Fair Value Measurements

6 Months Ended

Jul. 03, 2021

Note 11. Fair Value Measurements

Recurring Fair Value Measurements

The assets and liabilities carried at fair value, measured on a recurring basis, as of July 3, 2021 were as follows:


			Fair Value Measurements Using
(In millions)	Total		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
Assets
Investments	$	33.9	$	27.0	$	6.9	$	—
Derivative assets		9.3		.6		8.7		—
Bank drafts		12.4		12.4		—		—
Liabilities
Cross-currency swap	$	25.2	$	—	$	25.2	$	—
Derivative liabilities		5.8		—		5.8		—
Contingent consideration liabilities		10.4		—		—		10.4

The assets and liabilities carried at fair value, measured on a recurring basis, as of January 2, 2021 were as follows:


			Fair Value Measurements Using
(In millions)	Total		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
Assets
Investments	$	33.6	$	27.4	$	6.2	$	—
Derivative assets		5.2		.1		5.1		—
Bank drafts		12.8		12.8		—		—
Liabilities
Cross-currency swap	$	36.7	$	—	$	36.7	$	—
Derivative liabilities		9.5		.3		9.2		—

Investments include fixed income securities (primarily U.S. government and corporate debt securities) measured at fair value using quoted prices/bids and a money market fund measured at fair value using net asset value. As of July 3, 2021, investments of $.8 million and $33.1 million were included in “Cash and cash equivalents” and “Other current assets,” respectively, in the unaudited Condensed Consolidated Balance Sheets. As of January 2, 2021, investments of $1 million and $32.6 million were included in “Cash and cash equivalents” and “Other current assets,” respectively, in the unaudited Condensed Consolidated Balance Sheets. Derivatives that are exchange-traded are measured at fair value using quoted market prices and classified within Level 1 of the valuation hierarchy. Derivatives measured based on foreign exchange rate inputs that are readily available in public markets are classified within Level 2 of the valuation hierarchy. Bank drafts (maturities greater than three months) are valued at face value due to their short-term nature and were included in “Other current assets” in the unaudited Condensed Consolidated Balance Sheets.

Contingent consideration liabilities relate to estimated earn-out payments associated with one of the 2021 Acquisitions. These payments are based on the achievement of certain performance targets based on the terms of the purchase agreement, and our estimates are based on the expected payments related to these targets as of July 3, 2021.

We have classified these liabilities as Level 3. As of July 3, 2021, contingent consideration liabilities of approximately $3 million and $7 million were included in “Other current liabilities” and “Long-term retirement benefits and other liabilities,” respectively, in the unaudited Condensed Consolidated Balance Sheets.

Avery Dennison Corporation

he activity related to contingent consideration for the six months ended July 3, 2021 is shown below.


(In millions)
Acquisition	$	11.6
Payments		(1.2	)
Balance at July 3, 2021	$	10.4

- 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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