Toro 2014 Annual Report Download - page 74

The following tables show the effects of the master netting arrangements on the fair value of the company’s derivative contracts that are
recorded in the consolidated balance sheets:
Assets Liabilities
Gross Amounts Gross Liabilities Net Amount of Gross Amounts Gross Assets Net Amount of
of Recognized Offset in the Assets Presented of Recognized offset in the Liabilities Presented
October 31, 2014 Assets Balance Sheet in the Balance Sheet Liabilities Balance Sheet in the Balance Sheet
Forward currency contracts $6,265 $(235) $6,030 $ (9) – $ (9)
Cross currency contracts 831 – 831 (536) – (536)
Total $7,096 $(235) $6,861 $(545) – $(545)
Assets Liabilities
Gross Amounts Gross Liabilities Net Amount of Gross Amounts Gross Assets Net Amount of
of Recognized Offset in the Assets Presented of Recognized offset in the Liabilities Presented
October 31, 2013 Assets Balance Sheet in the Balance Sheet Liabilities Balance Sheet in the Balance Sheet
Forward currency contracts $1,266 – $1,266 $(1,968) $37 $(1,931)
Cross currency contracts – – – (443) – (443)
Total $1,266 – $1,266 $(2,411) $37 $(2,374)
During the second quarter of fiscal 2007, the company entered requires significant management judgment. The three levels are
into three treasury lock agreements based on a 30-year U.S. Trea- defined as follows:
sury security with a principal balance of $30,000 each for two of Level 1 – Unadjusted quoted prices in active markets for identi-
the agreements and $40,000 for the third agreement. These trea- cal assets or liabilities.
sury lock agreements provided for a single payment at maturity, Level 2 – Observable inputs other than Level 1 prices, such as
which was April 23, 2007, based on the change in value of the quoted prices for similar assets or liabilities in active markets;
reference treasury security. These agreements were designated as quoted prices for identical assets or liabilities in markets that are
cash flow hedges and resulted in a net settlement of $182, which not active; or other inputs that are observable or can be corrobo-
was recorded in AOCL, and will be amortized to interest expense rated by observable market data for substantially the full term of
over the 30-year term of the senior notes. The unrecognized loss the assets or liabilities.
portion of the fair value of these agreements in AOCL as of Octo- Level 3 – Unobservable inputs reflecting management’s assump-
ber 31, 2014 and 2013 was $137 and $143, respectively. tions about the inputs used in pricing the asset or liability.
Cash balances are valued at their carrying amounts in the con-
Fair Value solidated balance sheets, which are reasonable estimates of their
The company categorizes its assets and liabilities into one of three fair value due to their short-term nature. Forward currency con-
levels based on the assumptions (inputs) used in valuing the asset tracts are valued based on observable market transactions of for-
or liability. Estimates of fair value for financial assets and financial ward currency prices and spot currency rates as of the reporting
liabilities are based on the framework established in the accounting date. The fair value of cross currency contracts is determined
guidance for fair value measurements. The framework defines fair using discounted cash flow analysis on the expected cash flows of
value, provides guidance for measuring fair value, and requires each derivative. This analysis reflects the contractual terms of the
certain disclosures. The framework discusses valuation techniques derivatives, including the period to maturity, and uses observable
such as the market approach (comparable market prices), the market-based inputs such as interest rates and foreign currency
income approach (present value of future income or cash flow), exchange rates. In addition, credit valuation adjustments, which
and the cost approach (cost to replace the service capacity of an consider the impact of any credit enhancements to the contracts,
asset or replacement cost). The framework utilizes a fair value such as collateral postings, thresholds, mutual puts, and guaran-
hierarchy that prioritizes the inputs to valuation techniques used to tees, are incorporated in the fair values to account for potential
measure fair value into three broad levels. Level 1 provides the nonperformance risk. The unfunded deferred compensation liability
most reliable measure of fair value, while Level 3 generally is primarily subject to changes in fixed-income investment con-
tracts based on current yields. For accounts receivable and
accounts payable, carrying amounts are a reasonable estimate of
fair value given their short-term nature.
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