FLEX LTD.FLEX
FLEX LTD. Fair Value Disclosure
FAIR VALUE MEASUREMENT OF ASSETS AND LIABILITIES
Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact, and it considers assumptions that market participants would use when pricing the asset or liability. The accounting guidance for fair value establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is as follows:
Level 1 - Applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2 - Applies to assets or liabilities for which there are inputs other than quoted prices included within level 1 that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets) such as cash and cash equivalents and money market funds; or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
The Company values foreign exchange forward contracts using level 2 observable inputs which primarily consist of an income approach based on the present value of the forward rate less the contract rate multiplied by the notional amount.
The Company's cash equivalents include bank time deposits and money market funds, which are valued using level 2 inputs, such as interest rates and maturity periods. Due to their short-term nature, their carrying amount approximates fair value.
Level 3 - Applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
The Company has accrued for contingent consideration related to an acquisition in fiscal year 2025, classified as a level 3 measurement in the fair value hierarchy due to significant unobservable inputs. Fair value is determined using internal cash flow models that incorporate unobservable inputs, including the probability of achieving performance milestones. As of March 31, 2026 and March 31, 2025, the balance of contingent consideration was $2 million and $5 million, respectively.
The significant inputs include the Company's probability assessments of expected future revenue during the earn-out periods, associated volatility, and a discount rate reflecting uncertainties in the obligation consistent with the terms of the purchase agreement. Significant decreases in expected revenue, or increases in the discount rate or volatility, would reduce fair value estimates. The interrelationship between these inputs is not considered significant.
During fiscal years 2026 and 2025, there were no other additions to the accrual, payments, fair value adjustments, or unrealized gains or losses included in earnings.
The Company has deferred compensation plans for its officers and certain other employees. Amounts deferred under the plans are invested in hypothetical investments selected by the participant or the participant's investment manager. The Company's deferred compensation plan assets are included in other non-current assets on the consolidated balance sheets and include money market funds, mutual funds, corporate and government bonds and certain convertible securities that are valued using prices obtained from various pricing sources. These sources price these investments using certain market indices and the performance of these investments in relation to these indices. As a result, the Company has classified these investments as either level 1 or level 2, dependent on the valuation inputs, within the fair value hierarchy.
Financial Instruments Measured at Fair Value on a Recurring Basis
The following table presents the Company's assets and liabilities measured at fair value on a recurring basis as of March 31, 2026 and 2025:
| Fair Value Measurements as of March 31, 2026 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Money market funds and time deposits (Note 2) | $ | — | $ | 1,644 | $ | — | $ | 1,644 | |||||||||||||||
| Foreign currency contracts (Note 10) | — | 55 | — | 55 | |||||||||||||||||||
| Deferred compensation plan assets: | |||||||||||||||||||||||
| Mutual funds, money market accounts and equity securities | 35 | 13 | — | 48 | |||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Foreign currency contracts (Note 10) | $ | — | $ | (73) | $ | — | $ | (73) | |||||||||||||||
| Contingent consideration in connection with acquisitions | — | — | (2) | (2) | |||||||||||||||||||
| Fair Value Measurements as of March 31, 2025 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Money market funds and time deposits (Note 2) | $ | — | $ | 1,535 | $ | — | $ | 1,535 | |||||||||||||||
| Foreign currency contracts (Note 10) | — | 34 | — | 34 | |||||||||||||||||||
| Deferred compensation plan assets: | |||||||||||||||||||||||
| Mutual funds, money market accounts and equity securities | — | 43 | — | 43 | |||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Foreign currency contracts (Note 10) | $ | — | $ | (79) | $ | — | $ | (79) | |||||||||||||||
| Contingent consideration in connection with acquisitions | — | — | (5) | (5) | |||||||||||||||||||
Other financial instruments
The following table presents the Company's major debts not carried at fair value as of March 31, 2026 and 2025:
| As of March 31, 2026 | As of March 31, 2025 | ||||||||||||||||||||||||||||
| Carrying Amount | Fair Value | Carrying Amount | Fair Value | Fair Value Hierarchy | |||||||||||||||||||||||||
| (In millions) | (In millions) | ||||||||||||||||||||||||||||
4.750% Notes due June 2025 | $ | — | $ | — | $ | 531 | $ | 531 | Level 1 | ||||||||||||||||||||
3.750% Notes due February 2026 | — | — | 678 | 672 | Level 1 | ||||||||||||||||||||||||
6.000% Notes due January 2028 | 398 | 406 | 398 | 409 | Level 1 | ||||||||||||||||||||||||
4.875% Notes due June 2029 | 654 | 655 | 655 | 651 | Level 1 | ||||||||||||||||||||||||
4.875% Notes due May 2030 | 671 | 669 | 676 | 669 | Level 1 | ||||||||||||||||||||||||
5.250% Notes due January 2032 | 651 | 651 | 499 | 497 | Level 1 | ||||||||||||||||||||||||
5.375% Notes due November 2035 | 598 | 585 | — | — | Level 1 | ||||||||||||||||||||||||
| Delayed Draw Term Loan due December 2027 | 500 | 500 | — | — | Level 1 | ||||||||||||||||||||||||
3.600% HUF Bonds due December 2031 | 296 | 237 | 269 | 215 | Level 2 | ||||||||||||||||||||||||
The Notes due June 2025, February 2026, January 2028, June 2029, May 2030, January 2032, and November 2035 are valued based on broker trading prices in active markets. The Delayed Draw Term Loan due December 2027 bears interest at variable interest rates; therefore, as of March 31, 2026, the carrying amount approximates fair value. HUF Bonds are valued based on the broker trading prices in an inactive market.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | May 20, 2026 | Showing above |
| 2025 | May 21, 2025 | |
| 2024 | May 17, 2024 | |
| 2023 | May 19, 2023 | |
| 2022 | May 20, 2022 | |
| 2021 | May 19, 2021 | |
| 2020 | May 28, 2020 | |
| 2019 | May 21, 2019 | |
| 2018 | Jun 14, 2018 | |
| 2017 | May 16, 2017 | |
| 2016 | May 20, 2016 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.