Fair Value

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In the absence of active markets for the identical assets or liabilities, such measurements involve developing assumptions based on market observable data and, in the absence of such data, internal information consistent with what market participants would use in a hypothetical transaction that occurs at the measurement date. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. Preference is given to observable inputs. These two types of inputs create the following fair value hierarchy:


•	Level 1 — Quoted prices for identical instruments in active markets.


•	Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.


•	Level 3 — Significant inputs to the valuation model are unobservable.

There were no changes during the periods presented to the valuation techniques we use to measure asset and liability fair values on a recurring basis. Except as previously discussed in Note 10, there were no transfers between the three levels of the fair value hierarchy for the periods presented.

The following section describes the valuation methodologies we use to measure different financial instruments at fair value on a recurring basis.

Derivative Financial Instruments

Our financial derivative assets and liabilities include FX forward contracts, FX embedded derivatives and commodity contracts, valued using valuation models based on observable market inputs such as forward rates, interest rates, our own credit risk and the credit risk of our counterparties, which comprise investment-grade financial institutions. Based on these inputs, the derivative assets and liabilities are classified within Level 2 of the valuation hierarchy. We have not made any adjustments to the inputs obtained from the independent sources. Based on our continued ability to enter into forward contracts, we consider the markets for our fair value instruments active. We primarily use the income approach, which uses valuation techniques to convert future amounts to a single present amount.

As of December 31, 2015, there had been no significant impact to the fair value of our derivative liabilities due to our own credit risk, as the related instruments are collateralized under our senior credit facilities. Similarly, there had been no significant impact to the fair value of our derivative assets based on our evaluation of our counterparties' credit risks.

Assets and liabilities measured at fair value on a recurring basis include the following as of December 31, 2015:



	Fair Value Measurements Using
	Level 1		Level 2			Level 3
Other current assets — FX embedded derivatives	$	—	$	8.0		$	—
Other assets — FX embedded derivatives	—		3.1			—
Accrued expenses — FX forward contracts, FX embedded derivatives and commodity contracts	—		(6.6		)	—
Other long-term liabilities — FX embedded derivatives and FX forward contracts	—		(1.3		)	—

Assets and liabilities measured at fair value on a recurring basis include the following as of December 31, 2014:



	Fair Value Measurements Using
	Level 1		Level 2			Level 3
Other current assets — FX embedded derivatives	$	—	$	4.1		$	—
Other assets — FX embedded derivatives	—		1.2			—
Accrued expenses — FX forward contracts, FX embedded derivatives, and commodity contracts	—		(9.4		)	—
Other long-term liabilities — FX forward contracts and FX embedded derivatives	—		(0.7		)	—

Goodwill, Indefinite-Lived Intangible and Other Long-Lived Assets

Certain of our non-financial assets are subject to impairment analysis, including long-lived assets, indefinite-lived intangible assets and goodwill. We review the carrying amounts of such assets whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable or at least annually for indefinite-lived intangible assets and goodwill. Any resulting asset impairment would require that the instrument be recorded at its fair value. As of December 31, 2015, and with the exception of the impairment charges noted below, we did not have any significant non-financial assets or liabilities that are required to be measured at fair value on a recurring or non-recurring basis.

During the fourth quarter of 2015, we determined that the fair value of our Balcke Duerr reporting unit was less than the carrying value of its net assets (see Note 8). The fair value of our Balcke Duerr reporting unit was based upon weighting the income and market approaches utilizing estimated cash flows and a terminal value discounted at a rate of return that reflects the relative risk of the cash flows, as well as valuation multiples derived from comparable publicly-traded companies that were applied to the historical and projected operating results for the Balcke Duerr reporting unit (unobservable inputs - Level 3). Based on this analysis, we recorded a $13.7 impairment charge related to Balcke Duerr’s goodwill during the fourth quarter of 2015, which represented the entire amount of Balcke Duerr’s goodwill.

During 2014, we recorded an impairment charge of $10.9 related to the trademarks of a business within our Power reportable segment. The fair value of the trademarks was determined by applying estimated royalty rates to projected revenues, with the resulting cash flows discounted at a rate of return that reflected current market conditions (unobservable inputs — Level 3).

In addition, during 2014 we recorded an impairment charge of $18.0 related to our Cooling Power reporting unit's investment in the Shanghai Electric joint venture as we determined that the fair value of the investment was less than its carrying value. The fair value of the investment was based upon weighting the income and market approaches, utilizing estimated cash flows and a terminal value discounted at a rate of return that reflects the relative risk of the cash flows (unobservable inputs — Level 3).

Indebtedness and Other

The estimated fair value of our debt instruments (excluding capital leases) as of December 31, 2015 and 2014 approximated the related carrying values of $372.1 and $719.5, respectively, due primarily to the variable market-based interest rates for such instruments. See Note 12 for further details.