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Fair Value Measurements | 12 Months Ended
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Mar. 31, 2020
Fair Value Disclosures [Abstract] |
Fair Value Measurements | FAIR VALUE MEASUREMENTS Universal measures certain financial and nonfinancial assets and liabilities at fair value based on applicable accounting guidance. The financial assets and liabilities measured at fair value include money market funds, trading securities associated with deferred compensation plans, interest rate swap agreements, forward foreign currency exchange contracts, and guarantees of bank loans to tobacco growers. The application of the fair value guidance to nonfinancial assets and liabilities primarily includes the determination of fair values for goodwill and long-lived assets when indicators of potential impairment are present. Under the accounting guidance, fair value is defined as 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. The framework for measuring fair value is based on a fair value hierarchy that distinguishes between observable inputs and unobservable inputs. Observable inputs are based on market data obtained from independent sources. Unobservable inputs require the Company to make its own assumptions about the value placed on an asset or liability by market participants because little or no market data exists. There are three levels within the fair value hierarchy.
Level |  | Description
1 |  | quoted prices in active markets for identical assets or liabilities that the Company has the ability to access as of the reporting date;
2 |  | quoted prices in active markets for similar assets or liabilities, or quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability; and
3 |  | unobservable inputs for the asset or liability.
As permitted under the accounting guidance, the Company uses net asset value per share ("NAV") as a practical expedient to measure the fair value of its money market funds. The fair values for those funds are presented under the heading "NAV" in the tables that follow in this disclosure. In measuring the fair value of liabilities, the Company considers the risk of non-performance in determining fair value. Universal has not elected to report at fair value any financial instruments or any other assets or liabilities that are not required to be reported at fair value under current accounting guidance. Recurring Fair Value Measurements At March 31, 2020 and 2019, the Company had certain financial assets and financial liabilities that were required to be measured and reported at fair value on a recurring basis. These assets and liabilities are listed in the tables below and are classified based on how their values were determined under the fair value hierarchy or the NAV practical expedient:
|  | March 31, 2020
|  |  |  | Fair Value Hierarchy |  |
|  | NAV |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Assets |  |  |  |  |  |  |  |  |  |
Money market funds |  | $ | 4,011 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 4,011 |
Trading securities associated with deferred compensation plans |  | — |  |  | 12,635 |  |  | — |  |  | — |  |  | 12,635 |
Forward foreign currency exchange contracts |  | — |  |  | — |  |  | 314 |  |  | — |  |  | 314 |
Total financial assets measured and reported at fair value |  | $ | 4,011 |  |  | $ | 12,635 |  |  | $ | 314 |  |  | $ | — |  |  | $ | 16,960 |
Liabilities |  |  |  |  |  |  |  |  |  |
Guarantees of bank loans to tobacco growers |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 103 |  |  | $ | 103 |
Acquisition-related contingent consideration obligations - short-term |  | — |  |  | — |  |  | — |  |  | 4,173 |  |  | 4,173 |
Acquisition-related contingent consideration obligations - long-term |  | — |  |  | — |  |  | — |  |  | 2,532 |  |  | 2,532 |
Interest rate swap agreements |  | — |  |  | — |  |  | 37,163 |  |  | — |  |  | 37,163 |
Forward foreign currency exchange contracts |  | — |  |  | — |  |  | 15,842 |  |  | — |  |  | 15,842 |
Total financial liabilities measured and reported at fair value |  | $ | — |  |  | $ | — |  |  | $ | 53,005 |  |  | $ | 6,808 |  |  | $ | 59,813 |
|  | March 31, 2019
|  |  |  | Fair Value Hierarchy |  |
|  | NAV |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Assets |  |  |  |  |  |  |  |  |  |
Money market funds |  | $ | 156,864 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 156,864 |
Trading securities associated with deferred compensation plans |  | — |  |  | 16,315 |  |  | — |  |  | — |  |  | 16,315 |
Forward foreign currency exchange contracts |  | — |  |  | — |  |  | 540 |  |  | — |  |  | 540 |
Total financial assets measured and reported at fair value |  | $ | 156,864 |  |  | $ | 16,315 |  |  | $ | 540 |  |  | $ | — |  |  | $ | 173,719 |
Liabilities |  |  |  |  |  |  |  |  |  |
Guarantees of bank loans to tobacco growers |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 803 |  |  | $ | 803 |
Interest rate swap agreements |  | — |  |  | — |  |  | 6,351 |  |  | — |  |  | 6,351 |
Forward foreign currency exchange contracts |  | — |  |  | — |  |  | 386 |  |  | — |  |  | 386 |
Total financial liabilities measured and reported at fair value |  | $ | — |  |  | $ | — |  |  | $ | 6,737 |  |  | $ | 803 |  |  | $ | 7,540 |
Money market funds The fair value of money market funds, which are reported in cash and cash equivalents in the consolidated balance sheets, is based on NAV, which is the amount at which the funds are redeemable and is used as a practical expedient for fair value. These funds are not classified in the fair value hierarchy, but are disclosed as part of the fair value table above. Trading securities associated with deferred compensation plans Trading securities represent mutual fund investments that are matched to employee deferred compensation obligations. These investments are bought and sold as employees defer compensation, receive distributions, or make changes in the funds underlying their accounts. Quoted market prices (Level 1) are used to determine the fair values of the mutual funds. Interest rate swap agreements The fair values of interest rate swap agreements are determined based on dealer quotes using a discounted cash flow model matched to the contractual terms of each instrument. Since inputs to the model are observable and significant judgment is not required in determining the fair values, interest rate swaps are classified within Level 2 of the fair value hierarchy. Forward foreign currency exchange contracts The fair values of forward foreign currency exchange contracts are also determined based on dealer quotes using a discounted cash flow model matched to the contractual terms of each instrument. Since inputs to the model are observable and significant judgment is not required in determining the fair values, forward foreign currency exchange contracts are classified within Level 2 of the fair value hierarchy. Acquisition-related contingent consideration obligations The Company estimates the fair value of acquisition-related contingent consideration obligations by applying an income approach model that utilizes probability-weighted discounted cash flows. As a result of the acquisition of FruitSmart, Inc., the Company recognized a contingent consideration liability of $6.7 million on the date of acquisition. See Note 2 for additional information. Each period the Company evaluates the fair value of the acquisition-related contingent consideration obligations. Significant judgment is applied to this model and therefore the acquisition-related contingent consideration obligation is classified within Level 3 of the fair value hierarchy. A reconciliation of the change in the balance of the acquisition-related contingent consideration obligation (Level 3) for the fiscal years ended March 31, 2020 and 2019 is provided below.
| Fiscal Year Ended March 31,
| 2020 |  | 2019
Balance beginning of year | $ | — |  |  | $ | — |
Additions | 6,705 |  |  | — |
Payments | — |  |  | — |
Balance at end of year | $ | 6,705 |  |  | $ | — |
Guarantees of bank loans to tobacco growers The Company guarantees bank loans to tobacco growers in Brazil for crop financing. In the event that the farmers default on their payments to the banks, the Company would be required to perform under the guarantees. The Company regularly evaluates the likelihood of farmer defaults based on an expected loss analysis and records the fair value of its guarantees as an obligation in its consolidated financial statements. The fair value of the guarantees is determined using the expected loss data for all loans outstanding at each measurement date. The present value of the cash flows associated with the estimated losses is then calculated at a risk-adjusted interest rate that is aligned with the expected duration of the liability and includes an adjustment for nonperformance risk. This approach is sometimes referred to as the “contingent claims valuation method.” Although historical loss data is an observable input, significant judgment is required in applying this information to the portfolio of guaranteed loans outstanding at each measurement date and in selecting a risk-adjusted interest rate. Significant increases or decreases in the risk-adjusted interest rate may result in a significantly higher or lower fair value measurement. The guarantees of bank loans to tobacco growers are therefore classified within Level 3 of the fair value hierarchy. A reconciliation of the change in the balance of the financial liability for guarantees of bank loans to tobacco growers (Level 3) for the fiscal years ended March 31, 2020 and 2019 is provided below.
|  | Fiscal Year Ended March 31,
|  | 2020 |  | 2019
Balance at beginning of year |  | $ | 803 |  |  | $ | 974 |
Payments under the guarantees and transfers to allowance for loss on direct loans to farmers (removal of prior crop year loans from the portfolio) |  | (659 | ) |  | (765 | )
Provision for loss or transfers from allowance for loss on direct loans to farmers (addition of current crop year loans) |  | (5 | ) |  | 749 |
Change in discount rate and estimated collection period |  | (7 | ) |  | 53 |
Currency remeasurement |  | (29 | ) |  | (208 | )
Balance at end of year |  | $ | 103 |  |  | $ | 803 |
Long-term Debt The fair value of the Company’s long-term debt was approximately $370 million at each of the balance sheet dates March 31, 2020 and 2019. The Company estimates the fair value of its long-term debt using Level 2 inputs which are based upon quoted market prices for the same or similar obligations or on calculations that are based on the current interest rates available to the Company for debt of similar terms and maturities. Nonrecurring Fair Value Measurements Assets and liabilities that are measured at fair value on a nonrecurring basis primarily relate to long-lived assets, right-of-use operating lease assets and liabilities, goodwill and intangibles, and other noncurrent assets. These assets and liabilities fair values are evaluated for impairment when potential indicators of impairment exist. Accordingly, the nonrecurring measurement of the fair value of these assets and liabilities are classified within Level 3 of the fair value hierarchy. Long-Lived Assets As discussed in Note 4, due to business changes that have affected the leaf tobacco market in Tanzania and the Company's operations there, the long-lived assets of those operations were tested for impairment at December 31, 2018, and an impairment charge was recorded to reduce their carrying value to fair value in fiscal year 2019. The long-lived assets consist principally of the Company's processing facility and equipment, storage facilities, tobacco buying and receiving stations, employee housing, and vehicles and transportation equipment. The aggregate fair value and carrying value of those assets following the impairment adjustments was approximately $17 million. The fair values of the property, plant and equipment were determined based principally on a probability-weighting of the discounted cash flows expected under multiple operating and disposition scenarios. Significant judgment was required in estimating the amount and timing of the future cash flows associated with the use and disposition of the assets, as well as the probabilities associated with the respective operating and disposition scenarios.

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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 -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19207-110258 + Details
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