Notes to Consolidated Financial Statements October 26, 2014 Note A  Summary of Significant Accounting Policies Fair Value Measurements:  Pursuant to the provisions of  Accounting Standards Codification (ASC) 820,  Fair Value  Measurements and Disclosures  (ASC 820), the Company mea- sures certain assets and liabilities at fair value or discloses the  fair value of certain assets and liabilities recorded at cost in  the consolidated financial statements. Fair value is calculated  as the price that would be received to sell an asset or paid to  transfer a liability in an orderly transaction between market  participants at the measurement date (an exit price). ASC 820  establishes a fair value hierarchy which requires assets and  liabilities measured at fair value to be categorized into one  of three levels based on the inputs used in the valuation. The  Company classifies assets and liabilities in their entirety based  on the lowest level of input significant to the fair value mea- surement. The three levels are defined as follows: Principles of Consolidation:  The consolidated financial state- ments include the accounts of Hormel Foods Corporation (the  Company) and all of its majority-owned subsidiaries after elim- ination of intercompany accounts, transactions, and profits. Reclassifications:  Certain reclassifications of previously  reported amounts have been made to conform to the current  year presentation. The reclassifications had no impact on net  earnings or operating cash flows as previously reported. Stock Split:  On November 22, 2010, the Company’s Board of  Directors authorized a two-for-one split of the Company’s  common stock, which was subsequently approved by  shareholders at the Company’s Annual Meeting on January  31, 2011, and effected on February 1, 2011. The Company’s  common stock was reclassified by reducing the par value from  $0.0586 per share to $0.0293 per share and the number of  authorized shares was increased from 400.0 million to 800.0  million shares, in order to effect a two-for-one stock split. The  number of authorized shares of nonvoting common stock and  preferred stock were also increased to 400.0 million shares  and 160.0 million shares, respectively, with no change in the  par value of those shares. Unless otherwise noted, all prior year share amounts and per  share calculations throughout this Annual Report have been  restated to reflect the impact of this split, and to provide data  on a comparable basis. Such restatements include calcu- lations regarding the Company’s weighted-average shares,  earnings per share, and dividends per share. Use of Estimates:  The preparation of financial statements in  conformity with U.S. generally accepted accounting principles  requires management to make estimates and assumptions  that affect the amounts reported in the financial statements  and accompanying notes. Actual results could differ from  those estimates. Fiscal Year:  The Company’s fiscal year ends on the last Sunday  in October. Fiscal years 2014, 2013, and 2012 consisted of 52 weeks. Cash and Cash Equivalents:  The Company considers all  investments with an original maturity of three months or less  on their acquisition date to be cash equivalents. The Company’s  cash equivalents as of October 26, 2014, and October 27, 2013,  consisted primarily of bank deposits, money market funds  rated AAA, or other highly liquid investment accounts. During fiscal 2012 and 2013, the Company also held securities  as part of an investment portfolio, which were classified  as short-term marketable securities on the Consolidated  Statements of Financial Position. These investments were  also trading securities. Therefore, unrealized gains and losses  were included in the Company’s earnings. The Company  recorded gains of $0.2 million and $1.3 million for fiscal years  2013 and 2012, respectively. These securities were liquidated  in the first quarter of fiscal 2013. Investments:  The Company maintains a rabbi trust to  fund certain supplemental executive retirement plans and  deferred income plans, which is included in other assets  on the Consolidated Statements of Financial Position. The  securities held by the trust are classified as trading securi- ties. Therefore, unrealized gains and losses associated with  these investments are included in the Company’s earnings.  Securities held by the trust generated gains of $2.9 million,  $4.6 million, and $4.3 million for fiscal years 2014, 2013, and  2012, respectively. The Company has transitioned the majority  of this portfolio to more fixed return investments to reduce the  exposure to volatility in equity markets. See additional discussion regarding the Company’s fair value  measurements in Notes I, M, and N. Level 1:  Observable inputs based on quoted prices (unad- justed) in active markets for identical assets or liabilities. Level 2:  Observable inputs, other than those included in  Level 1, based on quoted prices for similar assets and  liabilities in active markets, or quoted prices for identical  assets and liabilities in inactive markets. Level 3:  Unobservable inputs that reflect an entity’s own  assumptions about what inputs a market participant would  use in pricing the asset or liability based on the best infor- mation available in the circumstances.