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Fair value measurements | 3 Months Ended
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Mar. 31, 2012
Fair Value Disclosures [Abstract] |
Fair value measurements | Fair value measurements ASC 820, “Fair Value Measurements and Disclosures,” defines fair value, establishes a framework for measuring fair value, and delineates disclosures about fair value measurements. This guidance applies to a broad range of other existing accounting pronouncements that require or permit fair value measurements. ASC 820 defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” Fair value is an exit price and that exit price should reflect all the assumptions that market participants would use in pricing the asset or liability. Our fair value measurements include the consideration of market risks that other market participants might consider in pricing the particular asset or liability, specifically non-performance risk and counterparty credit risk. Consideration of the non-performance risk and counterparty credit risk are used to establish the appropriate risk-adjusted discount rates used in our fair value measurements. The following section describes the valuation methodology used to measure our financial assets and liabilities that were accounted for at fair value.
Overview of Century’s valuation methodology
| Level | Significant inputs
Cash equivalents | 1 | Quoted market prices
Trust assets (1) | 1 | Quoted market prices
Surety bonds | 1 | Quoted market prices
Primary aluminum put option contracts | 2 | Quoted London Metal Exchange (“LME”) forward market prices, historical volatility measurements and risk-adjusted discount rates
Natural gas forward financial contracts | 2 | Quoted natural gas forward market prices for primary aluminum and risk-adjusted discount rates
Power contract | 3 | Quoted LME forward market prices, power tariff prices, management’s estimate of future power usage and risk-adjusted discount rates
E.ON U.S. (“E.ON”) contingent obligation | 3 | Quoted LME forward market prices for primary aluminum, management’s estimates of the LME forward market prices for primary aluminum for periods beyond the quoted periods and management’s estimate of future level of operations at Century Aluminum of Kentucky, our wholly owned subsidiary (“CAKY”)
Primary aluminum sales premium contracts | 3 | Management’s estimates of future U.S. Midwest premium and risk-adjusted discount rates
(1) | Trust assets are currently invested in money market funds. The trust has sole authority to invest the funds in secure interest producing investments consisting of short-term securities issued or guaranteed by the United States government or cash and cash equivalents.
Fair value measurements The following table sets forth by level within the ASC 820 fair value hierarchy our financial assets and liabilities that are accounted for at fair value on a recurring basis. As required by ASC 820, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of fair value assets and liabilities and the placement within the fair value hierarchy levels.
Recurring Fair Value Measurements | As of March 31, 2012
| Level 1 | Level 2 | Level 3 | Total
ASSETS: |  |  |  |
Cash equivalents | $ | 175,321 |  | $ | — |  | $ | — |  | $ | 175,321 |
Trust assets | 15,572 |  | — |  | — |  | 15,572 |
Surety bond – workers comp insurance | 2,391 |  | — |  | — |  | 2,391 |
Primary aluminum put option contracts | — |  | 2,981 |  | — |  | 2,981 |
Power contract | — |  | — |  | 53 |  | 53 |
TOTAL | $ | 193,284 |  | $ | 2,981 |  | $ | 53 |  | $ | 196,318 |
LIABILITIES: |  |  |  |
Natural gas forward financial purchase contracts | $ | — |  | $ | 236 |  | $ | — |  | $ | 236 |
E.ON contingent obligation – net | — |  | — |  | 14,310 |  | 14,310 |
Primary aluminum sales contract – premium collar | — |  | — |  | 1,169 |  | 1,169 |
TOTAL | $ | — |  | $ | 236 |  | $ | 15,479 |  | $ | 15,715 |
Recurring Fair Value Measurements | As of December 31, 2011
| Level 1 | Level 2 | Level 3 | Total
ASSETS: |  |  |  |
Cash equivalents | $ | 176,284 |  | $ | — |  | $ | — |  | $ | 176,284 |
Trust assets | 15,889 |  | — |  | — |  | 15,889 |
Surety bonds – workers comp insurance | 2,391 |  | — |  | — |  | 2,391 |
Primary aluminum put option contracts | — |  | 9,331 |  | — |  | 9,331 |
Power contract | — |  | — |  | 106 |  | 106 |
TOTAL | $ | 194,564 |  | $ | 9,331 |  | $ | 106 |  | $ | 204,001 |
LIABILITIES: |  |  |  |
Natural gas forward financial purchase contracts | $ | — |  | $ | 281 |  | $ | — |  | $ | 281 |
E.ON contingent obligation – net | — |  | — |  | 13,958 |  | 13,958 |
Primary aluminum sales contract – premium collar | — |  | — |  | 908 |  | 908 |
TOTAL | $ | — |  | $ | 281 |  | $ | 14,866 |  | $ | 15,147 |
Change in Level 3 Fair Value Measurements during the three months ended March 31,
| Derivative liabilities - net
| 2012 | 2011
Beginning balance, January 1, | $ | (14,760 | ) | $ | (13,802 | )
Total loss (realized/unrealized) included in earnings | (613 | ) | (473 | )
Settlements | (53 | ) | (36 | )
Ending balance, March 31, | $ | (15,426 | ) | $ | (14,311 | )
Amount of total loss included in earnings attributable to the change in unrealized losses (gains) relating to assets and liabilities held at March 31, | $ | 613 |  | $ | 473 |
The net gain (loss) on our derivative assets and liabilities is recorded in our statement of operations under net loss on forward contracts. See Note 3 Derivative and hedging instruments for the location of our Level 3 derivative assets and liabilities within our consolidated balance sheets.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19296-110258 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 159 -Paragraph 17-22, 27, 28 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=6947722&loc=d3e13433-108611 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 15C, 15D -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 28 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=6947722&loc=d3e13504-108611 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 15A -Subparagraph a-d -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=6947722&loc=d3e13537-108611 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 133 -Paragraph 44A, 44B -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19207-110258 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 3, 10, 14, 15 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 15B -Subparagraph a, b -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 157 -Paragraph 32, 33, 34 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. + Details
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