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92 THE EST{E LAUDER COMPANIES INC.
Level 1: Inputs based on quoted market prices for identi-
cal assets or liabilities in active markets at the
measurement date.
Level 2: Observable inputs other than quoted prices
included in Level 1, such as quoted prices for
similar assets and liabilities in active markets;
quoted prices for identical or similar assets and
liabilities in markets that are not active; or other
inputs that are observable or can be corrobo-
rated by observable market data.
Level 3: Inputs reflect management’s best estimate of
what market participants would use in pricing
the asset or liability at the measurement date.
The inputs are unobservable in the market and
significant to the instrument’s valuation.
principal or most advantageous market for the asset or
liability, in an orderly transaction between market partici-
pants at the measurement date. The accounting for fair
value measurements must be applied to nonfinancial
assets and nonfinancial liabilities, which principally consist
of assets and liabilities acquired through business combi-
nations, goodwill, indefinite-lived intangible assets and
long-lived assets for the purposes of calculating potential
impairment, and liabilities associated with restructuring
activities. The Company is required to maximize the use
of observable inputs and minimize the use of unob-
servable inputs when measuring fair value. The three
levels of inputs that may be used to measure fair value are
as follows:
The following table presents the Company’s hierarchy for its financial assets and liabilities measured at fair value on a
recurring basis as of June 30, 2014:
Level 1 Level 2 Level 3 Total
(In millions)
Assets:
Foreign currency forward contracts $— $ 4.2 $— $ 4.2
Available-for-sale securities 7.6 — — 7.6
Total $7.6 $ 4.2 $— $11.8
Liabilities:
Foreign currency forward contracts $— $19.1 $— $19.1
The following table presents the Company’s hierarchy for its financial assets and liabilities measured at fair value on a
recurring basis as of June 30, 2013:
Level 1 Level 2 Level 3 Total
(In millions)
Assets:
Foreign currency forward contracts $— $21.7 $— $21.7
Available-for-sale securities 6.5 — — 6.5
Total $6.5 $21.7 $— $28.2
Liabilities:
Foreign currency forward contracts $— $ 9.1 $— $ 9.1
The following table presents the Company’s hierarchy and impairment charges for certain of its nonfinancial assets
measured at fair value on a nonrecurring basis during fiscal 2013:
Impairment Date of
Charges Carrying Value Carrying Value Level 3
(In millions)
Goodwill $ 9.6 April 1, 2013 $— $—
Other intangible assets, net (trademark) 8.1 April 1, 2013 — —
Total $17.7
To determine the fair value of the Darphin reporting unit
at April 1, 2013, the Company used the income approach.
Under the income approach, the Company determines
fair value using a discounted cash flow method, project-
ing future cash flows of the reporting unit. For the Darphin
reporting unit, negative cash flows in future forecasted
periods would not support a value in excess of carrying
value at that time and therefore the Company concluded
that all remaining goodwill was fully impaired.