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Fair Value Measurements
 12 Months Ended
Jun. 30, 2020
Fair Value Measurements  
Fair Value Measurements

15.    Fair Value Measurements

Fair value is defined as the exit price that would be received to sell an asset or paid to transfer a liability. Fair value is a market-based measurement  that should be determined  using assumptions  that market participants would use in pricing an asset or liability. 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-based (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—Quoted prices in active markets for identical assets or liabilities.

Level 2—Significant observable 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—Unobser Unobservable inputs for which there is little or no market data available, and that are significant to the overall fair value measurement, are employed that require the reporting entity to develop its own assumptions.

In assessing the fair value of financial instruments at June 30, 2020 and 2019, we used a variety of methods and assumptions  that were based on estimates of market conditions  and risks existing at the time.

Short-term investments

As of June 30, 2020, our short-term investments consist of cash deposits held at financial institutions. We consider the carrying amounts  of these short-term investments to be representative  of their fair value.

Current Assets and Liabilities

We consider the carrying amounts  of current assets and current liabilities to be representative  of their fair value because of the current nature  of these items.

Contingent Consideration on Acquisitions

We determine the fair value of contingent  consideration on acquisitions based on contractual terms, our current forecast of performance factors related to the acquired business and an applicable discount rate.

Debt

We record debt, including term loans and revolver balances, at amortized cost in our consolidated financial statements. We believe the carrying value of the debt is approximately equal to its fair value, due to the variable nature of the instruments and our evaluation of estimated market prices.

Derivatives

We determine the fair value of derivative instruments based upon pricing models using observable market inputs for these types of financial instruments, such as spot and forward currency translation rates.

Non-financial assets

Our non-financial assets, which primarily consist of goodwill, other intangible assets, property and equipment, and lease-related ROU assets, are not required to be measured at fair value on a recurring basis, and instead are reported at carrying value in the consolidated balance sheet. We assess the carrying values of non-financial assets for impairment on a periodic basis or whenever events or changes in circumstances indicate an asset may not be fully recoverable.

Fair Value of Assets (Liabilities)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of June 30

 

2020

 

2019

 

    

Level 1

    

Level 2

    

Level 3

    

Level 1

    

Level 2

    

Level 3

Short-term investments

 

$

55,000

 

$

 —

 

$

 —

 

$

24,000

 

$

 —

 

$

 —

Foreign currency derivatives

 

$

 —

 

$

(3,774)

 

$

 —

 

$

 —

 

$

383

 

$

 —

Interest rate swap

 

$

 —

 

$

(9,674)

 

$

 —

 

$

 —

 

$

(977)

 

$

 —

Contingent consideration on acquisitions

 

$

 —

 

$

 —

 

$

(4,840)

 

$

 —

 

$

 —

 

$

 —

 

There were no transfers between levels during the years ended June 30, 2020 and 2019.

The table below provides a summary of the changes in the fair value of Level 3 liabilities:

 

 

 

 

 

 

    

June 30,

 

 

2020

Balance at June 30, 2019

 

$

 —

Osprey acquisition

 

 

(7,553)

Accretion for the time value of money

 

 

(275)

Fair value adjustment

 

 

2,988

Balance at June 30, 2020

 

$

(4,840)

 

For a detailed discussion on the fair value of our pension plan assets, see “—Employee Benefit Plans.”