Fair Value Measurements

12 Months Ended

Aug. 31, 2014

We measure and disclose certain financial instruments at fair value as described in Note 5, Financial Instruments. Liabilities measured at fair value on a recurring basis, all of which are included in other liabilities on our Consolidated Balance Sheets, consist of the following as of August 31, 2014 and 2013:



			Fair Value Measurements at Reporting Dates Using
	Fair Value as of Respective Reporting Dates		Quoted Prices in Active Markets for Identical Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
($ in thousands)	Fair Value as of Respective Reporting Dates				Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Contingent consideration as of August 31, 2014	$	41,893	$	—	$	—	$	41,893
Contingent consideration as of August 31, 2013	$	5,277	$	—	$	—	$	5,277

Our contingent consideration liabilities are classified within Level 3 and valued using discounted cash flow valuation methods encompassing significant unobservable inputs. The inputs include estimated operating results scenarios for the applicable performance periods, probability weightings assigned to operating results scenarios and the discount rates applied. Our contingent consideration liabilities relate to the following:

•

Open Colleges - As a result of our acquisition of Open Colleges during the second quarter of fiscal year 2014, we had contingent consideration that was principally based on Open Colleges’ operating results for its fiscal year ended June 30, 2014 as defined in the acquisition agreement. Based on information available as of the acquisition date, we initially estimated the fair value of the contingent consideration to be $21.4 million using a discounted cash flow valuation method encompassing significant unobservable inputs. The inputs included estimated operating results for the performance period, probability weightings assigned to the operating results scenarios and the discount rate applied. Based on Open Colleges’ operating results for the performance period, we paid A$37.8 million (equivalent to $35.2 million as of August 31, 2014) in the first quarter of fiscal year 2015 to settle the contingent consideration, which also represents the fair value of the liability as of August 31, 2014. The increase in fair value of the contingent consideration was included in Contingent consideration charges and acquisition costs on our Consolidated Statements of Income during fiscal year 2014.


•	Apollo Global - As a result of our purchase of the noncontrolling interest in Apollo Global during fiscal year 2013, we have contingent consideration that is based on a portion of Apollo Global’s operating results through the fiscal years ending August 31, 2017. As of August 31, 2014, the estimated fair value for this contingent consideration was $6.7 million.

We did not change our valuation techniques associated with recurring fair value measurements from prior periods. The following summarizes the changes in liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the respective periods:



	Year Ended August 31,
($ in thousands)	2014		2013
Beginning balance	$	5,277	$	—
Initial contingent consideration at fair value	21,371		6,000
Change in fair value included in net income	13,907		(723		)
Currency translation adjustment	1,338		—
Ending balance	$	41,893	$	5,277

Liabilities measured at fair value on a nonrecurring basis during fiscal years 2014 and 2013, all of which are included in other liabilities on our Consolidated Balance Sheets, consist of the following:



			Fair Value Measurements at Measurement Dates Using
($ in thousands)	Fair Value at Measurement Dates		Quoted Prices in Active Markets for Identical Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Losses for Respective Fiscal Years
Fiscal year 2014 restructuring obligations	$	34,701	$	—	$	—	$	34,701	$	34,701
Fiscal year 2013 restructuring obligations	$	92,151	$	—	$	—	$	92,151	$	92,151

During fiscal years 2014 and 2013, we recorded $34.7 million and $92.2 million, respectively, of aggregate initial lease and other contract obligations at fair value associated with our restructuring activities. We recorded obligation liabilities on the dates we ceased using the right conveyed by the respective contracts, and we measured the liabilities at fair value using Level 3 inputs included in the valuation method. Refer to Note 2, Restructuring and Other Charges.

- 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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