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FAIR VALUE MEASUREMENTS | 12 Months Ended
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Mar. 30, 2024
Fair Value Disclosures [Abstract] |
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS Financial assets and financial liabilities measured and reported at fair value are classified in a three-level hierarchy that prioritizes the inputs used in the valuation process. A financial instrument’s categorization within the valuation hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The hierarchy is based on the observability and objectivity of the pricing inputs, as follows: •Level 1 — Quoted prices in active markets for identical assets or liabilities. •Level 2 — Significant directly observable data (other than Level 1 quoted prices) or significant indirectly observable data through corroboration with observable market data. Inputs would normally be (i) quoted prices in active markets for similar assets or liabilities, (ii) quoted prices in inactive markets for identical or similar assets or liabilities, or (iii) information derived from or corroborated by observable market data. •Level 3 — Prices or valuation techniques that require significant unobservable data inputs. These inputs would normally be VF’s own data and judgments about assumptions that market participants would use in pricing the asset or liability.
RECURRING FAIR VALUE MEASUREMENTS
The following table summarizes financial assets and financial liabilities that are measured and recorded in the consolidated financial statements at fair value on a recurring basis:
| Total Fair Value |  | Fair Value Measurement Using (a)
(In thousands) |  | Level 1 |  | Level 2 |  | Level 3
March 2024 |  |  |  |  |  |  |
Financial assets: |  |  |  |  |  |  |
Cash equivalents: |  |  |  |  |  |  |
Money market funds | $ | 171,931 |  |  | $ | 171,931 |  |  | $ | — |  |  | $ | — |
Time deposits | 54,853 |  |  | 54,853 |  |  | — |  |  | — |
Derivative financial instruments | 32,548 |  |  | — |  |  | 32,548 |  |  | — |
Deferred compensation and other | 95,236 |  |  | 95,236 |  |  | — |  |  | — |
Financial liabilities: |  |  |  |  |  |  |
Derivative financial instruments | 40,234 |  |  | — |  |  | 40,234 |  |  | — |
Deferred compensation | 90,804 |  |  | — |  |  | 90,804 |  |  | — |
| Total Fair Value |  | Fair Value Measurement Using (a)
(In thousands) |  | Level 1 |  | Level 2 |  | Level 3
March 2023 |  |  |  |  |  |  |
Financial assets: |  |  |  |  |  |  |
Cash equivalents: |  |  |  |  |  |  |
Money market funds | $ | 418,304 |  |  | $ | 418,304 |  |  | $ | — |  |  | $ | — |
Time deposits | 21,233 |  |  | 21,233 |  |  | — |  |  | — |
Derivative financial instruments | 49,688 |  |  | — |  |  | 49,688 |  |  | — |
Deferred compensation and other | 99,200 |  |  | 99,200 |  |  | — |  |  | — |
Financial liabilities: |  |  |  |  |  |  |
Derivative financial instruments | 72,653 |  |  | — |  |  | 72,653 |  |  | — |
Deferred compensation | 96,364 |  |  | — |  |  | 96,364 |  |  | — |
(a)There were no transfers among the levels within the fair value hierarchy during the years ended March 2024 or 2023. VF’s cash equivalents include money market funds and time deposits with maturities within three months of their purchase dates, that approximate fair value based on Level 1 measurements. The fair value of derivative financial instruments, which consist of foreign exchange forward contracts and interest rate swap contracts, is determined based on observable market inputs (Level 2), including spot and forward exchange rates for foreign currencies and interest rate forward curves, and considers the credit risk of the Company and its counterparties. VF’s deferred compensation assets primarily represent investments held within plan trusts as an economic hedge of the related deferred compensation liabilities (Note 17). These investments primarily include mutual funds (Level 1) that are valued based on quoted prices in active markets. Liabilities related to VF’s deferred compensation plans are recorded at amounts due to participants, based on the fair value of the participants’ selection of hypothetical investments. In connection with the Supreme acquisition on December 28, 2020, the fair value of the related contingent consideration liability was initially estimated at $207.0 million (Level 3). During Fiscal 2022, the contingent consideration liability was remeasured at fair value based on the probability-weighted present value of various future cash payment outcomes resulting from the estimated achievement levels of the financial targets, with changes of $150.0 million recognized in the selling, general and administrative expenses line item in the Consolidated Statement of Operations in the year ended March 2022. As of March 2022, the estimated fair value of the contingent consideration liability was $57.0 million and was paid during Fiscal 2023. All other significant financial assets and financial liabilities are recorded in the consolidated financial statements at cost, except life insurance contracts which are recorded at cash surrender value. These other financial assets and financial liabilities include cash held as demand deposits, accounts receivable, short-term borrowings, accounts payable and accrued liabilities. At March 2024 and 2023, their carrying values approximated their fair values. Additionally, at March 2024 and 2023, the carrying values of VF’s long-term debt, including the current portion, were $5,703.0 million and $6,635.3 million, respectively, compared with fair values of $5,263.3 million a nd $6,244.4 million at those respective dates. Fair value for long-term debt is a Level 2 estimate based on quoted market prices or values of comparable borrowings.
NONRECURRING FAIR VALUE MEASUREMENTS
Certain non-financial assets, primarily property, plant and equipment, goodwill and intangible assets, and operating lease right-of-use assets, are not required to be measured at fair value on a recurring basis and are reported at carrying value. However, these assets are required to be assessed for impairment whenever events or circumstances indicate their carrying value may not be fully recoverable, and at least annually for goodwill and indefinite-lived intangible assets. In the event an impairment is required, the asset is adjusted to its estimated fair value, using market-based assumptions. The Company recorded $39.4 million, $3.0 million and $6.4 million of impairments in the years ended March 2024, 2023 and 2022, respectively, related to retail store assets, lease right-of-use assets and other fixed assets. These impairments were recorded in the selling, general and administrative expenses line item in the Consolidated Statements of Operations. The Company recorded $507.6 million and $735.0 million of impairments in the years ended March 2024 and 2023, respectively, related to goodwill and indefinite-lived trademark intangible assets. No impairment charges of goodwill or indefinite-lived trademark intangible assets were recorded in the year ended March 2022. Refer to additional discussion of management's goodwill and indefinite-lived intangible asset impairment testing below.
Fiscal 2024 Goodwill and Intangible Asset Impairment Testing
Timberland Reporting Unit and Indefinite-Lived Intangible Asset Impairment Analysis During the third quarter of Fiscal 2024, management determined that the recent downturn in the Timberland financial results, combined with a downward revision to the latest Fiscal 2024 forecast and forward-looking financial projections, was a triggering event that required management to perform a quantitative impairment analysis of both the Timberland reporting unit goodwill, which includes the Timberland® brand, and the Timberland indefinite-lived trademark intangible asset, which includes both the Timberland® and Timberland PRO® brands. The carrying values of the goodwill and indefinite-lived trademark intangible asset at the testing date were $407.9 million and $999.5 million, respectively. As a result of the impairment testing performed, VF recorded a goodwill impairment charge of $195.3 million in the third quarter of Fiscal 2024 to write down the Timberland reporting unit carrying value to its estimated fair value. No impairment charge was recorded on the indefinite-lived trademark intangible asset. The estimated fair value of the indefinite-lived trademark intangible asset exceeded its carrying value by a significant amount. During the fourth quarter of Fiscal 2024, management determined that the continued downturn in Timberland financial results and weakness in the wholesale channel, combined with expectations of a slower recovery, was a triggering event that required management to perform a quantitative impairment analysis of both the Timberland reporting unit goodwill and indefinite-lived trademark intangible asset. The carrying values of the goodwill and indefinite-lived trademark intangible asset at the testing date were $211.7 million and $999.5 million, respectively. As a result of the impairment testing performed, management concluded that the Timberland reporting unit goodwill was fully impaired and thus recorded an additional impairment charge of $211.7 million in the Consolidated Statement of Operations for the year ended March 2024. Based on the analysis, management concluded that the indefinite-lived trademark intangible asset was not impaired and the estimated fair value exceeded its carrying value by 14%. The Timberland reporting unit is included in the Outdoor reportable segment. Management's revenue and profitability forecasts used in the Timberland reporting unit and indefinite-lived trademark intangible asset valuations considered recent and historical performance, strategic initiatives, industry trends and macroeconomic factors. Assumptions used in the valuations were similar to those that would be used by market participants performing independent valuations of the business. Key assumptions developed by management and used in the quantitative analysis of the Timberland reporting unit and indefinite-lived trademark intangible asset include: •Financial projections and future cash flows that considered recent actual results lower than previous internal forecasts, slower recovery from the recent downturn, with moderate revenue growth and profitability improvement throughout the forecast period that reflects the long-term strategy for the business, and terminal growth rates based on the expected long-term growth rate of the business; •Tax rates based on the statutory rates for the countries in which the brand operates and the related intellectual property is domiciled; •Royalty rates based on market data as well as active license agreements for the brand and similar VF brands; and, •Market-based discount rates. The valuation model used by management in the indefinite-lived trademark intangible asset impairment testing assumes recovery from the recent downturn in the brand's operating results and the return to revenue growth over the projection period. If the brand is unable to achieve the financial projections, an impairment of the indefinite-lived trademark intangible asset could occur in the future. Management performed a sensitivity analysis on the impairment model used to test the Timberland indefinite-lived trademark intangible asset. In doing so, management determined that a 40% decrease in the annual growth rate assumption for revenues used in the projections, combined with a 100 basis point increase in the discount rate used in the relief-from-royalty model resulted in the estimated fair value of the indefinite-lived trademark intangible asset to be below its carrying value, which would result in impairment. Dickies Reporting Unit and Indefinite-Lived Intangible Asset Impairment Analysis During the second quarter of Fiscal 2024, management determined that the recent downturn in the Dickies historical financial results, combined with a downward revision to the latest Fiscal 2024 forecast, was a triggering event that required management to perform a quantitative impairment analysis of both the Dickies reporting unit goodwill and the Dickies indefinite-lived trademark intangible asset. Based on the analysis, management concluded that both the goodwill and indefinite-lived intangible asset were not impaired. For goodwill, the estimated fair value of the reporting unit exceeded the carrying value by 8%. The estimated fair value of the indefinite-lived trademark intangible asset exceeded its carrying value by a significant amount. The carrying values of the goodwill and indefinite-lived trademark intangible asset at the testing date were $61.2 million and $290.0 million, respectively. During the third quarter of Fiscal 2024, management determined that the continued downturn in the Dickies financial results, weakness in certain key U.S. wholesale customer accounts, including lost product placement, and weakness in certain international markets, combined with expectations of a slower recovery, which have resulted in further reductions to the financial projections, was a triggering event that required management to perform a quantitative impairment analysis of both the Dickies reporting unit goodwill and the Dickies indefinite-lived trademark intangible asset. The carrying values of the goodwill and indefinite-lived trademark intangible asset at the testing date were $61.8 million and $290.0 million, respectively. Based on the analysis, management concluded that the Dickies reporting unit goodwill was fully impaired and thus recorded an impairment charge of $61.8 million in the third quarter of Fiscal 2024. Based on the analysis, management concluded that the indefinite-lived trademark intangible asset was not impaired and the estimated fair value exceeded its carrying value by a significant amount. During the fourth quarter of Fiscal 2024, management determined that the overall weakness in the Dickies business and financial results, was a triggering event that required management to perform a quantitative impairment analysis of the Dickies indefinite-lived trademark intangible asset. The carrying value of the indefinite-lived trademark intangible asset at the testing date was $290.0 million. Based on the analysis, management concluded that the indefinite-lived trademark intangible asset was not impaired and the estimated fair value exceeded its carrying value by 16%. The Dickies reporting unit is included in the Work reportable segment. Management's revenue and profitability forecasts used in the Dickies reporting unit and indefinite-lived trademark intangible asset valuations considered recent and historical performance, strategic initiatives, industry trends and macroeconomic factors. Assumptions used in the valuations were similar to those that would be used by market participants performing independent valuations of the business. Key assumptions developed by management and used in the quantitative analysis of the Dickies reporting unit and indefinite-lived trademark intangible asset include: •Financial projections and future cash flows, including a base year that considered recent actual results lower than previous internal forecasts, continued weakness in certain key accounts and markets, slower recovery from the recent downturn, with moderate revenue growth and improved profitability throughout the forecast period that reflects the long-term strategy for the business, and terminal growth rates based on the expected long-term growth rate of the business; •Tax rates based on the statutory rates for the countries in which the brand operates and the related intellectual property is domiciled; •Royalty rates based on market data as well as active license agreements for the brand and similar VF brands; and, •Market-based discount rates. The valuation model used by management in the indefinite-lived trademark intangible asset impairment testing assumes recovery from the recent downturn in the brand's operating results and the return to revenue growth over the projection period. If the brand is unable to achieve the financial projections, an impairment of the indefinite-lived trademark intangible asset could occur in the future. Management performed a sensitivity analysis on the impairment model used to test the Dickies indefinite-lived trademark intangible asset. In doing so, management determined that a 50% decrease in the annual growth rate assumption for revenues used in the projections, combined with a 200 basis point increase in the discount rate used in the relief-from-royalty model resulted in the estimated fair value of the indefinite-lived trademark intangible asset to be below its carrying value, which would result in impairment. Icebreaker Reporting Unit and Indefinite-Lived Intangible Asset Impairment Analysis In conjunction with VF's annual goodwill and indefinite-lived intangible asset impairment testing as of the beginning of the fourth quarter of Fiscal 2024, management performed a quantitative impairment analysis of the Icebreaker reporting unit goodwill and indefinite-lived trademark intangible asset. The decision to bypass the optional qualitative impairment assessment and proceed directly to a quantitative impairment analysis was based on results from management's prior testing, combined with a downward revision to the latest Fiscal 2024 forecast and forward-looking financial projections. The carrying values of the Icebreaker reporting unit goodwill and indefinite-lived trademark intangible asset at the testing date were $81.2 million and $62.1 million, respectively. As a result of the annual impairment testing, VF recorded a goodwill impairment charge of $38.8 million in the Consolidated Statement of Operations for the year ended March 2024. Based on the analysis, management concluded that the indefinite-lived trademark intangible asset was not impaired and the estimated fair value exceeded its carrying value by a significant amount. The Icebreaker reporting unit is included in the Outdoor reportable segment. Management's revenue and profitability forecasts used in the Icebreaker reporting unit and indefinite-lived trademark intangible asset valuations considered recent and historical performance, strategic initiatives, industry trends and macroeconomic factors. Assumptions used in the valuations were similar to those that would be used by market participants performing independent valuations of the business. Key assumptions developed by management and used in the quantitative analysis of the Icebreaker reporting unit and indefinite-lived trademark intangible asset include: •Financial projections and future cash flows, including a base year that considered recent actual results lower than previous internal forecasts, slower recovery from the recent downturn, with moderate revenue growth and improved profitability throughout the forecast period that reflects the long-term strategy for the business, and terminal growth rates based on the expected long-term growth rate of the business; •Tax rates based on the statutory rates for the countries in which the brand operates and the related intellectual property is domiciled; •Royalty rates based on market data as well as active license agreements for similar VF brands; and, •Market-based discount rates. The valuation model used by management in the impairment testing assumes recovery from the recent downturn in the brand's operating results and the return to revenue growth and improved profitability over the projection period. If the brand is unable to achieve the financial projections, additional impairment of the reporting unit goodwill or impairment of the indefinite-lived trademark intangible asset could occur in the future. Supreme Reporting Unit and Indefinite-Lived Intangible Asset Impairment Analysis In conjunction with VF's annual goodwill and indefinite-lived intangible asset impairment testing as of the beginning of the fourth quarter of Fiscal 2024, management performed a quantitative impairment analysis of the Supreme reporting unit goodwill and indefinite-lived trademark intangible asset. The decision to bypass the optional qualitative impairment assessment and proceed directly to a quantitative impairment analysis was based on the impairment results from management's prior year testing and the overall significance of the related assets. Based on the analysis, management concluded the Supreme reporting unit goodwill and indefinite-lived trademark intangible asset were not impaired. For goodwill, the estimated fair value of the reporting unit exceeded the carrying value by 8%. The estimated fair value of the indefinite-lived trademark intangible asset exceeded its carrying value by 3%. The carrying values of the Supreme reporting unit goodwill and indefinite-lived trademark intangible asset at the testing date were $819.7 million and $852.0 million, respectively. The Supreme reporting unit is included in the Active reportable segment. Management's revenue and profitability forecasts used in the Supreme reporting unit and indefinite-lived trademark intangible asset valuations considered recent and historical performance, strategic initiatives, industry trends and macroeconomic factors. Assumptions used in the valuations were similar to those that would be used by market participants performing independent valuations of the business. Key assumptions developed by management and used in the quantitative analysis of the Supreme reporting unit and indefinite-lived trademark intangible asset include: •Financial projections and future cash flows that are comparable to those used in the prior year testing, as the brand is executing on its strategy and delivered strong profitability growth in the current year, with moderate revenue growth and a continued improvement in profitability throughout the forecast period that reflects the long-term strategy for the business, and terminal growth rates based on the expected long-term growth rate of the business; •Tax rates based on the statutory rates for the countries in which the brand operates and the related intellectual property is domiciled; •Royalty rates based on market data as well as active license agreements with similar VF brands; •Market-based discount rates that are slightly lower than prior testing due to overall market conditions; and, •Market approach reflecting improved recent historical financial measures for Supreme. The valuation model used by management in the impairment testing assumes continued recovery in the brand's operating results with revenue growth and improved profitability over the projection period. If the brand is unable to achieve the financial projections, additional impairment of the reporting unit goodwill and indefinite-lived trademark intangible asset could occur in the future. Management performed a sensitivity analysis on the impairment models used to test the Supreme reporting unit goodwill and indefinite-lived trademark intangible asset. In doing so, management determined that individual changes of either a 20% reduction in the annual growth assumption for earnings before interest, taxes, depreciation and amortization (“EBITDA”) used in the projections, or a 100 basis point increase in the discount rate used in the discounted cash flow model resulted in the estimated fair value of the reporting unit to be below its carrying value, which would result in goodwill impairment. Management also determined that individual changes of either a 10% decrease in the annual growth rate assumption for revenues used in the projections, or a 50 basis point increase in the discount rate used in the relief-from-royalty model resulted in the estimated fair value of the indefinite-lived trademark intangible asset to be below its carrying value, which would result in impairment. Timberland PRO Reporting Unit Impairment Analysis In conjunction with VF's annual goodwill and indefinite-lived intangible asset impairment testing as of the beginning of the fourth quarter of Fiscal 2024, management performed a quantitative impairment analysis of the Timberland PRO reporting unit goodwill. The decision to bypass the optional qualitative impairment assessment and proceed directly to a quantitative impairment analysis was based on current year declines in revenue and segment profit and reductions to recent financial projections. Based on the analysis, management concluded the Timberland PRO reporting unit goodwill was not impaired. For goodwill, the estimated fair value of the reporting unit exceeded the carrying value by 17%. The carrying value of the Timberland PRO reporting unit goodwill at the testing date was $51.5 million. The Timberland PRO reporting unit is included in the Work reportable segment. Management's revenue and profitability forecasts used in the Timberland PRO reporting unit valuation considered recent and historical performance, strategic initiatives, industry trends and macroeconomic factors. Assumptions used in the valuation were similar to those that would be used by market participants performing independent valuations of the business. Key assumptions developed by management and used in the quantitative analysis of the Timberland PRO reporting unit include: •Financial projections and future cash flows, including the current year that considered actual results lower than previous internal forecasts, with recovery expected to begin next fiscal year driven by revenue growth and improved profitability throughout the forecast period that reflects the long-term strategy for the business and is in-line with historical financial results, and terminal growth rates based on the expected long-term growth rate of the business; •Tax rates based on the statutory rates for the countries in which the brand operates and the related intellectual property is domiciled; •Royalty rate assumption consistent with that used in the Timberland reporting unit analysis; and, •Market-based discount rates. The valuation model used by management in the impairment testing assumes recovery from the recent downturn in the brand's operating results and the return to revenue growth and improved profitability over the projection period. If the brand is unable to achieve the financial projections, an impairment of the reporting unit goodwill could occur in the future. Management performed a sensitivity analysis on the impairment model used to test the Timberland PRO reporting unit goodwill. In doing so, management determined that individual changes of either a 20% reduction in the annual growth assumption for EBITDA used in the projections, or a 200 basis point increase in the discount rate used in the discounted cash flow model resulted in the estimated fair value of the reporting unit to be below its carrying value, which would result in goodwill impairment. Altra Reporting Unit and Indefinite-Lived Intangible Asset Impairment Analysis In conjunction with VF's annual goodwill and indefinite-lived intangible asset impairment testing as of the beginning of the fourth quarter of Fiscal 2024, management performed a quantitative impairment analysis of the Altra reporting unit goodwill and indefinite-lived trademark intangible asset. The decision to bypass the optional qualitative impairment assessment and proceed directly to a quantitative impairment analysis was based on results from management's prior testing, combined with recent actual segment profit margins lower than previous internal forecasts. Based on the analysis, management concluded the Altra reporting unit goodwill and indefinite-lived trademark intangible asset were not impaired. For goodwill, the estimated fair value of the reporting unit exceeded the carrying value by 15%. The estimated fair value of the indefinite-lived trademark intangible asset exceeded its carrying value by a significant amount. The carrying values of the Altra reporting unit goodwill and indefinite-lived trademark intangible asset at the testing date were $61.7 million and $46.4 million, respectively. The Altra reporting unit is included in the Outdoor reportable segment. Management's revenue and profitability forecasts used in the Altra reporting unit and indefinite-lived trademark intangible asset valuations considered recent and historical performance, strategic initiatives, industry trends and macroeconomic factors. Assumptions used in the valuations were similar to those that would be used by market participants performing independent valuations of the business. Key assumptions developed by management and used in the quantitative analysis of the Altra reporting unit and indefinite-lived trademark intangible asset include: •Financial projections and future cash flows, including a base year that considered recent actual results lower than previous internal forecasts, with consistent revenue growth and improved profitability throughout the forecast period that reflects the long-term strategy for the business, and terminal growth rates based on the expected long-term growth rate of the business; •Tax rates based on the statutory rates for the countries in which the brand operates and the related intellectual property is domiciled; •Royalty rates based on market data as well as active license agreements for other VF brands; and, •Market-based discount rates. The valuation model used by management in the impairment testing assumes recovery from the recent downturn in the brand's operating results and the return to revenue growth and improved profitability over the projection period. If the brand is unable to achieve the financial projections, an impairment of the reporting unit goodwill or indefinite-lived trademark intangible asset could occur in the future. Management performed a sensitivity analysis on the impairment model used to test the Altra reporting unit goodwill. In doing so, management determined that individual changes of either a 10% reduction in the annual growth assumption for EBITDA used in the projections, or a 200 basis point increase in the discount rate used in the discounted cash flow model resulted in the estimated fair value of the reporting unit to be below its carrying value, which would result in goodwill impairment. Smartwool Reporting Unit and Indefinite-Lived Intangible Asset Impairment Analysis In conjunction with VF's annual goodwill and indefinite-lived intangible asset impairment testing as of the beginning of the fourth quarter of Fiscal 2024, management performed a quantitative impairment analysis of the Smartwool reporting unit goodwill and indefinite-lived trademark intangible asset. The decision to bypass the optional qualitative impairment assessment and proceed directly to a quantitative impairment analysis was based on current year declines in revenue and segment profit and reductions to recent financial projections, combined with recent actual segment profit margins lower than previous internal forecasts. Based on the analysis, management concluded the Smartwool reporting unit goodwill and indefinite-lived trademark intangible asset were not impaired. For goodwill, the estimated fair value of the reporting unit exceeded the carrying value by a significant amount. The estimated fair value of the indefinite-lived trademark intangible asset also exceeded its carrying value by a significant amount. The carrying values of the Smartwool reporting unit goodwill and indefinite-lived trademark intangible asset at the testing date were $53.5 million and $75.4 million, respectively. The Smartwool reporting unit is included in the Outdoor reportable segment. Management's revenue and profitability forecasts used in the Smartwool reporting unit and indefinite-lived trademark intangible asset valuations considered recent and historical performance, strategic initiatives, industry trends and macroeconomic factors. Assumptions used in the valuations were similar to those that would be used by market participants performing independent valuations of the business. Key assumptions developed by management and used in the quantitative analysis of the Smartwool reporting unit and indefinite-lived trademark intangible asset include: •Financial projections and future cash flows, including a base year that considered recent actual results lower than previous internal forecasts, continued near-term weakness in the wholesale channel, moderate revenue growth and improved profitability throughout the forecast period that reflects the long-term strategy for the business, and terminal growth rates based on the expected long-term growth rate of the business; •Tax rates based on the statutory rates for the countries in which the brand operates and the related intellectual property is domiciled; •Royalty rates based on market data as well as active license agreements for other VF brands; and, •Market-based discount rates. The valuation model used by management in the impairment testing assumes recovery from the recent downturn in the brand's operating results and the return to revenue growth and improved profitability over the projection period. If the brand is unable to achieve the financial projections, an impairment of the reporting unit goodwill or indefinite-lived trademark intangible asset could occur in the future. Indefinite-Lived Intangible Assets - Significant Assumptions The impairment testing of indefinite-lived trademark intangible assets during Fiscal 2024 used significant unobservable inputs to estimate fair values. The discount rates used in the testing ranged from 12.0% to 18.5%, with a weighted average of 14.2% based on relative fair value. The royalty rates used in the testing ranged from 4.0% to 10.0%, with a weighted average of 7.0% based on relative fair value. The long-term revenue growth rates used in the testing ranged from 2.0% to 3.5%, with a weighted average of 2.3% based on relative fair value. Other Reporting Units and Indefinite-Lived Intangible Assets - Qualitative Impairment Analysis For the remaining reporting units and indefinite-lived intangible assets, VF elected to perform a qualitative assessment during the annual goodwill and indefinite-lived intangible asset impairment testing, as of the beginning of the fourth quarter of Fiscal 2024, to determine whether it was more likely than not that the goodwill and indefinite-lived trademark intangible assets in those reporting units were impaired. The carrying values of the reporting unit goodwill and indefinite-lived trademark intangible assets subject to qualitative assessment at the testing date were $443.5 million and $522.3 million, respectively. In this qualitative assessment, VF considered relevant events and circumstances for each reporting unit, including (i) current year results and performance versus management's plans, (ii) financial outlook based on the latest internal financial plan, (iii) changes in the reporting unit carrying value since prior year and the amounts relative to the size of the respective business, (iv) industry and market conditions in which the reporting unit operates, (v) macroeconomic conditions, including discount rate and foreign exchange rate changes, and (vi) changes in products or services offered by the reporting unit. If applicable, performance in recent years was compared to forecasts included in prior valuations. Based on the results of the qualitative assessment, VF concluded it was more likely than not that the carrying values of the goodwill and indefinite-lived trademark intangible assets were less than their fair values, and that further quantitative testing was not necessary.
Fiscal 2023 Goodwill and Intangible Asset Impairment Testing
Supreme Reporting Unit and Indefinite-Lived Intangible Asset Impairment Analysis During the second quarter of Fiscal 2023, due to continued increases in the federal funds rate and strengthening of the U.S. dollar relative to other currencies, management performed a quantitative impairment analysis of both the Supreme reporting unit goodwill and the indefinite-lived trademark intangible asset. The carrying values of the Supreme reporting unit goodwill and indefinite-lived trademark intangible asset at the testing date were $1.21 billion and $1.19 billion, respectively. As a result of the interim impairment testing performed, VF recorded impairment charges of $229.0 million and $192.9 million related to the Supreme reporting unit goodwill and indefinite-lived trademark intangible asset, respectively, in the Consolidated Statement of Operations for the year ended March 2023. The impairment related to an increase in the market-based discount rates used in the valuations and the negative impact of foreign currency exchange rate changes on financial projections. Management’s revenue and profitability forecasts used in the Supreme reporting unit and indefinite-lived trademark intangible asset valuations considered recent and historical performance, strategic initiatives and industry trends. Assumptions used in the valuations were similar to those that would be used by market participants performing independent valuations of the business. Key assumptions developed by management and used in the interim quantitative analysis of the Supreme reporting unit and indefinite-lived trademark intangible asset included: •Financial projections and future cash flows reflecting results lower than prior forecasts primarily driven by the negative impacts of foreign currency exchange rate changes. The projections assumed revenue growth and profitability improvement throughout the forecast period reflecting the long-term strategy for the business which was largely unchanged from the business combination valuation, and terminal growth rates based on the expected long-term growth rate of the business; •Tax rates based on the statutory rates for the countries in which the brand operates and the related intellectual property is domiciled; •Royalty rates based on market data as well as active license agreements with similar VF brands; •Market-based discount rates reflecting increases in the federal funds rate; and, •Market approach reflecting lower recent historical financial measures for Supreme and valuation multiples. In conjunction with VF's annual goodwill and indefinite-lived intangible asset impairment testing as of the beginning of the fourth quarter of Fiscal 2023, management performed a quantitative impairment analysis of the Supreme reporting unit goodwill and indefinite-lived trademark intangible asset. T he decision to bypass the optional qualitative impairment assessment and proceed directly to a quantitative impairment analysis was based on the recent impairment results from the interim quantitative analysis, weakness in recent Supreme financial performance including the results from the latest season and the overall significance of the related assets. As a result of the annual impairment testing, VF recorded additional impairment charges of $165.1 million and $148.0 million to the Supreme reporting unit goodwill and indefinite-lived trademark intangible asset, respectively, in the Consolidated Statement of Operations for the year ended March 2023. The remaining carrying values of the Supreme reporting unit goodwill and indefinite-lived trademark intangible asset, after the impairment charges, were $825.9 million and $852.0 million, respectively. The impairment related to lower financial projections and increased risk of achieving management's forecasts. The Supreme reporting unit is included in the Active reportable segment. Management's revenue and profitability forecasts used in the Supreme reporting unit and indefinite-lived trademark intangible asset valuations considered historical performance, strategic initiatives and industry trends. Assumptions used in the valuations were similar to those that would be used by market participants performing independent valuations of the business. Key assumptions developed by management and used in the quantitative analysis of the Supreme reporting unit and indefinite-lived trademark intangible asset included: •Financial pro jections and future cash flows, including a base year reflecting actual results lower than forecasts used in the second quarter of Fiscal 2023, primarily driven by weakness in the North America region, and a longer recovery timeline, revenue growth and profitability improvement throughout the forecast period that reflects the long-term strategy for the business, including geographic expansion, and terminal growth rates based on the expected long-term growth rate of the business; •Tax rates based on the statutory rates for the countries in which the brand operates and the related intellectual property is domiciled; •Royalty rates based on market data as well as active license agreements with similar VF brands; •Market-based discount rates, including consideration of additional risk of achievement of the financial projections based on recent financial performance; and, •Market approach reflecting lower recent historical financial measures for Supreme.
Methodology and Management's Use of Estimates and Assumptions
Our impairment testing of goodwill and indefinite-lived trademark intangible assets utilizes significant unobservable inputs (Level 3) to determine fair value. The fair value of reporting units for goodwill impairment testing is determined using a combination of two valuation methods: an income approach and a market approach. The income approach is based on projected future (debt-free) cash flows that are discounted to present value. The appropriate discount rate is based on the reporting unit’s weighted average cost of capital (“WACC”) that takes market participant assumptions into consideration. For the market approach, management uses both the guideline company and similar transaction methods. The guideline company method analyzes market multiples of revenues and EBITDA for a group of comparable public companies. The market multiples used in the valuation are based on the relative strengths and weaknesses of the reporting unit compared to the selected guideline companies. Under the similar transactions method, valuation multiples are calculated utilizing actual transaction prices and revenue/EBITDA data from target companies deemed similar to the reporting unit. Management typically assigns more weight to the income-based valuation method. Management uses the relief-from-royalty method to value indefinite-lived trademark intangible assets. Under this method, revenues expected to be generated by the trademark are multiplied by a selected royalty rate. The royalty rate is selected based on consideration of (i) royalty rates included in active license agreements, if applicable, (ii) royalty rates received by market participants in the apparel or footwear industry, and (iii) the current performance of the reporting unit. The estimated after-tax royalty revenue stream is then discounted to present value using the reporting unit’s WACC adjusted, as appropriate, to factor in the risk of the intangible asset. Management’s revenue and profitability forecasts used in the reporting unit and intangible asset valuations were developed in conjunction with management’s forecast and plan review, which includes management's overall assessment of events and circumstances, including macroeconomic conditions and industry and market considerations, and the resulting outlook for the businesses, considering recent performance, trends and strategic initiatives. Assumptions used in the valuations are similar to those that would be used by market participants performing independent valuations of these businesses. Management's Use of Estimates and Assumptions Management made its estimates based on information available as of the date of our assessments, using assumptions we believe market participants would use in performing an independent valuation of the business. Although management believes the estimates and assumptions used in the impairment testing are reasonable and appropriate, it is possible that VF's assumptions and conclusions regarding impairment or recoverability of goodwill or indefinite-lived trademark intangible assets in any reporting unit could change in future periods. There can be no assurance the estimates and assumptions, particularly our long-term financial projections, used in our goodwill and indefinite-lived intangible asset impairment testing will prove to be accurate predictions of the future, if, for example, (i) the businesses do not perform as projected, (ii) overall economic conditions in Fiscal 2025 or future years vary from current assumptions (including changes in discount rates, royalty rates and foreign currency exchange rates), (iii) business conditions or strategies change from current assumptions, including loss of major customers or channels, (iv) investors require higher rates of return on equity investments in the marketplace, or (v) enterprise values of comparable publicly traded companies, or actual sales transactions of comparable companies, were to decline, resulting in lower multiples of revenues and EBITDA. A future impairment charge of goodwill or indefinite-lived intangible assets could have a material effect on VF’s consolidated financial position and results of operations.

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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 -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482106/820-10-50-2 + Details
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