Fair value measurement

The estimated fair value of Signet’s financial instruments held or issued to finance Signet’s operations is summarized below. Certain estimates and judgments were required to develop the fair value amounts. The fair value amounts shown below are not necessarily indicative of the amounts that Signet would realize upon disposition nor do they indicate Signet’s intent or ability to dispose of the financial instrument. Assets and liabilities that are carried at fair value are required to be classified and disclosed in one of the following three categories:

Level 1—quoted market prices in active markets for identical assets and liabilities

Level 2—observable market based inputs or unobservable inputs that are corroborated by market data

Level 3—unobservable inputs that are not corroborated by market data

Signet determines fair value based upon quoted prices when available or through the use of alternative approaches, such as discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the investment. The methods Signet uses to determine fair value on an instrument-specific basis are detailed below:



	May 5, 2018								February 3, 2018								April 29, 2017
(in millions)	Carrying Value			Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)			Carrying Value			Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)			Carrying Value			Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)
Assets:
US Treasury securities	$	7.3		$	7.3	$	—		$	7.5		$	7.5	$	—		$	7.9		$	7.9	$	—
Corporate equity securities	4.3			4.3		—			4.5			4.5		—			4.0			4.0		—
Foreign currency contracts	0.4			—		0.4			—			—		—			0.4			—		0.4
Commodity contracts	0.1			—		0.1			—			—		—			2.0			—		2.0
Interest rate swaps	2.3			—		2.3			2.2			—		2.2			0.8			—		0.8
US government agency securities	4.7			—		4.7			5.1			—		5.1			4.9			—		4.9
Corporate bonds and notes	10.6			—		10.6			10.8			—		10.8			11.1			—		11.1
Total assets	$	29.7		$	11.6	$	18.1		$	30.1		$	12.0	$	18.1		$	31.1		$	11.9	$	19.2

Liabilities:
Foreign currency contracts	$	(1.2	)	$	—	$	(1.2	)	$	(2.3	)	$	—	$	(2.3	)	$	(1.3	)	$	—	$	(1.3	)
Commodity contracts	—			—		—			(0.1		)	—		(0.1		)	—			—		—
Total liabilities	$	(1.2	)	$	—	$	(1.2	)	$	(2.4	)	$	—	$	(2.4	)	$	(1.3	)	$	—	$	(1.3	)

Investments in US Treasury securities and corporate equity securities are based on quoted market prices for identical instruments in active markets, and therefore were classified as Level 1 measurements in the fair value hierarchy. Investments in US government agency securities and corporate bonds and notes are based on quoted prices for similar instruments in active markets, and therefore were classified as Level 2 measurements in the fair value hierarchy. The fair value of derivative financial instruments has been determined based on market value equivalents at the balance sheet date, taking into account the current interest rate environment, foreign currency forward rates or commodity forward rates, and therefore were classified as Level 2 measurements in the fair value hierarchy. See Note 16 for additional information related to the Company’s derivatives.

As of May 5, 2018, the fair value of the in-house finance receivable portfolio was approximately 70% of par value. This estimated value was derived from a discounted cash flow model using unobservable inputs, including estimated yields, loss rates, payment rates and discount rates to estimate the fair value associated with the accounts receivable existing as of May 5, 2018, with consideration given to the terms of the agreements entered into with CarVal and Castlelake during the first quarter of Fiscal 2019. See Note 4 for additional information.

Goodwill and other indefinite-lived intangible assets, are evaluated for impairment annually or more frequently if events or conditions indicate the carrying value of a reporting unit or an indefinite-lived intangible asset may not be recoverable. Impairment testing compares the carrying amount of the reporting unit or other intangible assets with its fair value. During the 13 weeks ended May 5, 2018, the Company performed an interim impairment test for goodwill and indefinite-lived intangible assets. The fair value was calculated using a combination of discounted cash flow and guideline public company methodologies for the reporting units and the relief from royalty method for the indefinite-lived intangible assets, respectively. The fair value of goodwill and indefinite-lived intangible assets is a Level 3 valuation based on certain unobservable inputs including projected cash flows and estimated risk-adjusted rates of return that would be utilized by market participants in valuing these assets or prices of similar assets. See Note 15 for additional information.

The carrying amounts of cash and cash equivalents, other receivables, accounts payable, accrued expenses, other liabilities, income taxes and the revolving credit facility approximate fair value because of the short-term maturity of these amounts.

The fair values of long-term debt instruments were determined using quoted market prices in inactive markets or discounted cash flows based upon current observable market interest rates and therefore were classified as Level 2 measurements in the fair value hierarchy. See Note 18 for classification between current and long-term debt. The carrying amount and fair value of outstanding debt at May 5, 2018, February 3, 2018 and April 29, 2017 were as follows:



	May 5, 2018				February 3, 2018				April 29, 2017
(in millions)	Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value
Long-term debt:
Senior notes (Level 2)	$	394.6	$	382.3	$	394.5	$	396.3	$	393.9	$	396.5
Securitization facility (Level 2)	—		—		—		—		599.7		600.0
Term loan (Level 2)	317.0		319.5		323.5		326.2		340.8		344.1
Total	$	711.6	$	701.8	$	718.0	$	722.5	$	1,334.4	$	1,340.6