Graco 2009 Annual Report Download - page 77

Newell Rubbermaid Inc. 2009 Annual Report
75
FOOTNOTE 17
OTHER EXPENSE, NET
Other expense, net consists of the following for the years ended December 31, (in millions):
2009 2008 2007
Equity in earnings $(0.6) $ (1.3) $(0.1)
Currency transaction loss 2.1 7.3 4.2
Losses on debt extinguishment (1) 4.7 52.2 —
Other 0.5 0.9 0.1
$ 6.7 $59.1 $ 4.2
(1) See Footnote 9 for further information regarding charges recognized related to debt extinguishments.
FOOTNOTE 18
FAIR VALUE
Accounting principles generally accepted in the U.S. define fair value as the price that would be received to sell an asset or transfer a liability in an orderly
transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market
participants would use in pricing an asset or liability. The authoritative guidance 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. As the basis for evaluating such inputs, a three-tier value hierarchy
prioritizes the inputs used in measuring fair value as follows:
• 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, other accrued liabilities and other noncurrent liabilities. 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 the authoritative guidance on fair value in 2008.
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 the relevant authoritative guidance, 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 fair value hierarchy.