Fair Value Measurements

9 Months Ended

Sep. 30, 2016

ASC Topic 820 emphasizes that fair value is a market-based measurement, not an entity specific measurement. Therefore, a fair value measurement should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering market participant assumptions in fair value measurements, ASC Topic 820 establishes a fair value hierarchy, which prioritizes the inputs used in measuring fair values as follows:


Level 1:	Observable inputs such as quoted prices for identical assets or liabilities in active markets;


Level 2:	Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and


Level 3:	Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

Assets and liabilities measured at fair value are based on one or more of the following three valuation techniques noted in ASC Topic 820:


A.	Market approach: Prices and other relevant information generated by market transactions involving identical or comparable assets, liabilities or a group of assets or liabilities, such as a business.


B.	Cost approach: Amount that would be required to replace the service capacity of an asset (replacement cost).


C.	Income approach: Techniques to convert future amounts to a single present amount based upon market expectations (including present value techniques, option-pricing and excess earnings models).

The following tables classify assets and liabilities measured at fair value on a recurring basis as of September 30, 2016 and December 31, 2015:



			Basis of fair value measurements
(in millions)	Balance at September 30, 2016		Quoted prices in active markets for identical items (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Valuation technique
Assets:
Foreign currency contracts	$	3.6	$	—	$	3.6	$	—	A
Other long-term receivables (insurance settlement agreement note receivable)	$	82.0	$	—	$	82.0	$	—	C
Liabilities:
Foreign currency contracts	$	4.0	$	—	$	4.0	$	—	A
Commodity contracts	$	1.5	$	—	$	1.5	$	—	A



			Basis of fair value measurements
(in millions)	Balance at December 31, 2015		Quoted prices in active markets for identical items (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Valuation technique
Assets:
Foreign currency contracts	$	2.7	$	—	$	2.7	$	—	A
Other long-term receivables (insurance settlement agreement note receivable)	$	81.2	$	—	$	81.2	$	—	C
Liabilities:
Foreign currency contracts	$	8.7	$	—	$	8.7	$	—	A
Commodity contracts	$	10.4	$	—	$	10.4	$	—	A
Interest rate swap contracts	$	2.7	$	—	$	2.7	$	—	A

In addition to items that are measured at fair value on a recurring basis, the Company measures certain assets and liabilities at fair value on a non-recurring basis. As further described in the Recent Transactions footnote to the Condensed Consolidated Financial Statements, the fair value of the Remy light vehicle aftermarket business, based on the anticipated sale price, was less than the carrying value. As a result, the Company recorded an asset impairment expense of $106.5 million in the three months ended September 30, 2016 to adjust the net book value of this business to its fair value. As the fair value was determined using other observable inputs, the fair value measurement is classified within Level 2 of the hierarchy.

- 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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