Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

v3.23.1
Fair Value Measurements
 6 Months Ended
Mar. 31, 2023
Fair Value Disclosures [Abstract]  
Fair Value Measurements FAIR VALUE MEASUREMENTS
The following assets and liabilities are recorded at fair value on a recurring basis.
•We hold mutual fund assets within a Rabbi Trust to cover liabilities in our deferred compensation plan. These assets have prices quoted within active markets and, accordingly, are classified as level 1 within the fair value hierarchy.
•We have three interest rate swap agreements, serving to reduce our interest rate risk on our debt. These assets and liabilities can be valued using observable data and, accordingly, are classified as level 2 within the fair value hierarchy.
•We anticipate paying additional consideration for certain acquisitions based upon the subsequent performance of the businesses acquired. This liability is based upon our internal assumptions over revenues, margins, volumes, and contract terms. Accordingly, these inputs are not observable and are classified as level 3 within the fair value hierarchy.
•We will receive payments from the sale of a small commercial practice in the United Kingdom over the next three years. We have discounted the asset based upon our cost of capital, which is not an observable input. The balance at the sale of the business was $6.8 million. These assets are held in "Prepaid expenses and other current assets" and "Other assets" on our consolidated balance sheet.
The tables below present assets and liabilities measured and recorded at fair value in our consolidated balance sheets on a recurring basis and their corresponding level within the fair value hierarchy. No transfers between Level 1, Level 2, and Level 3 fair value measurements occurred for the three months ended March 31, 2023.
Table 8.1: Fair Value Measurements
As of March 31, 2023
Level 1 Level 2 Level 3 Balance
(in thousands)
Assets:
Deferred compensation assets - Rabbi Trust $ 25,820  $ —  $ —  $ 25,820 
Interest rate swap - $300 million notional value
 —  24,636  —  24,636 
Notes receivable —  —  7,055  7,055 
Total assets $ 25,820  $ 24,636  $ 7,055  $ 57,511 
Liabilities:
Interest rate swaps - $350 million notional value
 $ —  $ 4,548  $ —  $ 4,548 
Contingent consideration —  —  13,654  13,654 
Total liabilities $ —  $ 4,548  $ 13,654  $ 18,202 
The fair values of receivables, prepaids, other assets, accounts payable, accrued costs, and other current liabilities approximate the carrying values as a result of the short-term nature of these instruments. The carrying value of our debt is consistent with the fair value as the stated interest rates in the agreements are consistent with the current market rates used in notes with similar terms in the markets (Level 2 inputs).
Accumulated Other Comprehensive Loss
All amounts recorded in accumulated other comprehensive loss are related to our foreign currency translations and interest rate swap, net of tax. The following table shows changes in accumulated other comprehensive loss:
Table 8.2: Details of Changes in Accumulated Other Comprehensive Loss by Category
Foreign currency translation adjustment Net unrealized gain on derivatives, net of tax Total
(in thousands)
Balance as of September 30, 2022 $ (57,109) $ 23,148  $ (33,961)
Other comprehensive income before reclassifications 8,885  (5,012) 3,873 
Amounts reclassified from accumulated other comprehensive loss 116  (3,331) (3,215)
Net current period other comprehensive losses 9,001  (8,343) 658 
Balance as of March 31, 2023 $ (48,108) $ 14,805  $ (33,303)
Contingent Consideration
The fair value of our contingent considerations are based upon estimates of the likely payments, which are based upon assumptions over future performance. The liabilities are reviewed on a quarterly basis and, where changes in estimates arise, these are recorded to selling and general administrative expenses.
Our contingent consideration relates to the businesses below:
•In October 2021, we acquired the student loan servicing business from Navient, rebranded as Aidvantage. Future payments are based upon volumes, up to a maximum payment of $65.0 million. At March 31, 2023 and September 30, 2022, the Aidvantage contingent consideration was $11.2 million and $13.8 million, respectively.
•In January 2022, we acquired BZ Bodies Limited. Future payments are based upon the performance of the business through December 2023, up to a maximum payment of $2.5 million (£2.0 million British Pounds). At March 31, 2023 and September 30, 2022, we recorded a contingent consideration liability for the maximum payment, which we anticipate making in fiscal year 2024.
•In December 2015, we acquired companies doing business as Assessments Australia. Future payments were based upon future revenue earnings. The deadline for the payment expired on December 31, 2022, with no payment being required.
Movement in our contingent consideration balance is as follows:
Table 8.3: Fair Value Measurement Using Significant Unobservable Inputs (Level 3)
Contingent Consideration
(in thousands)
Opening contingent consideration as of September 30, 2022 $ 16,236 
Adjustments to fair value recorded in the period 1,202 
Cash payments (4,041)
Foreign currency translations 257 
Closing contingent consideration as of March 31, 2023 $ 13,654