Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

v2.4.0.8
Fair Value Measurements
9 Months Ended
Sep. 28, 2013
Fair Value Measurements

Note N — 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. 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:

 

In thousands    Total
Fair Value
     Fair Value Measurement Using (a)  
      Level 1      Level 2      Level 3  

September 2013

           

Financial assets:

           

Cash equivalents:

           

Money market funds

   $ 109,867       $ 109,867       $ —         $ —     

Time deposits

     20,264         20,264         —           —     

Derivative instruments

     12,732         —           12,732         —     

Investment securities

     214,267         189,037         25,230         —     

Other marketable securities

     4,579         4,579         —           —     

Financial liabilities:

           

Derivative instruments

     37,691         —           37,691         —     

Deferred compensation

     263,912         —           263,912         —     

December 2012

           

Financial assets:

           

Cash equivalents:

           

Money market funds

   $ 181,635       $ 181,635       $ —         $ —     

Time deposits

     17,042         17,042         —           —     

Derivative instruments

     16,153         —           16,153         —     

Investment securities

     188,307         157,230         31,077         —     

Other marketable securities

     4,513         4,513         —           —     

Financial liabilities:

           

Derivative instruments

     29,468         —           29,468         —     

Deferred compensation

     230,733         —           230,733         —     

 

(a)  There were no transfers among the levels within the fair value hierarchy during the first nine months of 2013 or the year ended December 2012.

The fair value of derivative instruments, which consist of forward foreign exchange contracts, is determined based on observable market inputs, 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 the Company’s deferred compensation plans and primarily include mutual funds (Level 1) that are valued based on quoted prices in active markets. Investment securities also include collective trust funds (Level 2) that are valued based on the net asset values of the underlying assets.

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 September 2013 and December 2012, their carrying values approximated their fair values. Additionally, at September 2013 and December 2012, the carrying value of VF’s long-term debt, including the current portion, was $1,430.1 million and $1,832.0 million, respectively, compared with a fair value of $1,556.0 million and $2,111.4 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.