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Fair Value Measures

12 Months Ended

Sep. 30, 2019

Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. Valuation techniques must maximize the use of observable inputs and minimize the use of unobservable inputs. When determining the fair value measurements for assets and liabilities required to be recorded at fair value, we consider the principal or most advantageous market in which we would transact and consider assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance.

The determination of the applicable level within the hierarchy of a particular financial asset or liability depends on the lowest level of inputs that are significant to the fair value measurement as of the measurement date as follows:


•	Level 1: Quoted prices for identical assets or liabilities in active markets.


•	Level 2: Observable inputs other than those described as Level 1.


•	Level 3: Unobservable inputs that are supportable by little or no market activities and are based on significant assumptions and estimates.

Assets and liabilities measured at fair value on a recurring basis at September 30, 2019 and 2018 consisted of (dollars in thousands):



	September 30, 2019
	Level 1		Level 2			Level 3			Total
Assets:
Money market funds^(a)	$	217,861	$	—		$	—		$	217,861
Time deposits^(b)			115,913			—			115,913
Commercial paper, $77,089 at cost^(b)	—		77,494			—			77,494
Corporate notes and bonds, $37,504 at cost^(b)			37,566			—			37,566
Foreign currency exchange contracts^(b)			597			—			597
Total assets at fair value	$	217,861	$	231,570		$	—		$	449,431
Liabilities:
Foreign currency exchange contracts^(b)			$	(327	)				$	(327	)
Contingent acquisition payments^(c)						(2,925		)	(2,925		)
Total liabilities at fair value	$	—	$	(327	)	$	(2,925	)	$	(3,252	)



	September 30, 2018
	Level 1		Level 2			Level 3			Total
Assets:
Money market funds^(a)	$	200,004	$	—		$	—		$	200,004
Time deposits^(b)	—		88,158			—			88,158
Commercial paper, $27,194 at cost^(b)	—		27,363			—			27,363
Corporate notes and bonds, $57,563 at cost^(b)	—		57,417			—			57,417
Foreign currency exchange contracts^(b)	—		143			—			143
Total assets at fair value	$	200,004	$	173,081		$	—		$	373,085
Liabilities:
Foreign currency exchange contracts^(b)	$	—	$	(1,192	)	$	—		$	(1,192	)
Contingent acquisition payments^(c)	—		—			(4,000		)	(4,000		)
Total liabilities at fair value	$	—	$	(1,192	)	$	(4,000	)	$	(5,192	)


^(a)	Money market funds and time deposits with original maturity of 90 days or less are included within cash and cash equivalents in the consolidated balance sheets and are valued at quoted market prices in active markets.

^(b) Time deposits, commercial paper, corporate notes and bonds, and foreign currency exchange contracts are recorded at fair market values, which are determined based on the most recent observable inputs for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active or are directly or indirectly observable. Time deposits are generally for terms of one year or less. Commercial paper and corporate notes and bonds generally mature within three years and had a weighted average maturity of 0.53 years and 0.61 years as of September 30, 2019 and September 30, 2018, respectively.

^(c) The fair values of our contingent consideration arrangements were determined using either the option pricing model with Monte Carlo simulation or the probability-weighted discounted cash flow method.

The estimated fair value of our long-term debt approximated $2,143.4 million (face value $2,137.0 million) as of September 30, 2019 and $2,423.6 million (face value $2,437.0 million) as of September 30, 2018, based on Level 2 measurements. The fair value of each borrowing was estimated using the average of the bid and ask trading quotes at the end of the reporting periods. There was no balance outstanding under our revolving credit agreement as of September 30, 2019 and September 30, 2018.

Additionally, contingent acquisition payments are recorded at fair values upon the acquisition, and are remeasured in subsequent reporting periods with the changes in fair values recorded within acquisition-related costs, net. Such payments are contingent upon the achievement of specified performance targets and are valued using the option pricing model with Monte Carlo simulation or the probability-weighted discounted cash flow model (Level 3 measurement).

The following table provides a summary of changes in fair value of our Level 3 financial instruments for the years ended September 30, 2019 and 2018 (dollars in thousands):



	Amount
Balance as of September 30, 2017	$	8,648
Earn-out liability established at time of acquisition	2,000
Payments and foreign currency translation	(8,188		)
Adjustments to fair value included in acquisition-related costs, net	1,540
Balance as of September 30, 2018	4,000
Earn-out liability established at time of acquisition	1,500
Payments and foreign currency translation	(2,550		)
Adjustments to fair value included in acquisition-related costs, net	(25		)
Balance as of September 30, 2019	$	2,925

Contingent acquisition payment liabilities are scheduled to be paid in periods through fiscal year 2021. As of September 30, 2019, we could be required to pay up to $4.8 million if the specified performance targets are achieved.

- 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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