Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

v3.7.0.1
Fair Value Measurements
6 Months Ended
Jul. 01, 2017
Fair Value Disclosures [Abstract]  
Fair Value Measurements
Fair Value Measurements
Financial assets and financial liabilities measured and reported at fair value are classified in a three-level hierarchy that prioritizes the inputs used in the valuation process. A financial instrument’s categorization within the valuation hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The hierarchy is based on the observability and objectivity of the pricing inputs, as follows:
 
Level 1 — Quoted prices in active markets for identical assets or liabilities.
Level 2 — Significant directly observable data (other than Level 1 quoted prices) or significant indirectly observable data through corroboration with observable market data. Inputs would normally be (i) quoted prices in active markets for similar assets or liabilities, (ii) quoted prices in inactive markets for identical or similar assets or liabilities or (iii) information derived from or corroborated by observable market data.
Level 3 — Prices or valuation techniques that require significant unobservable data inputs. These inputs would normally be VF’s own data and judgments about assumptions that market participants would use in pricing the asset or liability.
The following table summarizes financial assets and financial liabilities that are measured and recorded in the consolidated financial statements at fair value on a recurring basis:
 
Total Fair  Value
 
Fair Value Measurement Using (a)
In thousands
 
Level 1
 
Level 2
 
Level 3
June 2017
 
 
 
 
 
 
 
Financial assets:
 
 
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
 
 
Money market funds
$
363,279

 
$
363,279

 
$

 
$

Time deposits
12,342

 
12,342

 

 

Derivative financial instruments
36,265

 

 
36,265

 

Investment securities
205,079

 
190,380

 
14,699

 

Financial liabilities:
 
 
 
 
 
 
 
Derivative financial instruments
52,634

 

 
52,634

 

Deferred compensation
236,413

 

 
236,413

 

December 2016
 
 
 
 
 
 
 
Financial assets:
 
 
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
 
 
Money market funds
$
840,842

 
$
840,842

 
$

 
$

Time deposits
14,774

 
14,774

 

 

Derivative financial instruments
103,340

 

 
103,340

 

Investment securities
196,738

 
179,673

 
17,065

 

Financial liabilities:
 
 
 
 
 
 
 
Derivative financial instruments
25,574

 

 
25,574

 

Deferred compensation
232,214

 

 
232,214

 

 
(a) 
There were no transfers among the levels within the fair value hierarchy during the first half of 2017 or the year ended December 2016.
VF’s cash equivalents include money market funds and short-term time deposits that approximate fair value based on Level 1 measurements. The fair value of derivative financial instruments, which consist of forward foreign currency exchange contracts, is determined based on observable market inputs (Level 2), including spot and forward exchange rates for foreign currencies, and considers the credit risk of the Company and its counterparties. Investment securities are held in VF’s deferred compensation plans as an economic hedge of the related deferred compensation liabilities. These investments are classified as trading securities and primarily include mutual funds (Level 1) that are valued based on quoted prices in active markets and a separately managed fixed-income fund (Level 2) with underlying investments that are valued based on quoted prices for similar assets in active markets or quoted prices in inactive markets for identical assets. Liabilities related to VF’s deferred compensation plans are recorded at amounts due to participants, based on the fair value of the participants’ selection of hypothetical investments.
All other financial assets and financial liabilities are recorded in the consolidated financial statements at cost, except life insurance contracts which are recorded at cash surrender value. These other financial assets and financial liabilities include cash held as demand deposits, accounts receivable, short-term borrowings, accounts payable and accrued liabilities. At June 2017 and December 2016, their carrying values approximated their fair values. Additionally, at June 2017 and December 2016, the carrying values of VF’s long-term debt, including the current portion, were $2,365.4 million and $2,292.9 million, respectively, compared with fair values of $2,572.0 million and $2,486.6 million at those respective dates. Fair value for long-term debt is a Level 2 estimate based on quoted market prices or values of comparable borrowings.