Fair Value
Fair Value Option for Long-term Debt
The Company has elected not to record its long-term debt instruments at fair value, but has measured them at fair value for disclosure purposes. As of October 3, 2015, the aggregate carrying amount of the Company's long-term debt instruments approximates fair value as estimated using quoted prices.
Assets/Liabilities Measured at Fair Value on a Recurring Basis
The Company's primary financial assets and financial liabilities measured at fair value on a recurring basis are cash equivalents, defined benefit plan assets (see Note 16), deferred compensation plan assets, foreign currency forward contracts and contingent consideration (see Note 13). The fair value of cash equivalents, deferred compensation plan assets and foreign currency forward contracts was not material as of October 3, 2015 or September 27, 2014.
Offsetting Derivative Assets and Liabilities
The Company has entered into master netting arrangements with each of its derivative counterparties that allows net settlement of derivatives assets and liabilities under certain conditions, such as multiple transactions with the same currency maturing on the same date. The Company presents its derivative assets and derivative liabilities on a gross basis in the consolidated balance sheets. The amount that the Company had the right to offset under these netting arrangements was not material as of October 3, 2015 or September 27, 2014.
Non-Financial Assets Measured at Fair Value on a Nonrecurring Basis
Assets held-for-sale, consisting of land and buildings, are measured at fair value on a nonrecurring basis since these assets are subject to fair value adjustments only when the carrying amount of such assets exceeds the fair value of such assets or such assets have been previously impaired and the fair value exceeds the carrying amount by less than the amount of the impairment that has been recognized. Fair value is generally estimated using independent third party valuations based on market comparables. The Company did not have any assets classified as held-for-sale for accounting purposes as of October 3, 2015. The carrying value of the Company's assets held-for-sale was $11.6 million as of September 27, 2014 and was included in prepaid expenses and other current assets on the consolidated balance sheets.
Other non-financial assets, such as intangible assets are measured at fair value as of the date such assets are acquired or in the period an impairment is recorded. See Note 13 for further information regarding these assets.
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.