Toro 2015 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, 2015 Assets Balance Sheet in the Balance Sheet Liabilities Balance Sheet in the Balance Sheet
Forward currency contracts $3,380 $(207) $3,173 $(1,711) – $(1,711)
Cross currency contracts 2,136 – 2,136 (134) – (134)
Total $5,516 $(207) $5,309 $(1,845) – $(1,845)
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)
Level 3 – Unobservable inputs reflecting management’s assump-
Fair Value
tions about the inputs used in pricing the asset or liability.
The company categorizes its assets and liabilities into one of three
Cash balances are valued at their carrying amounts in the con-
levels based on the assumptions (inputs) used in valuing the asset
solidated balance sheets, which are reasonable estimates of their
or liability. Estimates of fair value for financial assets and financial
fair value due to their short-term nature. Forward currency con-
liabilities are based on the framework established in the accounting
tracts are valued based on observable market transactions of for-
guidance for fair value measurements. The framework defines fair
ward currency prices and spot currency rates as of the reporting
value, provides guidance for measuring fair value, and requires
date. The fair value of cross currency contracts is determined
certain disclosures. The framework discusses valuation techniques
using discounted cash flow analysis on the expected cash flows of
such as the market approach (comparable market prices), the
each derivative. This analysis reflects the contractual terms of the
income approach (present value of future income or cash flow),
derivatives, including the period to maturity, and uses observable
and the cost approach (cost to replace the service capacity of an
market-based inputs such as interest rates and foreign currency
asset or replacement cost). The framework utilizes a fair value
exchange rates. In addition, credit valuation adjustments, which
hierarchy that prioritizes the inputs to valuation techniques used to
consider the impact of any credit enhancements to the contracts,
measure fair value into three broad levels. Level 1 provides the
such as collateral postings, thresholds, mutual puts, and guaran-
most reliable measure of fair value, while Level 3 generally
tees, are incorporated in the fair values to account for potential
requires significant management judgment. The three levels are
nonperformance risk. The unfunded deferred compensation liability
defined as follows:
is primarily subject to changes in fixed-income investment con-
Level 1 – Unadjusted quoted prices in active markets for identi-
tracts based on current yields. For accounts receivable and
cal assets or liabilities.
accounts payable, carrying amounts are a reasonable estimate of
Level 2 – Observable inputs other than Level 1 prices, such as
fair value given their short-term nature.
quoted prices for similar assets or liabilities in active markets;
quoted prices for identical assets or liabilities in markets that are
not active; or other inputs that are observable or can be corrobo-
rated by observable market data for substantially the full term of
the assets or liabilities.
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