Fair Value Measurements

Financial assets and liabilities are measured at fair value using the three-level valuation hierarchy for disclosure of fair value measurements. The determination of the applicable level within the hierarchy of a particular asset or liability depends on the inputs used in the valuation as of the measurement date, notably the extent to which the inputs are market-base (observable) or internally derived (unobservable). Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from independent sources. Unobservable inputs are inputs based on a company’s own assumptions about market participant assumptions developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the reliability of inputs as follows:

Level 1 – Valuations based on quoted prices in active markets for identical assets or liabilities that a company has the ability

to access at the measurement date.

Level 2 – Valuations based on quoted inputs other than quoted prices included within Level 1, that are observable for the

asset or liability, either directly or indirectly through corroboration with observable market data.

Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

At December 30, 2017 and April 1, 2017, the fair values of the Company’s foreign currency forward contracts, the Company’s only derivative instruments, were determined using broker quotations, which were calculations derived from observable market information: the applicable currency rates at the balance sheet date and those forward rates particular to the contract at inception. The Company makes no adjustments to these broker obtained quotes or prices, but assesses the credit risk of the counterparty and would adjust the provided valuations for counterparty credit risk when appropriate. The fair values of the forward contracts are included in prepaid expenses and other current assets, and in accrued expenses and other current liabilities in the consolidated balance sheets, depending on whether they represent assets or liabilities to the Company, as detailed in Note 12.

All contracts are measured and recorded at fair value on a recurring basis and are categorized in Level 2 of the fair value hierarchy, as shown in the following table (in millions):



	Fair value at December 30, 2017 using:						Fair value at April 1, 2017 using:
	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Forward foreign currency exchange contracts - assets	$	—	$	—	$	—	$	—	$	4.7	$	—
Forward foreign currency exchange contracts - liabilities	$	—	$	9.5	$	—	$	—	$	0.4	$	—

The Company's long-term debt obligations are recorded in its consolidated balance sheets at carrying values, which may differ from the related fair values. The fair value of the Company's long-term debt is estimated using external pricing data, including any available quoted market prices and based on other debt instruments with similar characteristics. Borrowings under revolving credit agreements, if outstanding, are recorded at carrying value, which approximates fair value due to the short-term nature of such borrowings. Please refer to Note 9 for detailed information relating to carrying values of the Company's outstanding debt. The following table summarizes the carrying values and estimated fair values of the Company's long-term debt, based on Level 2 measurements (in millions):



	December 30, 2017
	Carrying Value		Estimated Fair Value
4.000% Senior Notes	$	444.2	$	453.0
Term Loan	$	548.2	$	553.4

The Company’s cash and cash equivalents, accounts receivable, accounts payable and restructuring liabilities are recorded at carrying value, which approximates fair value.

Non-Financial Assets and Liabilities

The Company’s non-financial assets include goodwill, intangible assets and property and equipment. Such assets are reported at their carrying values and are not subject to recurring fair value measurements. The Company’s goodwill is assessed for impairment at least annually during the fourth quarter of each fiscal year, while its other long-lived assets, including fixed assets and finite-lived intangible assets, are assessed for impairment whenever events or changes in circumstances indicate that the carrying amount of any such asset may not be recoverable. The fair values of these assets are determined based on Level 3 measurements using the Company’s best estimates of the amount and timing of future cash flows, based on historical experience, market conditions, current trends and performance expectations.

During the three months and nine months ended December 30, 2017, the Company recorded impairment charges of $2.6 million and $18.9 million, respectively, within the MK Retail segment. The following table details the carrying values and fair values of the Company’s long-lived assets that have been impaired (in millions):



	Three Months Ended				Nine Months Ended
	December 30, 2017				December 30, 2017
	Carrying Value Prior to Impairment		Fair Value		Carrying Value Prior to Impairment		Fair Value
Fixed assets	$	3.5	$	0.9	$	16.9	$	2.4
Lease Rights	—		—		3.6		0.2
Customer relationships	—		—		1.0		—
Total	$	3.5	$	0.9	$	21.5	$	2.6

During the nine months ended December 31, 2016, the Company recorded impairment charges of $5.4 million, which included $4.9 million to impair Michael Kors full-price retail store fixed assets with a book value of $5.4 million and a fair value of $0.5 million, as well as $0.5 million to fully impair fixed assets for certain Michael Kors U.S. wholesale operations.