Fair Value Measurement of Assets and Liabilities

6 Months Ended

Jun. 30, 2018

Fair Value Disclosures [Abstract]

Fair Value Measurement of Assets and Liabilities

9.  Fair Value Measurement of Assets and Liabilities

The following financial assets and liabilities are recorded at fair value on a recurring basis (in millions):

	As of June 30, 2018
			Fair Value Measurements at Reporting Date Using:
Description	Recorded Balance		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Derivatives, current and long-term
Foreign currency forward contracts	$	9.9	$	-	$	9.9	$	-
Interest rate swaps		37.2		-		37.2		-
Total Assets	$	47.1	$	-	$	47.1	$	-
Liabilities
Derivatives, current and long-term
Foreign currency forward contracts	$	10.9	$	-	$	10.9	$	-
Interest rate swaps		1.2		-		1.2		-
Contingent payments related to acquisitions		23.5		-		-		23.5
Total Liabilities	$	35.6	$	-	$	12.1	$	23.5

	As of December 31, 2017
			Fair Value Measurements at Reporting Date Using:
Description	Recorded Balance		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Derivatives, current and long-term
Foreign currency forward contracts	$	1.6	$	-	$	1.6	$	-
Interest rate swaps		4.5		-		4.5		-
Total Assets	$	6.1	$	-	$	6.1	$	-
Liabilities
Derivatives, current and long-term
Foreign currency forward contracts	$	50.9	$	-	$	50.9	$	-
Contingent payments related to acquisitions		41.0		-		-		41.0
Total Liabilities	$	91.9	$	-	$	50.9	$	41.0

We value our foreign currency forward contracts using a market approach based on foreign currency exchange rates obtained from active markets, and we perform ongoing assessments of counterparty credit risk.  

We value our interest rate swaps using a market approach based on publicly available market yield curves and the terms of our swaps, and we perform ongoing assessments of counterparty credit risk.

Contingent payments related to acquisitions consist of commercial milestone, cost savings and sales-based payments, and are valued using discounted cash flow techniques.  The fair value of commercial milestone payments reflects management’s expectations of probability of payment, and increases as the probability of payment increases or expectation of timing of payments is accelerated.  The fair value of cost savings and sales-based payments is based upon probability-weighted future cost savings and revenue estimates, and increases as cost savings and revenue estimates increase, probability weighting of higher cost savings and revenue scenarios increase or expectation of timing of payment is accelerated.  

The following table provides a reconciliation of the beginning and ending balances of items measured at fair value on a recurring basis in the tables above that used significant unobservable inputs (Level 3) (in millions):

	Level 3 - Liabilities
Contingent payments related to acquisitions
Beginning balance December 31, 2017	$	41.0
Change in estimate		0.3
Settlements		(17.8	)
Ending balance June 30, 2018	$	23.5

Changes in estimates are recognized in Acquisition, integration and related on our condensed consolidated statement of earnings.