Fair Value of Financial Assets and Financial Liabilities

3 Months Ended

Apr. 30, 2011

Fair Value of Financial Assets and Financial Liabilities

Fair Value of Financial Assets and Financial Liabilities

5. Fair Value of Financial Assets and Financial Liabilities

The Company utilizes a hierarchy that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques (market approach, income approach and cost approach that relate to its financial assets and financial liabilities). The levels of the hierarchy are described as follows:

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Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities.

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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.

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Level 3: Unobservable inputs that reflect the reporting entity's own assumptions.

Management's assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of financial assets and financial liabilities and their placement within the fair value hierarchy. The level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company recognizes transfers between levels at the end of each reporting period. As of April 30, 2011 and April 30, 2010 there were no transfers of assets between levels. The Company's financial assets that are accounted for at fair value on a recurring basis are presented in the tables below:


	Marketable Securities Fair Value as of April 30, 2011
	Level 1		Level 2		Level 3		Total
Assets:
Corporate bonds	$	138,799	$	—	$	—	$	138,799
Municipal and pre-refunded municipal bonds		—		133,338		—		133,338
Federal government agencies		71,628		—		—		71,628
Auction rate securities		—		—		26,716		26,716
Treasury bills		19,753		—		—		19,753
FDIC insured corporate bonds		10,500		—		—		10,500
Variable demand notes		—		1,900		—		1,900

	$	240,680	$	135,238	$	26,716	$	402,634


	Marketable Securities Fair Value as of January 31, 2011
	Level 1		Level 2		Level 3		Total
Assets:
Corporate bonds	$	137,559	$	—	$	—	$	137,559
Municipal and pre-refunded municipal bonds		—		186,404		—		186,404
Federal government agencies		59,175		—		—		59,175
Auction rate securities		—		—		29,462		29,462
Treasury bills		30,353		—		—		30,353
FDIC insured corporate bonds		23,555		—		—		23,555
Variable demand notes		—		1,900		—		1,900

	$	250,642	$	188,304	$	29,462	$	468,408


	Marketable Securities Fair Value as of April 30, 2010
	Level 1		Level 2		Level 3		Total
Assets:
Municipal and pre-refunded municipal bonds	$	—	$	151,580	$	—	$	151,580
Federal government agencies		227,517		—		—		227,517
Auction rate securities		—		—		33,505		33,505
Treasury bills		49,737		—		—		49,737
FDIC insured corporate bonds		51,038		—		—		51,038

	$	328,292	$	151,580	$	33,505	$	513,377

As of April 30, 2011, all of the Company's Level 3 financial instruments consisted of ARS that failed at auction. There was insufficient observable market information to determine fair value for these financial instruments. The Company estimated the fair values for these securities by incorporating assumptions that market participants would use in their estimates of fair value. Some of these assumptions included credit quality, collateralization, final stated maturity, estimates of the probability of being called or becoming liquid prior to final maturity, redemptions of similar ARS, previous market activity for the same investment security, impact due to extended periods of maximum auction rates and valuation models. As a result of this review, the Company determined its ARS to have a temporary impairment of $3,434, $3,788, and $4,120 as of April 30, 2011, January 31, 2011 and April 30, 2010, respectively. The estimated fair values could change significantly based on future market conditions. The Company will continue to assess the fair value of its ARS for substantive changes in relevant market conditions, changes in its financial condition or other changes that may alter its estimates described above. Failed ARS represented approximately 4.1% of the Company's total cash, cash equivalents and marketable securities as of April 30, 2011.

Below is a reconciliation of the beginning and ending ARS balances that the Company valued using a Level 3 valuation for the periods shown.


	Three Months Ended April 30, 2011			Fiscal Year Ended January 31, 2011			Three Months Ended April 30, 2010
Balance at beginning of period	$	29,462		$	33,505		$	33,505
Total gains (losses) realized/unrealized:
Included in earnings		—			—			—
Included in other comprehensive income		354			332			—
Purchases, issuances and settlements		(3,100	)		(4,375	)		—
Transfers in and/or out of Level 3		—			—			—

Balance at end of period	$	26,716		$	29,462		$	33,505

Unrealized losses included in accumulated other comprehensive income related to assets still held at reporting date	$	(3,434	)	$	(3,788	)	$	(4,120	)

Total gains for the period included in earnings attributable to the change in unrealized gains or losses related to assets still held at reporting date	$	—		$	—		$	—

- Definition

This element represents the disclosure related to the fair value measurement of assets and liabilities which includes [financial] instruments measured at fair value that are classified in stockholders' equity. Such assets and liabilities may be measured on a recurring or nonrecurring basis. The disclosures which may be required or desired include: (1) for assets and liabilities measured on a recurring basis, disclosure may include: (a) the fair value measurements at the reporting date; (b) the level within the fair value hierarchy in which the fair value measurements in their entirety fall, segregating fair value measurements using quoted prices in active markets for identical assets or liabilities (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3); (c) for fair value measurements using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (i) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (ii) purchases, sales, issuances, and settlements (net); (iii) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs); (d) the amount of the total gains or losses for the period in subparagraph (c) (i) above included in earnings (or changes in net assets) that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date and a description of where those unrealized gains or losses are reported in the statement of income (or activities); (e) the valuation technique(s) used to measure fair value and a discussion of changes in valuation techniques, if any, during the period and (2) for assets and liabilities that are measured at fair value on a nonrecurring basis (for example, impaired assets) disclosure may include, in addition to (a) above: (a) the reasons for the fair value measurements recorded; (b) the same as (b) above; (c) for fair value measurements using significant unobservable inputs (Level 3), a description of the inputs and the information used to develop the inputs; and (d) the valuation technique(s) used to measure fair value and a discussion of changes, if any, in the valuation technique(s) used to measure similar assets and/or liabilities in prior periods.

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