Fair Value Disclosures

9 Months Ended

Sep. 30, 2022

Recurring Fair Value Measurements

The following table presents the Company’s non-pension financial assets and liabilities, which are measured at fair value on a recurring basis (in millions):


	September 30, 2022								December 31, 2021
	Fair value Asset (Liability)								Fair value Asset (Liability)
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Derivatives:
Assets	$	—	$	237	$	—	$	237	$	—	$	40	$	—	$	40
Liabilities	—		(64)		—		(64)		—		(57)		—		(57)
Investment securities, including mutual funds	16		—		—		16		13		—		—		13

For publicly traded investment securities, including mutual funds, fair value is determined on the basis of quoted market prices and, accordingly, such investments are classified as Level 1. The Company determines the fair value of its derivative instruments

using standard pricing models and market-based assumptions for all significant inputs, such as yield curves and quoted spot and forward exchange rates. Accordingly, the Company’s derivative instruments are classified as Level 2.

Financial Instruments

The Company’s financial instruments include cash and cash equivalents, accounts receivable, accounts payable, derivative instruments, notes payable and short and long-term debt. The carrying values for current financial assets and liabilities, including cash and cash equivalents, accounts receivable, accounts payable and short-term debt approximate fair value due to the short maturity of such instruments. The fair values of the Company’s debt and derivative instruments are disclosed in Footnote 9 and Footnote 10, respectively.

Nonrecurring Fair Value Measurements

The Company’s nonfinancial assets, which are measured at fair value on a nonrecurring basis, include property, plant and equipment, goodwill, intangible assets and certain other assets.

The Company’s goodwill and indefinite-lived intangibles are fair valued using discounted cash flows. Goodwill impairment testing requires significant use of judgment and assumptions including the identification of reporting units; the assignment of assets and liabilities to reporting units; and the estimation of future cash flows, business growth rates, terminal values and discount rates. The testing of indefinite-lived intangibles under established guidelines for impairment also requires significant use of judgment and assumptions, such as the estimation of cash flow projections, terminal values, royalty rates, contributory cross charges, where applicable, and discount rates. Accordingly, these fair value measurements fall in Level 3 of the fair value hierarchy. These assets and certain liabilities are measured at fair value on a nonrecurring basis as part of the Company’s annual impairment testing and as circumstances require.

At September 30, 2022, goodwill for the Home Fragrance reporting unit in the Home Solutions segment, one tradename within the Home Appliances segment and two tradenames within the Baby reporting unit in the Learning and Development segment were fair valued at $56 million, $39 million, $40 million and $8 million, respectively, on a non-recurring basis in connection with triggering events that occurred during the third quarter of 2022. The most significant unobservable input (Level 3) used to estimate the fair value of the Home Fragrance reporting unit goodwill is the discount rate, which was 10.0%. The most significant unobservable inputs (Level 3) used to estimate the fair value of the indefinite-lived intangible asset for the Home Appliances reporting unit is the discount rate, which was 12.5%. The most significant unobservable input (Level 3) used to estimate the fair value of the two indefinite-lived intangible assets for the Baby reporting unit is the discount rate, which was 8.5%. See Footnotes 1 and 7 for further information.

- 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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