
8.	FAIR VALUE MEASUREMENTS

We measure certain assets and liabilities in accordance with ASC 820, Fair Value Measurements and Disclosures, which defines fair value as the price that would be received for an asset, or paid to transfer a liability, in an orderly transaction between market participants on the measurement date. In addition, it establishes a framework for measuring fair value according to the following three-tier fair value hierarchy:


•	Level 1 - Quoted prices for identical assets or liabilities in active markets accessible as of the measurement date;


•	Level 2 - Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and


•	Level 3 - Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

We had no transfers among levels of the fair value hierarchy during the three and nine months ended September 30, 2016 and 2015. Our policy is to recognize transfers at the end of quarterly reporting periods.

Financial Instruments

Our financial instruments include Cash and cash equivalents, Trade receivables, Notes and other receivables, Warehouse receivables, restricted cash, Accounts payable, Short-term borrowings, Warehouse facility, Credit facility, Long-term senior notes and foreign currency exchange contracts. The carrying amounts of Cash and cash equivalents, Trade receivables, Notes and other receivables, Warehouse receivables, restricted cash, Accounts payable, and the Warehouse facility approximate their estimated fair values due to the short-term maturity of these instruments. The carrying values of our Credit facility and Short-term borrowings approximate their estimated fair values given the variable interest rate terms and market spreads.

We estimated the fair value of our Long-term senior notes as $296.0 million and $282.0 million as of September 30, 2016 and December 31, 2015, respectively, using dealer quotes that are Level 2 inputs in the fair value hierarchy. The carrying value of our Long-term senior notes was $272.6 million and $272.3 million as of September 30, 2016 and December 31, 2015, respectively, and includes debt issuance costs of $2.4 million and $2.7 million, respectively.

We record Warehouse receivables at the lower of cost or fair value based on the committed purchase price. When applicable, we determine the fair value of Warehouse receivables based on readily observable Level 2 inputs.

Investments in Real Estate Ventures at Fair Value

We report certain direct investments in real estate ventures at fair value, for which we increase or decrease our investment each reporting period by the change in the fair value of these investments. We report these fair value adjustments in our Condensed Consolidated Statements of Comprehensive Income within Equity earnings from real estate ventures.

We estimate fair value using the NAV per share (or its equivalent) our investees provide. Critical inputs to NAV estimates included valuations of the underlying real estate assets and borrowings, which incorporate investment-specific assumptions such as discount rates, capitalization rates, rental and expense growth rates and asset-specific market borrowing rates. We did not consider adjustments to NAV estimates provided by investees, including adjustments for any restrictions to the transferability of ownership interests embedded within investment agreements to which we are a party, to be necessary based upon (1) our understanding of the methodology utilized and inputs incorporated to estimate NAV at the investee level derived through LaSalle's role as advisor or manager of these ventures, (2) consideration of market demand for the specific types of real estate assets held by each venture, and (3) contemplation of real estate and capital markets conditions in the localities in which these ventures operate. As of September 30, 2016 and December 31, 2015, investments in real estate ventures at fair value were $204.0 million and $155.2 million, respectively. As these investments are not required to be classified in the fair value hierarchy, they have been excluded from the following table.

Recurring Fair Value Measurements

The following table categorizes by level in the fair value hierarchy the estimated fair value of our assets and liabilities measured at fair value on a recurring basis.



	September 30, 2016			December 31, 2015
(in millions)	Level 2		Level 3	Level 2	Level 3
Assets
Foreign currency forward contracts receivable	$	6.0	—	9.5	—
Deferred compensation plan assets	168.7		—	134.3	—
Total assets at fair value	$	174.7	—	143.8	—
Liabilities
Foreign currency forward contracts payable	$	6.0	—	21.2	—
Deferred compensation plan liabilities	164.5		—	129.4	—
Earn-out liabilities	—		210.1	—	127.3
Total liabilities at fair value	$	170.5	210.1	150.6	127.3

Foreign Currency Forward Contracts

We regularly use foreign currency forward contracts to manage our currency exchange rate risk related to intercompany lending and cash management practices. These contracts are on our Condensed Consolidated Balance Sheets as current assets and current liabilities. We determine the fair values of these contracts based on current market rates. The inputs for these valuations are Level 2 inputs in the fair value hierarchy. As of September 30, 2016 and December 31, 2015, these contracts had a gross notional value of $2.05 billion ($1.08 billion on a net basis) and $2.28 billion ($1.26 billion on a net basis), respectively.

The revaluations of our foreign currency forward contracts resulted in no net gain as of September 30, 2016 and a net loss of $12.5 million as of September 30, 2015. We recognize gains and losses from the revaluation of these contracts as a component of Operating, administrative and other expense. They are offset by the gains and losses we recognize on the revaluation of intercompany loans and other foreign currency balances. The impact to net income was not significant for either of the three or nine months ended September 30, 2016 or 2015.

We record the asset and liability positions for our foreign currency forward contracts based on the net payable or net receivable position with the financial institutions from which we purchase these contracts. The $6.0 million asset as of September 30, 2016 was composed of gross contracts with receivable positions of $6.4 million and payable positions of $0.4 million. The $6.0 million liability as of September 30, 2016 was composed of gross contracts with receivable positions of $0.7 million and payable positions of $6.7 million. As of December 31, 2015, the $9.5 million asset was composed of gross contracts with receivable positions of $10.0 million and payable positions of $0.5 million. The $21.2 million liability as of December 31, 2015, was composed of gross contracts with receivable positions of $0.9 million and payable positions of $22.1 million.

Deferred Compensation Plan

We maintain a deferred compensation plan for certain of our U.S. employees that allows them to defer portions of their compensation. We invest directly in insurance contracts which yield returns to fund these deferred compensation obligations. We recognize an asset for the amount that could be realized under these insurance contracts at the balance sheet date, and we adjust the deferred compensation obligation to reflect the changes in the fair value of the amount owed to the employees. The inputs for this valuation are Level 2 inputs in the fair value hierarchy. We recorded this plan on our Condensed Consolidated Balance Sheet as of September 30, 2016 as Deferred compensation plan assets of $168.7 million, long-term deferred compensation plan liabilities of $164.5 million, included in Deferred compensation, and as a reduction of equity, Shares held in trust, of $6.1 million. We recorded this plan on our Condensed Consolidated Balance Sheet as of December 31, 2015 as Deferred compensation plan assets of $134.3 million, long-term deferred compensation plan liabilities of $129.4 million, included in Deferred compensation, and as a reduction of equity, Shares held in trust, of $6.2 million.

Earn-Out Liabilities

We classify our earn-out liabilities within Level 3 in the fair value hierarchy because the inputs we use to develop the estimated fair value include unobservable inputs. We base the fair value of our earn-out liabilities on the present value of probability-weighted future cash flows related to the earn-out performance criteria on each reporting date. We determine the probabilities of achievement we assign to the performance criteria based on the due diligence we performed at the time of acquisition as well as actual performance achieved subsequent to acquisition. See Note 5, Business Combinations, Goodwill and Intangibles, for additional discussion of our earn-out liabilities.

The tables below present a reconciliation for earn-out liabilities using significant unobservable inputs (Level 3) for the three and nine months ended September 30, 2016.



(in millions)	Balance as of June 30, 2016		Net decrease due to change in assumptions		Foreign currency translation adjustments	Purchases	Settlements		Balance as of September 30, 2016
Earn-out liabilities	$	169.6	(0.6	)	0.2	43.3	(2.4	)	210.1



(in millions)	Balance as of December 31, 2015		Net decrease due to change in assumptions		Foreign currency translation adjustments		Purchases	Settlements		Balance as of September 30, 2016
Earn-out liabilities	$	127.3	(1.5	)	(1.0	)	90.5	(5.2	)	210.1

Non-Recurring Fair Value Measurements

We review our investments in real estate ventures, except those investments otherwise reported at fair value, on a quarterly basis, or as otherwise deemed necessary, for indications of whether we may be unable to recover the carrying value of our investments and whether such investments are other than temporarily impaired. When the carrying amount of the investment is in excess of the estimated future undiscounted cash flows, we use a discounted cash flow approach or other acceptable method to determine the fair value of the investment in computing the amount of the impairment. Our determination of fair value primarily relies on Level 3 inputs. We did not recognize any investment-level impairment losses during either of the three or nine months ended September 30, 2016 or 2015. See Note 6, Investments in Real Estate Ventures, for additional information, including information related to impairment charges recorded at the investee level.