Quarterly report pursuant to Section 13 or 15(d)

FAIR VALUE MEASUREMENTS

v3.21.4
FAIR VALUE MEASUREMENTS
9 Months Ended
Jan. 01, 2022
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
December 2021
Financial assets:
Cash equivalents:
Money market funds $ 346,657  $ 346,657  $ —  $ — 
Time deposits 305,576  305,576  —  — 
Derivative financial instruments 57,466  —  57,466  — 
Deferred compensation 139,551  139,551  —  — 
Financial liabilities:
Derivative financial instruments 32,987  —  32,987  — 
Deferred compensation 145,399  —  145,399  — 
Contingent consideration 49,000  —  —  49,000 
Total Fair Value
Fair Value Measurement Using (a)
(In thousands) Level 1 Level 2 Level 3
March 2021
Financial assets:
Cash equivalents:
Money market funds $ 216,591  $ 216,591  $ —  $ — 
Time deposits 102,914  102,914  —  — 
Short-term investments 598,806  598,806  —  — 
Derivative financial instruments 13,257  —  13,257  — 
Deferred compensation 141,072  141,072  —  — 
Financial liabilities:
Derivative financial instruments 74,255  —  74,255  — 
Deferred compensation 150,713  —  150,713  — 
Contingent consideration 207,000  —  —  207,000 
(a)There were no transfers among the levels within the fair value hierarchy during the nine months ended December 2021 or the year ended March 2021.
The following table presents the changes in fair value of the contingent consideration liability designated as Level 3:
(In thousands) Three Months Ended December 2021 Nine Months Ended December 2021
Beginning Balance $ 99,000  $ 207,000 
Change in fair value (50,000) (158,000)
Ending Balance $ 49,000  $ 49,000 
VF’s cash equivalents include money market funds and time deposits with maturities within three months of their purchase dates, that approximate fair value based on Level 1 measurements. The fair value of derivative financial instruments, which consist of foreign exchange forward 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. VF’s deferred compensation assets primarily represent investments held within plan trusts as an economic hedge of the related deferred compensation liabilities. These investments primarily include mutual funds (Level 1) that are valued based on quoted prices in active markets. 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. VF's short-term investments at March 2021 included excess cash invested in a managed income fund that approximated fair value based on Level 1 measurements.
The contingent consideration liability represents the estimated amount of additional cash consideration to be paid to the selling shareholders of Supreme, which is dependent upon the achievement of certain financial targets over the one-year earn-out period ending January 31, 2022. The estimated fair value of the contingent consideration liability, which could range from
zero to $300.0 million, was $207.0 million as of March 2021. The contingent consideration liability is remeasured at fair value with changes recognized in the selling, general and administrative expenses line item in the Consolidated Statements of Operations. As of December 2021, the fair value of the contingent consideration liability was remeasured to an estimated fair value of $49.0 million based on the probability-weighted present value of various future cash payment outcomes resulting from the estimated achievement levels of the financial targets. Refer to Note 4 for additional information on the acquisition of Supreme.
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 December 2021 and March 2021, their carrying values approximated fair value. Additionally, at December 2021 and March 2021, the carrying values of VF’s long-term debt, including the current portion, were $5,147.3 million and $5,710.2 million, respectively, compared with fair values of $5,383.7 million and $6,017.3 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.