FAIR VALUE

9 Months Ended

Sep. 30, 2015

NOTE 9. FAIR VALUE

The ASC establishes a fair value hierarchy whereby the inputs contained in valuation techniques used to measure fair value are categorized into three broad levels as follows:

Level 1: quoted market prices in active markets that the reporting entity has the ability to access at the date of the fair value measurement;

Level 2: inputs other than quoted market prices described in Level 1 that are observable for the asset or liability, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

Level 3: unobservable inputs that are supported by little or no market activity and that are significant to the fair value measurement of the assets or liabilities.

The table below presents information about items that are carried at fair value at September 30, 2015 and December 31, 2014:

		Fair Value Measurement as of September 30, 2015
	Description	Balance		Level 1		Level 2		Level 3
Assets:
	Derivatives ^(a)	$	44.9	$	-	$	44.9	$	-
	Money market mutual funds		137.9		137.9		-		-
	Fixed maturity and open ended mutual funds ^(b)		36.2		36.2		-		-
	Total	$	219.0	$	174.1	$	44.9	$	-

Liabilities:
	Derivatives ^(a)	$	6.6	$	-	$	6.6	$	-
	Total	$	6.6	$	-	$	6.6	$	-

		Fair Value Measurement as of December 31, 2014
	Description	Balance		Level 1		Level 2		Level 3
Assets:
	Derivatives ^(a)	$	41.8	$	-	$	41.8	$	-
	Money market mutual funds		149.7		149.7		-		-
	Fixed maturity and open ended mutual funds ^(b)		48.0		48.0		-		-
	Total	$	239.5	$	197.7	$	41.8	$	-
Liabilities:
	Derivatives ^(a)	$	2.1	$	-	$	2.1	$	-
	Contingent consideration arising from acquisitions ^(c)		2.1		-		-		2.1
	Total	$	4.2	$	-	$	2.1	$	2.1


^(a)Represents interest rate swaps, FX forwards on certain assets and liabilities and net investment hedges in certain foreign subsidiaries as more fully described in Note 7 to the financial statements.

^(b)Consists of investments in fixed maturity mutual funds and open-ended mutual funds. The remaining contractual maturities for the fixed maturity instruments range from 14 month to 34 months and two months to 23 months at September 30, 2015 and December 31, 2014, respectively.

^(c)Represents contingent consideration liabilities pursuant to the agreements for the CSI acquisition.

The following table summarizes the changes in the fair value of the Company’s Level 3 liabilities:

	Contingent Consideration
	Nine Months Ended
	September 30,
	2015		2014
Balance as of January 1	$	2.1	$	17.5
Contingent consideration payments		(1.9)		(4.3)
Total losses (realized and unrealized):
Included in earnings		-		0.3
Foreign currency translation adjustments		(0.2)		(0.2)
Balance as of September 30	$	-	$	13.3

The following are descriptions of the methodologies utilized by the Company to estimate the fair value of its derivative contracts, fixed maturity plans and contingent consideration obligations:

Derivatives:

In determining the fair value of the derivative contracts, the Company utilizes industry standard valuation models. Where applicable, these models project future cash flows and discount the future amounts to a present value using spot rates, forward points, currency volatilities, interest rates as well as the risk of non-performance of the Company and the counterparties with whom it has derivative contracts. The Company established strict counterparty credit guidelines and only enters into transactions with financial institutions that adhere to these guidelines. Accordingly, the risk of counterparty default is deemed to be minimal.

Fixed maturity and open ended mutual funds:

The fixed maturity mutual funds and open ended mutual funds primarily represent exchange traded funds in India and are classified as securities available-for-sale. Accordingly, any unrealized gains and losses are recognized through OCI until the instruments mature or are sold.

Money market mutual funds:

The money market mutual funds represent publicly traded funds with a stable $1 net asset value.

Contingent consideration:

During the third quarter of 2015, the Company settled a contingent consideration obligation of 2.5 million Canadian dollars related to the acquisition of CSI that was based on certain non-financial metrics set forth in the acquisition agreement. Prior to the settlement of this obligation, the Company utilized a discounted cash flow methodology to value this obligation. At September 30, 2014, the Company also had contingent consideration obligations related to the acquisition of Copal. These obligations were measured using Level 3 inputs as defined in the ASC. The Company recorded the obligations for these contingent consideration arrangements on the date of each respective acquisition based on management’s best estimates of the achievement of the metrics and the value of the obligations were adjusted quarterly.

For certain of the contingent consideration obligations relating to the acquisition of Copal, a portion of the contingent cash payments were based on revenue and EBITDA growth for certain of the Copal entities. This growth was calculated by comparing revenue and EBITDA in the year immediately prior to the exercise of the put/call option to acquire the remaining 33% ownership interest of Copal Partners Limited, to revenue and EBITDA in Copal’s fiscal year ended March 31, 2011. Payments of $12.2 million under this arrangement were made in the fourth quarter of 2014 pursuant to the Company exercising its call option to acquire the remaining shares of Copal Amba. The Company had utilized discounted cash flow methodologies to value these obligations prior to their settlement in 2014. The expected future cash flows for these obligations were discounted using a risk-free interest rate plus a credit spread based on the option adjusted spread of the Company’s publicly traded debt as of the valuation date plus sovereign and size risk premiums. The most significant unobservable input involved in the measurement of these obligations was the projected future financial results of the applicable Copal Amba entities.

For the contingent consideration obligations relating to the acquisition of Amba, the payment was based on the acquired entity achieving a revenue target for its fiscal year ended March 31, 2014 which was met resulting in a $4.3 million payment in the third quarter of 2014.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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