Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

v2.4.0.6
Fair Value Measurements
 9 Months Ended
Sep. 29, 2012
Fair Value Measurements

Note L — 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:

 

            Fair Value Measurement Using:  
In thousands    Total Fair
Value		      Quoted Prices
In Active
Markets for
Identical Assets
(Level 1)		      Significant
Other
Observable
Inputs
(Level 2)		      Significant
Unobservable
Inputs
(Level 3)		  

September 2012

            

Financial assets:

            

Cash equivalents:

            

Money market funds

    $ 40       $ 40       $ —         $ —     

Time deposits

      86,919         86,919         —           —     

Derivative instruments

      26,843         —           26,843         —     

Investment securities

      188,969         158,207         30,762         —     

Other marketable securities

      3,964         3,964         —           —     

Financial liabilities:

            

Derivative instruments

      28,455         —           28,455         —     

Deferred compensation

      234,406         —           234,406         —     

December 2011

            

Financial assets:

            

Cash equivalents:

            

Money market funds

    $ 117       $ 117       $ —         $ —     

Time deposits

      89,585         89,585         —           —     

Derivative instruments

      46,328         —           46,328         —     

Investment securities

      175,225         144,391         30,834         —     

Other marketable securities

      4,913         4,913         —           —     

Financial liabilities:

            

Derivative instruments

      23,513         —           23,513         —     

Deferred compensation

      220,056         —           220,056         —     

The financial assets and financial liabilities in the above table have been recorded in the consolidated financial statements at fair value. 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, life insurance contracts, short-term borrowings, accounts payable and accrued liabilities. At September 2012 and December 2011, their carrying values approximated their fair values. Additionally, at September 2012 and December 2011, the carrying value of VF’s long-term debt, including the current portion, was $1,832.7 million and $1,834.5 million, respectively, compared with fair value of $2,118.8 million and $2,079.5 million at those dates. Fair value for long-term debt is a Level 2 estimate based on quoted market prices or values of comparable borrowings.