Graco 2008 Annual Report Download - page 69

Newell Rubbermaid Inc. 2008 Annual Report
67
FOOTNOTE 16
OTHER EXPENSE (INCOME), NET
Other expense, net consists of the following for the years ended December 31, (in millions):
2008 2007 2006
Equity in earnings $ (1.3) $(0.1) $(0.9)
Minority interest 2.0 3.1 3.6
Currency transaction loss 7.3 4.2 3.0
Loss on debt extinguishment (1) 52.2 — —
Other 0.9 0.1 4.0
$61.1 $ 7.3 $ 9.7
(1) See Footnote 9 for further information regarding charges recognized related to debt extinguishment.
FOOTNOTE 17
FAIR VALUE
In the first quarter of 2008, the Company adopted SFAS 157, which defines fair value, establishes a framework for measuring fair value under generally accepted
accounting principles, and requires expanded disclosures about fair value measurements. SFAS 157 does not require any new fair value measurements, but
rather generally applies to other accounting pronouncements that require or permit fair value measurements. The FASB issued Staff Position 157-2 “Effective
Date of FASB Statement No. 157” (“FSP 157-2”) which delayed the effective date of SFAS 157 for all non-financial assets and liabilities, except those that are
recognized or disclosed at fair value in the financial statements on a recurring basis, until January 1, 2009. The FSP 157-2 deferral applies to the Company’s
assets that are measured at fair value as part of its annual impairment assessment, including goodwill, other indefinite-lived intangible assets and other
long-lived assets, and other assets and liabilities adjusted to fair value from as circumstances require.
SFAS 157 emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and defines fair value as the price that
would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. SFAS 157 discusses
valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and
the cost approach (cost to replace the service capacity of an asset or replacement cost). These valuation techniques are based upon observable and
unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market
assumptions. SFAS 157 utilizes a fair value hierarchy that prioritizes valuation techniques used to measure fair value into three broad levels. The following
is a brief description of those three 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.
•฀ Level฀3:฀Unobservable฀inputs฀that฀reflect฀the฀reporting฀entity’s฀own฀assumptions.
The Company’s financial assets and liabilities adjusted to fair value at least annually are its money market fund investments included in cash and
cash equivalents, its mutual fund investments included in other assets, and its derivative instruments, which are primarily included in prepaid expenses
and other, other assets and other accrued liabilities. These assets and liabilities are subject to the measurement and disclosure requirements of SFAS 157
as they are adjusted to fair value at least annually. As the Company adjusts the value of its investments and derivative instruments to fair value each reporting
period, no adjustment to retained earnings resulted from the adoption of SFAS 157.
The Company determines the fair value of its mutual fund investments based on quoted market prices (Level 1).
Level 2 fair value determinations are derived from directly or indirectly observable (market based) information. Such inputs are the basis for the fair
values of the Company’s money market investments and derivative instruments. The money market investments held by the Company and included in cash
and cash equivalents are not publicly traded, but the fair value is determined based on the values of the underlying investments in the money market fund
(Level 2). The Company generally uses derivatives for hedging purposes pursuant to SFAS 133, and the Company’s derivatives are primarily foreign currency
forward contracts and interest rate swaps. The Company determines the fair value of its derivative instruments based on Level 2 inputs in the SFAS 157 fair
value hierarchy. Level 2 fair value determinations are derived from directly or indirectly observable (market based) information. Such inputs are the basis
for the fair values of the Company’s money market investments and derivative instruments.