Note 4 - Fair Value Measurements
 3 Months Ended
Nov. 30, 2011
Fair Value Disclosures [Text Block]
Note 4 — Fair Value Measurements

We follow the authoritative guidance set forth in ASC 820, Fair Value Measurements and Disclosures, for fair value measurements relating to financial and nonfinancial assets and liabilities, including presentation of required disclosures in our consolidated financial statements. This guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The guidance also establishes a fair value hierarchy, which requires maximizing the use of observable inputs when measuring fair value.

The three levels of inputs that may be used are:

       Level 1: Quoted market prices in active markets for identical assets or liabilities.

       Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.

       Level 3: Significant unobservable inputs that are not corroborated by market data.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

At November 30, 2011, our financial assets and liabilities measured at fair value on a recurring basis were as follows (in thousands):

         
Fair Value Measurements Using
 
   
Fair Value
   
(Level 1)
   
(Level 2)
   
(Level 3)
 
Assets:
                       
Short-term and Restricted Short-term Investments
                       
Certificates of deposit
  $ 319,386     $ —     $ 319,386     $ —  
Stock and bond mutual funds (a)
    26,346       26,346       —       —  
U.S. government and agency securities
    613       —       613       —  
Corporate bonds
    29,595       —       29,595       —  
Equity investments
    4,991       4,991       —       —  
Total
  $ 380,931     $ 31,337     $ 349,594     $ —  
                                 
Liabilities:
                               
Interest rate swap contract
  $ 19,322     $ —     $ 19,322     $ —  
Derivatives Not Designated as Hedging Instruments:
 
Other Current Assets
                               
Foreign currency forward assets
  $ 83     $ —     $ 83     $ —  
Other Accrued Liabilities
                               
Foreign currency forward liabilities
  $ 172     $ —     $ 172     $ —  

 
(a)
This class includes investments in a mutual fund that invests at least 80% of its assets in short-term bonds issued or guaranteed by U.S. government agencies and instrumentalities.

At August 31, 2011, our financial assets and liabilities measured at fair value on a recurring basis were as follows (in thousands):

       
Fair Value Measurements Using
 
   
Fair Value
   
(Level 1)
   
(Level 2)
   
(Level 3)
 
Assets:
                       
Short-term and Restricted Short-term Investments
                       
Certificates of deposit
  $ 461,786     $ —     $ 461,786     $ —  
Stock and bond mutual funds (a)
    6,473       6,473       —       —  
U.S. government and agency securities
    1,806       —       1,806       —  
Corporate bonds
    34,187       —       34,187       —  
Total
  $ 504,252     $ 6,473     $ 497,779     $ —  
                                 
Liabilities:
                               
Interest rate swap contract
  $ 27,059     $ —     $ 27,059     $ —  
Derivatives Not Designated as Hedging Instruments:
 
Other Current Assets
                               
Foreign currency forward assets
  $ 1,955     $ —     $ 1,955     $ —  
Other Accrued Liabilities
                               
Foreign currency forward liabilities
  $ 16     $ —     $ 16     $ —  

 
(a)
This class includes investments in a mutual fund that invests at least 80% of its assets in short-term bonds issued or guaranteed by U.S. government agencies and instrumentalities.

The following are the primary valuation methodologies used for valuing our short-term and restricted short-term investments:

 
●
Corporate bonds and U.S. government and agency securities: Valued at quoted prices in markets that are not active, broker dealer quotations or other methods by which all significant inputs are observable, either directly or indirectly.

 
●
Foreign government and foreign government guaranteed securities: Valued at quoted prices in markets that are not active, broker dealer quotations or other methods by which all significant inputs are observable, either directly or indirectly.

 
●
Stock and bond mutual funds: Valued at the net asset value of shares held at period end as quoted in the active market.  These mutual funds contain no unusual terms or trade restrictions.

 
●
Equity investments: Valued at the closing price of the shares held at period end as quoted in active markets.

We value the interest rate swap liability utilizing a discounted cash flow model that takes into consideration forward interest rates observable in the market and the counterparty’s credit risk. Our counterparty to this instrument is a major U.S. bank. As discussed in Note 9 — Debt and Revolving Lines of Credit, we designated the swap as a hedge against changes in cash flows attributable to changes in the benchmark interest rate related to our Westinghouse Bonds.

We manage our transaction exchange exposures with foreign currency derivative instruments denominated in our major currencies, which are generally the currencies of the countries in which we conduct the majority of our international business. We utilize derivative instruments such as forward contracts to manage forecasted cash flows denominated in foreign currencies generally related to engineering and construction projects. Our counterparties to these instruments are major U.S. banks. These currency derivative instruments are carried on the consolidated balance sheet at fair value and are based upon market observable forward exchange rates and forward interest rates.

We value derivative assets by discounting future cash flows based on currency forward rates. The discount rate used for valuing derivative assets incorporates counterparty credit risk, as well as our cost of capital. Derivative liabilities are valued using a discount rate that incorporates our credit risk.

See Note 2 – Cash, Cash Equivalents and Short-term Investments and Note 3 – Restricted and Escrowed Cash and Cash Equivalents and Restricted Short-term Investments for additional information regarding our major categories of investments.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Nonfinancial assets and liabilities recognized or disclosed at fair value in the financial statements on a nonrecurring basis include items such as goodwill and long lived assets that are measured at fair value resulting from impairment, if deemed necessary. To calculate the fair value of a reporting unit used in our goodwill impairment review, we utilized the guideline public company method (a market approach) and the discounted cash flow method (an income approach). The reporting unit’s fair value was determined by averaging the resulting fair values calculated under these two methods, which we consider a Level 3 fair value measurement. During the three months ended November 30, 2011, we did not record any fair value adjustments related to those nonfinancial assets and liabilities measured at fair value on a nonrecurring basis. See Note 8 – Goodwill and Other Intangible Assets for further discussion.

Effects of Derivative Instruments on Income and Other Comprehensive Income

Gains and losses related to derivative instruments have been recognized as follows (in millions):

     
November 30,
 
 
Location of Gain (Loss) Recognized in
Income on Derivatives
 
2011
   
2010
 
Derivatives Designated as Hedging Instruments:
             
Interest rate swap contract
Other comprehensive income (loss)
  $ 4.8     $ 3.3  
Derivatives Not Designated as Hedging Instruments:
                 
Foreign currency forward contracts
Other foreign currency transactions gains (losses), net
  $ (2.7 )   $ 0.5