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FAIR VALUE MEASUREMENT | 3 Months Ended
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Mar. 31, 2022
FAIR VALUE MEASUREMENT |
FAIR VALUE MEASUREMENT | 13. FAIR VALUE MEASUREMENT Fair value is the price that would be received upon the sale of an asset or paid upon the transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk, including the Company’s own credit risk. The Company applied FASB Accounting Standards Codification (“ASC”) 820— Fair Value Measurement, which provides guidance for using fair value to measure assets and liabilities by defining fair value and establishing the framework for measuring fair value. ASC 820 applies to financial and nonfinancial instruments that are measured and reported on a fair value basis. The three-level hierarchy of fair value measurements is based on whether the inputs to those measurements are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. The fair value hierarchy requires the use of observable market data when available and consists of the following levels:
| ● | Level 1—Unadjusted inputs based on quoted markets for identical assets or liabilities.
| ● | Level 2—Observable inputs, either direct or indirect, not including Level 1 measurements, corroborated by market data or based upon quoted prices in non-active markets.
| ● | Level 3—Unobservable inputs that reflect management’s best assumptions of what market participants would use in valuing the asset or liability.
The Company has included a tabular disclosure for financial assets and liabilities that are measured at fair value on a recurring basis in the condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021, respectively. Assets and Liabilities Measured at Fair Value on a Recurring Basis The following tables present the Company’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of March 31, 2022 and December 31, 2021 (in millions): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | March 31, 2022
​ |  | Total |  | Level 1 |  | Level 2 |  | Level 3
Assets: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
U.S. Treasury securities | ​ | $ | 21.3 | ​ | $ | 21.3 | ​ | $ | — | ​ | $ | —
Marketable securities: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Mutual funds | ​ | ​ | 17.4 | ​ | ​ | 17.4 | ​ | ​ | — | ​ | ​ | —
Money market funds | ​ |  | 10.0 | ​ |  | 10.0 | ​ |  | — | ​ |  | —
Total assets | ​ | $ | 48.7 | ​ | $ | 48.7 | ​ | $ | — | ​ | $ | —
Liabilities: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Contingent consideration liabilities | ​ | $ | 53.3 | ​ | $ | — | ​ | $ | — | ​ | $ | 53.3
Total liabilities | ​ | $ | 53.3 | ​ | $ | — | ​ | $ | — | ​ | $ | 53.3
​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | December 31, 2021
​ |  | Total |  | Level 1 |  | Level 2 |  | Level 3
Assets: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
U.S. Treasury securities | ​ | $ | 9.1 | ​ | $ | 9.1 | ​ | $ | — | ​ | $ | —
Marketable securities: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Mutual funds | ​ | ​ | 18.4 | ​ | ​ | 18.4 | ​ | ​ | — | ​ | ​ | —
Money market funds | ​ | ​ | 9.6 | ​ | ​ | 9.6 | ​ | ​ | — | ​ | ​ | —
Total assets | ​ | $ | 37.1 | ​ | $ | 37.1 | ​ | $ | — | ​ | $ | —
Liabilities: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Contingent consideration liabilities | ​ | $ | 70.5 | ​ | $ | — | ​ | $ | — | ​ | $ | 70.5
Total liabilities | ​ | $ | 70.5 | ​ | $ | — | ​ | $ | — | ​ | $ | 70.5
​ The following is a description of the Company’s valuation methodologies used for instruments measured at fair value on a recurring basis: Financial Investments Financial investments consist of highly liquid U.S. Treasury securities and marketable securities held in a trust for the Company’s non-qualified retirement and benefit plans, also referred to as deferred compensation plan assets. The deferred compensation plan assets have an equal and offsetting deferred compensation plan liability based on the value of the deferred compensation plan assets. These securities are valued by obtaining feeds from a number of live data sources, including active market makers and inter dealer brokers and therefore categorized as Level 1. No material adjustments were made to the carrying value of financial investments for the period ended March 31, 2022. See Note 15 (“Employee Benefit Plans”) for more information. Contingent Consideration Liabilities In connection with the acquisitions of Hanweck Associates, LLC (“Hanweck”), MATCHNow, and Cboe Asia Pacific, as well as the acquisition of assets of FT Providers, LLC (“FT Options”) and Trade Alert, LLC (“Trade Alert”), the Company entered into contingent consideration arrangements with the former owners. The total fair value of the liabilities at March 31, 2022 was $53.3 million. That value is based on the Company’s estimate of the likelihood that certain performance targets in the respective acquisition agreements are expected to be accomplished. In connection with the contingent consideration arrangements, the Company paid a total of $17.4 million in contingent consideration to Hanweck, FT Options, and Cboe Asia Pacific during the three months ended March 31, 2022. Because the fair value measurements relating to the contingent consideration liabilities are subject to management judgment, measurement uncertainty is inherent in the valuation of the contingent consideration liabilities as of the reporting date. Based on the recorded balance of the liabilities, any measurement uncertainty related to this Level 3 measurement is immaterial as of March 31, 2022. ​ Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis Certain assets, such as goodwill and intangible assets, are measured at fair value on a non-recurring basis. For goodwill, the process involves using a market approach and income approach (using discounted estimated cash flows) to determine the fair value of each reporting unit on a stand-alone basis. That fair value is compared to the carrying value of the reporting unit, including its recorded goodwill. In connection with the annual impairment evaluation of goodwill and indefinite life intangibles, impairment is considered to have occurred if the fair value of the reporting unit is lower than the carrying value of the reporting unit. For the intangible assets, the process also involves using a discounted cash flow method to determine the fair value of each intangible asset. Impairment is considered to have occurred if the fair value of the intangible asset is lower than its carrying value. The Company did not perform an impairment test during the three months ended March 31, 2022, as there were no market events that would indicate it was more likely than not that these assets were impaired. These measurements are considered Level 3 and these assets are recognized at fair value if they are deemed to be impaired. Equity investments without readily determinable fair values that are valued using the measurement alternative are measured at fair value on a non-recurring basis. See Note 4 (“Investments”) for more information. During the three months ended March 31, 2022, no observable transactions or impairments materially impacted the measurements of the investments accounted for as other equity investments. Fair Value of Assets and Liabilities The following tables present the Company’s fair value hierarchy for certain assets and liabilities held by the Company, with the exception of debt which is presented at its carrying value, as of March 31, 2022 and December 31, 2021 (in millions):
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | March 31, 2022
​ |  | Total |  | Level 1 |  | Level 2 |  | Level 3
Assets: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
U.S. Treasury securities | ​ | $ | 21.3 | ​ | $ | 21.3 | ​ | $ | — | ​ | $ | —
Deferred compensation plan assets | ​ | ​ | 27.4 | ​ | ​ | 27.4 | ​ | ​ | — | ​ | ​ | —
Total assets | ​ | $ | 48.7 | ​ | $ | 48.7 | ​ | $ | — | ​ | $ | —
Liabilities: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Contingent consideration liabilities | ​ | $ | 53.3 | ​ | $ | — | ​ | $ | — | ​ | $ | 53.3
Deferred compensation plan liabilities | ​ | ​ | 27.4 | ​ | ​ | 27.4 | ​ | ​ | — | ​ | ​ | —
Debt | ​ |  | 1,593.6 | ​ |  | — | ​ |  | 1,593.6 | ​ |  | —
Total liabilities | ​ | $ | 1,674.3 | ​ | $ | 27.4 | ​ | $ | 1,593.6 | ​ | $ | 53.3
​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | December 31, 2021
​ |  | Total |  | Level 1 |  | Level 2 |  | Level 3
Assets: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
U.S. Treasury securities | ​ | $ | 9.1 | ​ | $ | 9.1 | ​ | $ | — | ​ | $ | —
Deferred compensation plan assets | ​ |  | 28.0 | ​ |  | 28.0 | ​ |  | — | ​ |  | —
Total assets | ​ | $ | 37.1 | ​ | $ | 37.1 | ​ | $ | — | ​ | $ | —
Liabilities: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Contingent consideration liabilities | ​ | $ | 70.5 | ​ | $ | — | ​ | $ | — | ​ | $ | 70.5
Deferred compensation plan liabilities | ​ | ​ | 28.0 | ​ | ​ | 28.0 | ​ | ​ | — | ​ | ​ | —
Debt | ​ |  | 1,299.3 | ​ |  | — | ​ |  | 1,299.3 | ​ |  | —
Total liabilities | ​ | $ | 1,397.8 | ​ | $ | 28.0 | ​ | $ | 1,299.3 | ​ | $ | 70.5
​ Certain financial assets and liabilities, including cash and cash equivalents, accounts receivable, income tax receivable, accounts payable and Section 31 fees payable, are not measured at fair value on a recurring basis, but the carrying values approximate fair value due to their liquid or short-term nature. Debt The debt balance consists of fixed rate Senior Notes and a floating rate Term Loan Agreement. The fair values of the Senior Notes are classified as Level 2 under the fair value hierarchy and are estimated using prevailing market quotes. The fair value of the Term Loan Agreement was determined by utilizing a discounted cash flow analysis and is considered a Level 2 measurement. At March 31, 2022 and December 31, 2021, the fair values of the Company’s debt obligations were as follows (in millions): ​
​ | ​ | ​ | ​ | ​ | ​
​ | Fair Value
​ | March 31, 2022 | ​ | December 31, 2021
Term Loan Agreement | $ | 155.0 | ​ | $ | 160.1
3.650% Senior Notes |  | 661.7 | ​ | ​ | 702.6
1.625% Senior Notes | ​ | 430.4 | ​ | ​ | 470.9
3.000% Senior Notes | ​ | 300.0 | ​ | ​ | —
​ Information on Level 3 Financial Liabilities The following table sets forth a summary of changes in the fair value of the Company’s Level 3 financial liabilities during the three months ended March 31, 2022 (in millions):
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Level 3 Financial Liabilities for the Three Months Ended March 31, 2022
​ | ​ | Balance at | ​ | Realized (Gains) | ​ | ​ | ​ | ​ | ​ | Foreign | ​ | Balance at
​ | ​ | Beginning of | ​ | Losses during | ​ | ​ | ​ | ​ | ​ | Currency | ​ | End of
​ |  | Period |  | Period |  | Additions |  | Settlements | ​ | Translation |  | Period
Liabilities | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Contingent consideration liabilities |  | $ | 70.5 | ​ | $ | — | ​ | $ | — |  | $ | (17.4) | ​ | $ | 0.2 |  | $ | 53.3
Total liabilities | ​ | $ | 70.5 | ​ | $ | — | ​ | $ | — | ​ | $ | (17.4) | ​ | $ | 0.2 | ​ | $ | 53.3
​

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial 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 entity 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 risks 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. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=123874694&loc=d3e19207-110258 + Details
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