
9.	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 measurements 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 valuations during the years ended December 31, 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 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 $284.9 million and $282.0 million as of December 31, 2016 and 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 $272.7 million and $272.3 million as of December 31, 2016 and 2015, and includes debt issuance costs of $2.3 million and $2.7 million, respectively.

We record Warehouse receivables at the lower of cost or fair value based on the commitment 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 on our 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 ventures, and (3) contemplation of real estate and capital markets conditions in the localities in which these ventures operate. As of December 31, 2016 and 2015, investments in real estate ventures at fair value were $212.7 million and $155.2 million. 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.



	December 31,
	2016			2015
($ in millions)	Level 2		Level 3	Level 2	Level 3
Assets
Foreign currency forward contracts receivable	$	8.7	—	9.5	—
Deferred compensation plan assets	173.0		—	134.3	—
Mortgage banking derivative assets	—		31.4	—	—
Total assets at fair value	$	181.7	31.4	143.8	—
Liabilities
Foreign currency forward contracts payable	$	22.9	—	21.2	—
Deferred compensation plan liabilities	169.5		—	129.4	—
Earn-out liabilities	—		229.6	—	127.3
Mortgage banking derivative liabilities	—		15.9	—	—
Total liabilities at fair value	$	192.4	245.5	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 Consolidated Balance Sheet as current assets and current liabilities. We determine the fair value of these contracts based on current market rates. The inputs for these valuations are Level 2 inputs in the fair value hierarchy. As of December 31, 2016 and 2015, these contracts had a gross notional value of $1.90 billion ($1.39 billion on a net basis) and $2.28 billion ($1.26 billion on a net basis), respectively.

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 $8.7 million asset as of December 31, 2016 was comprised of gross contracts with receivable positions of $8.9 million and payable positions of $0.2 million. The $22.9 million liability position as of December 31, 2016 was comprised of gross contracts with receivable positions of $1.3 million and payable positions of $24.2 million. As of December 31, 2015, the $9.5 million asset was comprised of gross contracts with receivable positions of $10.0 million and payable positions of $0.5 million. The $21.2 million liability position as of December 31, 2015, was comprised 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 Consolidated Balance Sheet as of December 31, 2016 as Deferred compensation plan assets of $173.0 million, long-term deferred compensation liabilities of $169.5 million, included in Deferred compensation, and as a reduction of equity, Shares held in trust, of $6.0 million. We recorded this plan on our Consolidated Balance Sheet as of December 31, 2015 as Deferred compensation plan assets of $134.3 million, long-term deferred compensation 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 significant 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 are determined based on the due diligence we performed at the time of acquisition as well as actual performance achieved subsequent to acquisition. See Note 4, Business Combinations, Goodwill and Other Intangibles, for additional discussion of our earn-out liabilities.

Mortgage Banking Derivatives

In the normal course of business, we enter into simultaneous contractual commitments to originate and sell multi-family mortgage loans at fixed prices with fixed expiration dates. Commitments to borrowers become effective when the borrowers "lock-in" a specified interest rate and maximum principal balance for an established time frame (hereinafter referred to as an interest rate lock commitment or "IRLC"). All mortgagors are evaluated for creditworthiness prior to execution of an IRLC.

We are exposed to market interest risk (the risk of movement in market interest rates following the execution of an IRLC) until a loan is funded and onwards through delivery. To mitigate the effect of the interest rate risk inherent in providing IRLCs to borrowers, we simultaneously enter into a forward commitment to sell the eventual loan associated with the IRLC to a GSE or other investor. Similar to the IRLC, the forward sale commitment locks in an interest rate, maximum principal balance, and price for the sale of the loan. Ultimately, the terms of the forward sale commitment and the IRLC are matched in substantially all respects, with the objective of eliminating market interest rate and other balance sheet risk to the extent practical. As an additional element of protection, forward sale commitments extend for a longer period of time as compared to IRLCs to allow, among other things, for the closing of the loan and processing of paperwork to deliver the loan in accordance with the terms of the sale commitment.

The fair value of our rate lock commitments to borrowers and the related inputs primarily include, as applicable, the expected net cash flows associated with servicing the loan (Level 3) and the effects of interest rate movements between the date of the IRLC and the balance sheet date based on applicable published US Treasury prices (Level 2).

The fair value of our forward sales contracts to investors considers the market price movement of the same type of security between the trade date and the balance sheet date (Level 2). The market price changes are multiplied by the notional amount of the forward sales contracts to measure the fair value.

Both the rate lock commitments to borrowers and the forward sale contracts to buyers are undesignated derivatives and considered Level 3 valuations due to significant unobservable inputs related to counterparty credit risk. The fair valuation is determined using discounted cash flow techniques, and the derivatives are marked to fair value through Revenue in the Consolidated Statements on Comprehensive Income and are considered Level 3.

The tables below presents a reconciliation for assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3).



(in millions)	Balance as of December 31, 2015		Net change in fair value	Foreign currency translation adjustments		Purchases / Additions	Settlements		Balance as of December 31, 2016
Earn-out liabilities	$	127.3	13.5	(8.7	)	103.3	(5.8	)	229.6
Mortgage banking derivative assets and liabilities, net	—		6.2	—		22.6	(13.3	)	15.5



(in millions)	Balance as of December 31, 2014		Net change in fair value	Foreign currency translation adjustments		Purchases / Additions	Settlements		Balance as of December 31, 2015
Earn-out liabilities	$	25.1	2.4	(1.8	)	105.1	(3.5	)	127.3

Net change in fair value, included in the tables above, are reported in Net income as follows.



Category of Assets/Liabilities using Unobservable Inputs	Consolidated Statements of Comprehensive Income Account Caption
Other current liabilities/Other liabilities - Earn-out liabilities	Restructuring and acquisition charges
Other current assets - Mortgage banking derivative assets	Revenue
Other current liabilities - Mortgage banking derivative liabilities	Revenue

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 not be able 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 significant investment-level impairment losses during the years ended December 31, 2016, 2015 or 2014. See Note 5, Investments in Real Estate Ventures, for additional information, including information related to impairment charges recorded at the investee level.