content_image/1060133.jpg content_image/1060121.jpg
## 6. FAIR VALUE MEASUREMENTS 

## THE HERSHEY COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (amounts in thousands, except share data or if otherwise indicated) 

Accounting guidance on fair value measurements requires that financial assets and liabilities be classified and disclosed in one of the following categories of the fair value hierarchy: 

Level 1  – Based on unadjusted quoted prices for identical assets or liabilities in an active market. 

Level 2  – Based on observable market-based inputs or unobservable inputs that are corroborated by market data. 

Level 3  – Based on unobservable inputs that reflect the entity's own assumptions about the assumptions that a market participant would use in pricing the asset or liability. 

We did not have any Level 3 financial assets or liabilities, nor were there any transfers between levels during the periods presented. 

The following table presents assets and liabilities that were measured at fair value in the Consolidated Balance Sheets on a recurring basis as of December 31, 2020 and 2019: 

<img src='content_image/1060133.jpg'>

(1) The fair value of foreign currency forward exchange contracts is the difference between the contract and current market foreign currency exchange rates at the end of the period. We estimate the fair value of foreign currency forward exchange contracts on a quarterly basis by obtaining market quotes of spot and forward rates for contracts with similar terms, adjusted where necessary for maturity differences. 

(2) The fair value of interest rate swap agreements represents the difference in the present value of cash flows calculated at the contracted interest rates and at current market interest rates at the end of the period. We calculate the fair value of interest rate swap agreements quarterly based on the quoted market price for the same or similar financial instruments. 

(3) The fair value of deferred compensation derivatives is based on quoted prices for market interest rates and a broad market equity index. 

(4) The fair value of commodities futures and options contracts is based on quoted market prices. 

<img src='content_image/1060121.jpg'>

