Derivative Financial Instruments and Fair Value Measurements

Derivative Financial Instruments

We are exposed to various market risks relating to our ongoing business operations. The primary market risks, which are managed through the use of derivative instruments, are foreign currency exchange rate risk and interest rate risk. In certain circumstances, we enter into foreign currency forward exchange contracts (“forward contracts”) to reduce the effects of fluctuating foreign currency exchange rates on our cash flows denominated in foreign currencies. Our exposure to market risk for changes in interest rates relates primarily to our long-term debt obligations. We have historically managed interest rate risk through the use of a combination of fixed and variable rate borrowings.

The €400.0 ($446.9) notes due September 2022 and the €500.0 ($555.5) notes due June 2026 were designated as a hedge of our net investment in our foreign subsidiaries with a Euro-functional currency as of March 31, 2019. The gain or loss associated with foreign currency translation on these notes is recorded as a component of accumulated other comprehensive loss ("AOCI"), net of taxes. On occasion, forward contracts are also designated as a hedge of our net investment in our foreign subsidiaries. The effect of our net investment hedges on AOCI for the three months ended March 31 was as follows:



Instrument	Gain (Loss) Recognized in Other Comprehensive Income
	2019		2018⁽¹⁾
Euro Notes	$	22.4	$	(21.2	)

(1) The prior period amounts have been revised to conform with the current period presentation.

For our forward contracts that are not designated as hedges, any gain or loss resulting from the change in fair value is recognized in the current period earnings. These gains or losses are offset by the exposure related to receivables and payables with our foreign subsidiaries and to interest due on our Euro-denominated notes, which is paid annually in June and September. For both the three months ended March 31, 2019 and 2018, there was no effect on the Consolidated Statements of Operations from our forward contracts that are not designated as hedging instruments.

The following tables present the fair value of derivative and non-derivative assets and liabilities on the Consolidated Balance Sheets as of March 31:



		Assets
		Balance Sheet Location	2019		2018
Instruments not designated as hedges:
	Foreign currency forward contracts	Accounts receivable, net	$	—	$	—
Total instruments			$	—	$	—



		Liabilities
		Balance Sheet Location	2019		2018
Instruments designated as hedges:
	Euro Notes	Long-term debt	1,050.3		819.2
Instruments not designated as hedges:
	Foreign currency forward contracts	Accrued liabilities	—		—
Total instruments			$	1,050.3	$	819.2

Fair Value Measurements

The carrying value of long-term debt approximates fair value, except for the Euro-denominated notes. The fair value of the Euro-denominated notes, as observable at commonly quoted intervals (Level 2 inputs), was $1,050.3 and $1,052.9 as of March 31, 2019 and December 31, 2018, respectively, compared to a carrying value of $1,002.4 and $1,024.6, respectively.

Our deferred compensation plan assets were $98.2 and $89.5 as of March 31, 2019 and December 31, 2018, respectively. We determine the fair value of these assets, comprised of publicly traded securities, by using market quotes as of the last day of the period (Level 1 inputs).

We measure the fair value of the foreign currency forward contracts at the value based on either directly or indirectly observable inputs from third parties (Level 2 inputs).