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Fair Value Measurements
 12 Months Ended
Jan. 02, 2021
Fair Value Disclosures [Abstract]  
Fair Value Measurements 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 January 2, 2021 (in thousands):
Fair Value at January 2, 2021
Level 1Level 2Level 3Total
Assets:
Forward contracts$— $393 $— $393 
Deferred compensation plan assets:
Investment in publicly traded mutual funds6,257 — — 6,257 
Total$6,257 $393 $— $6,650 
Liabilities:
Contingent consideration$— $— $1,924 $1,924 
Forward contracts— 2,299 — 2,299 
Total$— $2,299 $1,924 $4,223 
The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of December 28, 2019 (in thousands):
Fair Value at December 28, 2019
Level 1Level 2Level 3Total
Assets:
Forward contracts$— $3,348 $— $3,348 
Deferred compensation plan assets:
Investment in publicly traded mutual funds5,243 — — 5,243 
Total$5,243 $3,348 $— $8,591 
Liabilities:
Contingent consideration$— $— $1,141 $1,141 
Forward contracts— 1,824 — 1,824 
Total$— $1,824 $1,141 $2,965 
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 January 2, 2021 and December 28, 2019, the fair value of the Company's debt approximated its carrying amount. The fair value of debt was obtained using observable market inputs.
Operating lease right-of-use assets with a carrying amount of $49.6 million and property, plant and equipment—net with a carrying amount of $7.5 million related to retail store leasehold improvements, fixturing and shop-in-shops were written down to a fair value of $19.4 million and $2.4 million, respectively, resulting in total pre-tax impairment charges of $35.3 million for fiscal year 2020.
The fair values of operating lease right-of-use assets and fixed assets related to retail stores were determined using Level 3 inputs, including forecasted cash flows and discount rates. Of the $35.3 million impairment expense, $23.0 million, $7.3 million and $1.0 million were recorded in SG&A in the Americas, Europe and Asia segments, respectively, and $2.3 million, $0.9 million, and $0.8 million were recorded in restructuring charges in the Americas, Europe and Asia segments, respectively.
In fiscal year 2019, operating lease right-of-use assets with a carrying amount of $18.3 million and property, plant and equipment—net with a carrying amount of $1.8 million related to retail store leasehold improvements, fixturing and shop-in-shops were written down to a fair value of $8.7 million and $0.5 million, respectively, resulting in total pre-tax impairment charges of $10.9 million.
The fair value of trade names are measured on a non-recurring basis using Level 3 inputs, including forecasted cash flows, discounts rates and implied royalty rates. Trade name impairment charges are recorded in the Corporate cost area. See Note 1—Significant Accounting Policies for additional disclosures about trade name impairment.
In fiscal year 2020, the MICHELE trade name with a carrying amount of $10.9 million was written down to its implied fair value of $8.4 million, resulting in a pre-tax impairment charge of $2.5 million. The trade name impairment was recorded to the Corporate cost area.
In fiscal year 2019, the SKAGEN trade name with a carrying amount of $21.1 million was written down to its implied fair value of $4.5 million, resulting in a pre-tax impairment charge of $16.6 million.
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. The contingent consideration is based on Fossil South Africa's projected earnings and dividends. The present value of the contingent consideration liability was valued at $1.9 million as of January 2, 2021. The Company recorded $0.1 million of the variable consideration in accrued expenses-other and $1.8 million in other long-term liabilities in the consolidated balance sheets at January 2, 2021.