VF Corporation Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

Fair Value Measurements

6 Months Ended

Jul. 02, 2011

Note M — Fair Value Measurements

Fair value is the price that would be received from the sale of an asset or paid to transfer a liability (i.e., an exit price) in the principal or most advantageous market in an orderly transaction between market participants. In determining fair value, the accounting standards distinguish between (i) market data obtained or developed from independent sources (i.e., observable data inputs) and (ii) a reporting entity's own data and assumptions that market participants would use in pricing an asset or liability (i.e., unobservable data inputs). 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. 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. Inputs would normally be a reporting entity's own data and judgments about assumptions that market participants would use in pricing the asset or liability.

The fair value measurement level for an asset or liability is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs.

The following table summarizes the classes of financial assets and financial liabilities measured and recorded at fair value on a recurring basis:


In thousands			Fair Value Measurement Using:
			Quoted Prices		Significant
			in Active		Other		Significant
	Total		Markets for		Observable		Unobservable
	Fair		Identical Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
June 2011
Financial assets:
Cash equivalents:
Money market funds	$	275,206	$	275,206	$	—	$	—
Time deposits		116,220		116,220		—		—
Derivative instruments		23,839		—		23,839		—
Investment securities		187,511		156,100		31,411		—
Other marketable securities		8,991		8,991		—		—

Financial liabilities:
Derivative instruments		63,906		—		63,906		—
Deferred compensation		221,981		—		221,981		—

December 2010
Financial assets:
Cash equivalents:
Money market funds	$	437,229	$	437,229	$	—	$	—
Time deposits		93,254		93,254		—		—
Derivative instruments		18,568		—		18,568		—
Investment securities		182,673		147,380		35,293		—
Other marketable securities		12,388		12,388		—		—

Financial liabilities:
Derivative instruments		28,815		—		28,815		—
Deferred compensation		212,011		—		212,011		—

All other financial assets and financial liabilities are carried at cost, which may differ from fair value. At June 2011 and December 2010, the carrying values of VF's cash held as demand deposits, accounts receivable, life insurance contracts, short-term borrowings, accounts payable and accrued liabilities approximated their fair values. At June 2011 and December 2010, the carrying value of VF's long-term debt, including the current portion, was $937.3 million and $938.6 million, respectively, compared with fair value of $1,037.8 million and $1,025.1 million at those dates. Fair value for long-term debt was estimated based on quoted market prices or values of comparable borrowings.

- Definition

This item represents the complete disclosure regarding the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments, assets, and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the Company is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risk is are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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