Famous Footwear 2014 Annual Report Download - page 68

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2014 BROWN SHOE COMPANY, INC. FORM 10-K 67
During 2014 and 2013, the eect of derivative instruments in cash flow hedging relationships on the consolidated statement
of earnings was as follows:
($ in thousands) 2014 2013
Gain (Loss) Gain (Loss) Gain Gain
Foreign exchange forward contracts: Recognized in Reclassified from Recognized in Reclassified
Income Statement Classification OCI on Accumulated OCI OCI on from Accumulated
Gains (Losses) - Realized Derivatives into Earnings Derivatives OCI into Earnings
Net sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 166 $ 93 $ 321 $ 244
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . (693) 113 762 71
Selling and administrative expenses . . . . . . . . . . . . . . . (271) (64) 675 355
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . 18 – 20 –
All of the gains and losses currently included within accumulated other comprehensive income associated with the
Company’s foreign exchange forward contracts are expected to be reclassified into net earnings within the next 12 months.
Additional information related to the Company’s derivative financial instruments are disclosed within Note 1 and Note 13 to
the consolidated financial statements.
13. FAIR VALUE MEASUREMENTS
Fair Value Hierarchy
Fair value measurement disclosures specify a hierarchy of valuation techniques based upon whether the inputs to those
valuation techniques reflect assumptions other market participants would use based upon market data obtained from
independent sources (“observable inputs”) or reflect the Company’s own assumptions of market participant valuation
(“unobservable inputs”). In accordance with the fair value guidance, the hierarchy is broken down into three levels based
on the reliability of the inputs as follows:
• Level 1 – Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical,
unrestricted assets or liabilities;
• Level 2 – Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar
assets and liabilities in active markets or financial instruments for which significant inputs are observable, either
directly or indirectly; and
• Level 3 – Prices or valuations that require inputs that are both signicant to the fair value measurement and unobservable.
In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs
and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in
its assessment of fair value. Classification of the financial or non-financial asset or liability within the hierarchy is
determined based on the lowest level input that is significant to the fair value measurement.
Measurement of Fair Value
The Company measures fair value as an exit price, the price to sell an asset or transfer a liability in an orderly
transaction between market participants at the measurement date, using the procedures described below for all
financial and non-financial assets and liabilities measured at fair value.
Money Market Funds
The Company has cash equivalents consisting of short-term money market funds backed by U.S. Treasury securities.
The primary objective of these investing activities is to preserve its capital for the purpose of funding operations and
it does not enter into money market funds for trading or speculative purposes. The fair value is based on unadjusted
quoted market prices for the funds in active markets with sucient volume and frequency (Level 1).
Deferred Compensation Plan Assets and Liabilities
The Company maintains a Deferred Compensation Plan for the benefit of certain management employees. The
investment funds oered to the participant generally correspond to the funds oered in the Company’s 401(k) plan
and the account balance fluctuates with the investment returns on those funds. The fair value of the assets and
corresponding liabilities are based on unadjusted quoted market prices for the funds in active markets with sucient
volume and frequency (Level 1). Additional information related to the Company’s Deferred Compensation Plan is
disclosed in Note 5 to the consolidated financial statements.
Deferred Compensation Plan for Non-Employee Directors
Non-employee directors are eligible to participate in a deferred compensation plan, whereby deferred compensation
amounts are valued as if invested in the Company’s common stock through the use of PSUs. Under the plan, each
participating director’s account is credited with the number of PSUs equal to the number of shares of the Company’s