MCCORMICK & CO INC | 2013 | FY | 3

FAIR VALUE MEASUREMENTS
Fair value can be measured using valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow) and the cost approach (cost to replace the service capacity of an asset or replacement cost). Accounting standards utilize a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
 
•
Level 1:   Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
•
Level 2:   Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
•
Level 3:   Unobservable inputs that reflect management’s own assumptions.
Our population of assets and liabilities subject to fair value measurements on a recurring basis at November 30, 2013 and 2012 are as follows:
 
 
Fair value measurements using fair
value hierarchy as of  November 30, 2013    
(millions)
Fair value      
Level 1
Level 2
Level 3      
Assets
 
 
 
 
Cash and cash equivalents
$
63.0

$
63.0

—

—

Insurance contracts
90.1

—

$
90.1

—

Bonds and other long-term investments
13.3

13.3

—

—

Interest rate derivatives
12.2

—

12.2

—

Foreign currency derivatives
1.1

—

1.1

—

Total
$
179.7

$
76.3

$
103.4

—

Liabilities
 
 
 
 
Foreign currency derivatives
$
1.6

—

$
1.6

—

Total
$
1.6

—

$
1.6

—

 
 
Fair value measurements using fair
value hierarchy as of November 30, 2012  
(millions)
Fair value      
Level 1
Level 2
Level 3      
Assets
 
 
 
 
Cash and cash equivalents
$
79.0

$
79.0

—

—

Insurance contracts
72.5

—

$
72.5

—

Bonds and other long-term investments
13.6

13.6

—

—

Interest rate derivatives
16.7

—

16.7

—

Foreign currency derivatives
0.9

—

0.9

—

Total
$
182.7

$
92.6

$
90.1

—

Liabilities
 
 
 
 
Foreign currency derivatives
$
1.9

—

$
1.9

—

Interest rate derivatives
0.1

—

0.1

—

Total
$
2.0

—

$
2.0

—


The fair values of insurance contracts are based upon the underlying values of the securities in which they are invested and are from quoted market prices from various stock and bond exchanges for similar type assets. The fair values of bonds and other long-term investments are based on quoted market prices from various stock and bond exchanges. The fair values for interest rate and foreign currency derivatives are based on values for similar instruments using models with market based inputs.

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