Note 16 – Fair Value

We classify our various assets and liabilities recorded or reported at fair value under a hierarchy prescribed by GAAP that prioritizes inputs to fair value measurement techniques into three broad levels:

Level 1: Observable inputs such as quoted prices for identical assets or liabilities in active markets;

Level 2: Observable inputs other than quoted prices that are directly or indirectly observable for the asset or liability, including quoted prices for similar assets or liabilities in active markets; quoted prices for similar or identical assets or liabilities in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable; and

Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.

Assets and liabilities subject to classification are classified upon acquisition. When circumstances dictate the transfer of an asset or liability to a different level, our policy is to recognize the transfer at the beginning of the reporting period in which the event resulting in the transfer occurred.

The following tables present the fair value of our financial assets and liabilities measured on a recurring basis as of the last day of February 2018 and 2017:

FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES


	Fair Values at
	February 28, 2018
(in thousands)	(Level 2) (1)
Assets:
Money market accounts	$	1,107
Interest rate swap		922
Foreign currency contracts		2,201
Total assets	$	4,230

Liabilities:

Floating rate debt	$	289,868
Foreign currency contracts		2,606
Total liabilities	$	292,474


	Fair Values at
	February 28, 2017
(in thousands)	(Level 2) (1)
Assets:
Money market accounts	$	2,711
Foreign currency contracts		2,167
Total assets	$	4,878

Liabilities:
Fixed rate debt (2)	$	20,105
Floating rate debt		465,852
Foreign currency contracts		47
Total liabilities	$	486,004

⁽¹⁾

Our financial assets and liabilities are classified as Level 2 assets because their valuation is dependent on observable inputs and other quoted prices for similar assets or liabilities, or model-derived valuations whose significant value drivers are observable.

⁽²⁾

Debt values are reported at estimated fair value in these tables, but are recorded in the accompanying consolidated balance sheets at the undiscounted value of remaining principal payments due.

The carrying amounts of cash and cash equivalents, receivables and accounts payable approximate fair value because of the short maturity of these items.

We use derivatives for hedging purposes and our derivatives are primarily interest rate swaps, foreign currency contracts and cross-currency debt swaps. See Notes 1, 17 and 18 to these consolidated financial statements for more information on our hedging activities.

We classify our fixed and floating rate debt as Level 2 items because the estimation of the fair market value of these financial assets requires the use of a discount rate based upon current market rates of interest for obligations with comparable remaining terms. Such comparable rates are considered significant other observable market inputs. The fair market value of the fixed rate debt at February 28, 2017 was computed using a discounted cash flow analysis and a discount rate of 1.8%. All other debt has floating interest rates, and its book value approximates its fair value as of the reporting date.

Our other non-financial assets include goodwill and other intangible assets, which we classify as Level 3 items. These assets are measured at fair value on a non-recurring basis as part of our impairment testing. Note 9 to these consolidated financial statements contains additional information regarding impairment testing and related intangible asset impairments. The table below presents other non-financial assets measured on a non-recurring basis using significant unobservable inputs (Level 3) for fiscal 2018 and 2017:

OTHER NON-FINANCIAL ASSETS

FAIR VALUE MEASUREMENTS USING SIGNIFICANT UNOBSERVABLE INPUTS (Level 3)


	Fiscal Years Ended
(in thousands)	2018		2017
Beginning balances	$	938,324	$	762,878
Total income (expense):
Included in net income - realized		(34,128)		(24,830)
Acquired during the period		1,212		200,565
Acquisition adjustments and retirements during the period		(173)		(289)
Ending balances	$	905,235	$	938,324