Fair Value Measurements

The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date.

ASC 820, Fair Value Measurement and Disclosures ("ASC 820"), establishes a fair value hierarchy, which prioritizes the inputs used in measuring fair value into three broad levels as follows:


•	Level 1—Quoted prices in active markets for identical assets or liabilities.


•	Level 2—Inputs, other than quoted prices in active markets, that are observable either directly or indirectly.


•	Level 3—Unobservable inputs based on the Company's assumptions.

ASC 820 requires the use of observable market data if such data is available without undue cost and effort.

The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of December 30, 2017 (in thousands):



	Fair Value at December 30, 2017
	Level 1		Level 2		Level 3		Total
Assets:
Forward contracts	$	—	$	2,438	$	—	$	2,438
Deferred compensation plan assets:
Investment in publicly traded mutual funds	4,806		—		—		4,806
Interest rate swap	—		195		—		195
Total	$	4,806	$	2,633	$	—	$	7,439
Liabilities:
Contingent consideration	$	—	$	—	$	6,452	$	6,452
Forward contracts	—		17,885		—		17,885
Total	$	—	$	17,885	$	6,452	$	24,337

The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of December 31, 2016 (in thousands):



	Fair Value at December 31, 2016
	Level 1		Level 2		Level 3		Total
Assets:
Forward contracts	$	—	$	28,936	$	—	$	28,936
Deferred compensation plan assets:
Investment in publicly traded mutual funds	2,385		—		—		2,385
Interest rate swaps	—		73		—		73
Total	$	2,385	$	29,009	$	—	$	31,394
Liabilities:
Forward contracts	$	—	$	4,966	$	—	$	4,966
Interest rate swap	—		613		—		613
Total	$	—	$	5,579	$	—	$	5,579

The fair values of the Company's deferred compensation plan assets are based on quoted prices. The deferred compensation plan assets are recorded in intangible and other assets—net in the Company's consolidated balance sheets. The fair values of the Company's forward contracts are based on published quotations of spot currency rates and forward points, which are converted into implied forward currency rates.

As of December 30, 2017, debt, excluding unamortized debt issuance costs and capital leases, was recorded at cost and had a carrying value of $445.9 million and a fair value of approximately $439.2 million. The fair value of the Company's debt approximated its carrying amount as of December 31, 2016. The fair value of debt was obtained from a third-party based on observable market inputs.

The fair values of the interest rate swap asset and liability are determined using valuation models based on market observable inputs, including forward curves, mid-market price, foreign exchange spot or forward rates and volatility levels. See Note 8—Derivatives and Risk Management for additional disclosures about the interest rate swap.

Property, plant and equipment—net with a carrying amount of $9.2 million related to retail store leasehold improvements and fixturing and related key money in the amount of $0.7 million was deemed not recoverable, resulting in total impairment charges of $9.9 million for fiscal year 2017.

The fair values of assets related to Company-owned retail stores were determined using Level 3 inputs. Of the $9.9 million impairment expense, $5.6 million, $1.9 million and $0.8 million were recorded in restructuring charges in the Americas, Europe and Asia segments, respectively, and $0.9 million, $0.4 million and $0.3 million were recorded in SG&A in the Europe, Americas and Asia segments, respectively.

In fiscal year 2016, property, plant and equipment—net with a carrying amount of $15.0 million related to retail store leasehold improvements and fixturing was written down to a fair value of $0.7 million, and related key money in the amount of $2.0 million was deemed not recoverable, resulting in total impairment charges of $16.3 million for fiscal year 2016.

The fair value of goodwill and trade names are measured on a non-recurring basis using Level 3 inputs, including forecasted cash flows, discounts rates and implied royalty rates.

In fiscal year 2017, the Company fully impaired its goodwill balance and recorded pre-tax impairment charges of $202.3 million, $114.3 million and $42.9 million in the Americas, Europe and Asia segments, respectively.

In fiscal year 2017, the SKAGEN trade name with a carrying amount of $55.6 million was written down to its implied fair value of $27.3 million, resulting in a pre-tax impairment charge of $28.3 million; the MISFIT trade name with a carrying amount of $11.8 million was deemed not recoverable, resulting in a pre-tax impairment charge of $11.8 million and the MICHELE trade name with a carrying amount of $18.5 million was written down to its implied fair value of $10.9 million, resulting in a pre-tax impairment charge of $7.6 million. Trade name impairment charges were recorded in the Corporate cost area. See Note 1—Significant Accounting Policies for additional disclosures about goodwill and trade name impairment.

The fair value of the contingent consideration liability related to Fossil Accessories South Africa Pty. Ltd. (‘‘Fossil South Africa’’) was determined using Level 3 inputs. See Note 14—Stockholders' Equity for additional disclosures about the equity transaction. The contingent consideration is based on Fossil South Africa's projected earnings and dividends through fiscal year 2020 with the final payments expected the following year. A discount rate of 14% was used to calculate the present value of the contingent consideration. The present value of the contingent consideration liability was valued at $6.5 million as of December 30, 2017.

In fiscal year 2017, the Company recorded a pre-tax impairment charge of $1.6 million related to a cost method investment and recorded a pre-tax impairment charge of $0.7 million related to property held for sale.