Fair value measurements

3 Months Ended

Mar. 31, 2020

6. Fair value measurements

The Company measures certain financial assets and liabilities, including derivative instruments, at fair value on a recurring basis. The fair value measurements of these financial assets and liabilities were determined using the following inputs as of December 31, 2019 and March 31, 2020:

	As of December 31, 2019
	Fair Value Measurements at Reporting Date Using
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Other Unobservable Inputs
	Total		(Level 1)		(Level 2)				(Level 3)
Assets
Derivative instruments (Note a, c)	$	21,309	$	—	$	21,309	$	—
Deferred compensation plan assets (Note a, e)		11,208		—		—		11,208
Total	$	32,517	$	—	$	21,309	$	11,208
Liabilities
Earn-out consideration (Note b, d)	$	22,184	$	—	$	—	$	22,184
Derivative instruments (Note b, c)		24,239		—		24,239		—
Deferred compensation plan liability (Note b, f)		10,943		—		—		10,943
Total	$	57,366	$	—	$	24,239	$	33,127

6. Fair value measurements (Continued)

	As of March 31, 2020
	Fair Value Measurements at Reporting Date Using
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Other Unobservable Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Assets
Derivative instruments (Note a, c)	$	9,202	$	—	$	9,202	$	—
Deferred compensation plan assets (Note a, e)	$	10,635	$	—	$	—	$	10,635
Total	$	19,837	$	—	$	9,202	$	10,635
Liabilities
Earn-out consideration (Note b, d)	$	22,409	$	—	$	—	$	22,409
Derivative instruments (Note b, c)	$	94,853	$	—	$	94,853	$	—
Deferred compensation plan liability (Note b, f)	$	17,583	$	—	$	—	$	17,583
Total	$	134,845	$	—	$	94,853	$	39,992

(a)	Included in “prepaid expenses and other current assets” and “other assets” in the consolidated balance sheets.

(b)	Included in “accrued expenses and other current liabilities” and “other liabilities” in the consolidated balance sheets.

(c)	The Company values its derivative instruments based on market observable inputs, including both forward and spot prices for the relevant currencies and interest rate indices for relevant interest rates. The quotes are taken from an independent market database.

(d)

The fair value of earn-out consideration, calculated as the present value of expected future payments to be made to the sellers of acquired businesses, was derived by estimating the future financial performance of the acquired businesses using the earn-out formula and performance targets specified in each purchase agreement and adjusting the result to reflect the Company’s estimate of the likelihood of achievement of such targets. Given the significance of the unobservable inputs, the valuations are classified in level 3 of the fair value hierarchy.

(e)

Deferred compensation plan assets consist of life insurance policies held under a Rabbi Trust. Assets held in the Rabbi Trust are valued based on the cash surrender value of the insurance contract, which is determined based on the fair value of the underlying assets included in the insurance portfolio and are therefore classified within level 3 of the fair value hierarchy.

(f)	The fair value of the deferred compensation plan liability is derived based on the fair value of the underlying assets in the insurance policies and is therefore classified within level 3 of the fair value hierarchy.

The following table provides a roll-forward of the fair value of earn-out consideration categorized as level 3 in the fair value hierarchy for the three months ended March 31, 2019 and 2020:

	Three months ended March 31,
	2019			2020
Opening balance	$	17,073		$	22,184
Earn-out consideration payable in connection with acquisitions		—			—
Payments made on earn-out consideration (Note a)		(10,000	)		—
Change in fair value of earn-out consideration (Note b)		—			—
Others (Note c)		403			225
Closing balance	$	7,476		$	22,409

(a) Includes an interest payment on earn-out consideration in excess of the acquisition date fair value, which is included in “cash flows from operating activities” amounting to $1,600 and $0 for the three months ended March 31, 2019 and 2020, respectively.

(b)	Changes in the fair value of earn-out consideration are reported in “other operating (income) expense, net” in the consolidated statements of income.

6. Fair value measurements (Continued)

(c)

“Others” is comprised of interest expense included in “interest income (expense), net” and the impact of changes in foreign exchange reported in “foreign exchange gains (losses), net” in the consolidated statements of income. This also includes a cumulative translation adjustment reported as a component of “other comprehensive income (loss).”

The following table provides a roll-forward of the fair value of deferred compensation plan assets categorized as level 3 in the fair value hierarchy for the three months ended March 31, 2019 and 2020:

	Three months ended March 31,
	2019		2020
Opening balance	$	1,613	$	11,208
Additions (net of redemption)^#		6,165		985
Change in fair value of deferred compensation plan assets (Note a)		288		(1,558	)
Closing balance	$	8,066	$	10,635

^# The Company accrued a liability of $7,248 during the quarter ended March 31, 2020 and a corresponding amount was paid to the plan after March 31, 2020.

(a)	Changes in the fair value of plan assets are reported in “other income (expense), net” in the consolidated statements of income.

The following table provides a roll-forward of the fair value of deferred compensation liabilities categorized as level 3 in the fair value hierarchy for the three months ended March 31, 2019 and 2020:

	Three months ended March 31,
	2019		2020
Opening balance	$	1,582	$	10,943
Additions (net of redemption)		6,165		8,187
Change in fair value of deferred compensation plan liabilities (Note a)		188		(1,547	)
Closing balance	$	7,935	$	17,583

(a)	Changes in the fair value of deferred compensation liabilities are reported in “selling, general and administrative expenses” in the consolidated statements of income.