FAIR VALUE

Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis

The Company measures certain assets and liabilities at fair value on a recurring basis such as its financial instruments. There have been no transfers between Level 1, 2 or 3 assets or liabilities during the fiscal year ended September 28, 2018.

Contingent consideration related to business combinations is recorded as a Level 3 liability because management uses significant judgments and unobservable inputs to determine the fair value. The Company reassesses the fair value of its contingent consideration liabilities on a quarterly basis and records any fair value adjustments to earnings in the period that they are determined. The decrease in Level 3 liabilities during fiscal 2018, relates to net adjustments to the fair value of contingent consideration liabilities, which were included in selling, general and administrative expenses, partially offset by the fair value of the contingent consideration associated with a business combination completed during the period, as detailed in Note 3 of these Notes to Consolidated Financial Statements. The fair value of the contingent consideration was determined using a probabilistic Black-Scholes pricing model calibrated to the expected revenue forecast to be generated from the acquired business over a one-year period.

Assets and liabilities recorded at fair value on a recurring basis consisted of the following (in millions):



	As of September 28, 2018								As of September 29, 2017
			Fair Value Measurements								Fair Value Measurements
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets
Cash equivalents*	$	79.3	$	29.7	$	49.6	$	—	$	592.6	$	592.6	$	—	$	—
U.S. Treasury and government securities	65.0		15.0		50.0		—		—		—		—		—
Corporate bonds and notes	216.0		—		216.0		—		—		—		—		—
Municipal bonds	2.8		—		2.8		—		—		—		—		—
Other government securities	33.1		—		33.1		—		—		—		—		—
Total	$	396.2	$	44.7	$	351.5	$	—	$	592.6	$	592.6	$	—	$	—
Liabilities
Contingent consideration	$	3.1	$	—	$	—	$	3.1	$	11.9	$	—	$	—	$	11.9
Total	$	3.1	$	—	$	—	$	3.1	$	11.9	$	—	$	—	$	11.9

* Cash equivalents included in Levels 1 and 2 consist of money market funds and corporate bonds and notes, foreign government bonds, commercial paper, and agency securities purchased with less than ninety days until maturity.

The following table summarizes changes to the fair value of the Level 3 liabilities (in millions):



	Contingent Consideration
Balance as of September 29, 2017	$	11.9
Increases to Level 3 liabilities	3.1
Changes in fair value included in earnings	(11.9		)
Balance as of September 28, 2018	$	3.1

Assets Measured and Recorded at Fair Value on a Nonrecurring Basis

The Company’s non-financial assets and liabilities, such as goodwill, intangible assets, and other long-lived assets resulting from business combinations, are measured at fair value using income approach valuation methodologies at the date of acquisition and are subsequently re-measured if there are indicators of impairment.