on prevailing interest rates plus an applicable margin.


⁽⁵⁾	Management estimates the fair value of its Other debt, primarily consisting of contributions received related to the construction costs of certain restaurants, using an income approach, by discounting future cash flows using a Company risk-adjusted rate over the remaining term of the debt.

- Definition

Tabular disclosure of the fair value of financial instruments, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

+ References+ Details

Tim Hortons Inc. 10-Q