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NOTE 16: FAIR VALUE
The fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets are marked to bid prices and financial liabilities are marked to offer prices. Fair value measurements do not include transaction costs. A fair value hierarchy is used to prioritize the quality and reliability of the information used to determine fair values of each financial instrument. Categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is defined into the following three categories:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs that are not corroborated by market data
The following table presents the Company’s hierarchy for its asset measured at fair value on a recurring basis as of December 31, 2011:
|
|
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Level 1
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Level 2
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|
Level 3
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|
|
|
|
|
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Quoted Prices
in Active
Markets for
Identical Assets
|
|
Significant
Other
Observable
Inputs
|
|
Significant
Unobservable
Inputs
|
|
Total
|
|
|
Investments available-for-sale
|
|
|
|
|
|
|
|
|
|
|
Municipal obligations
|
|
$
|
—
|
|
$
|
1,209
|
|
$
|
—
|
|
$
|
1,209
|
|
|
U.S. government security funds
|
|
983
|
|
—
|
|
—
|
|
983
|
|
|
Short-term deposits
|
|
—
|
|
3,104
|
|
—
|
|
3,104
|
|
|
Equity securities
|
|
381
|
|
—
|
|
—
|
|
381
|
|
|
Investment securities
|
|
1,429
|
|
—
|
|
—
|
|
1,429
|
|
|
Total assets measured at fair value on a recurring basis
|
|
$
|
2,793
|
|
$
|
4,313
|
|
$
|
—
|
|
$
|
7,106
|
|
The following table presents the Company’s hierarchy for its assets measured at fair value on a recurring basis as of December 31, 2010:
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
|
|
|
|
|
Quoted Prices
in Active
Markets for
Identical Assets
|
|
Significant
Other
Observable
Inputs
|
|
Significant
Unobservable
Inputs
|
|
Total
|
|
|
Investments available-for-sale
|
|
|
|
|
|
|
|
|
|
|
Municipal obligations
|
|
$
|
—
|
|
$
|
1,960
|
|
$
|
—
|
|
$
|
1,960
|
|
|
U.S. government security funds
|
|
974
|
|
—
|
|
—
|
|
974
|
|
|
Short-term deposits
|
|
—
|
|
3,148
|
|
—
|
|
3,148
|
|
|
Equity securities
|
|
388
|
|
—
|
|
—
|
|
388
|
|
|
Investment securities
|
|
1,778
|
|
—
|
|
—
|
|
1,778
|
|
|
Total assets measured at fair value on a recurring basis
|
|
$
|
3,140
|
|
$
|
5,108
|
|
$
|
—
|
|
$
|
8,248
|
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Investments available-for-sale — The majority of the Company’s investment portfolio consist of various fixed income securities such as U.S government funds, state and municipal bonds, mutual funds, short-term deposits and equity securities. The Level 1 securities are valued using quoted prices for identical assets in active markets including equity securities, U.S. government securities, and various mutual funds. The Level 2 securities include investments in state and municipal bonds whereby all significant inputs are observable or can be derived from or corroborated by observable market data for substantially the full term of the asset.
Investment securities — The majority of the Company’s trading portfolio consists of various marketable securities that are valued using quoted prices in active markets.
For the years ended December 31, 2011 and 2010, there were no fair value measurements using significant unobservable inputs (Level 3).
The carrying amounts reflected on the consolidated balance sheet for cash and cash equivalents, accounts and notes receivable, and accounts payable approximate fair value due to their short-term nature. The carrying amount reflected in the consolidated balance sheet for long-term debt approximates fair value due to the interest rate on the debt being variable based on current market rates. During the year ended December 31, 2011 and 2010, the Company did not have any write-offs related to the re-measurement of non-financial assets at fair value on a nonrecurring basis subsequent to their initial recognition.
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