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Fair value measurements
 12 Months Ended
Dec. 31, 2014
Fair Value Disclosures [Abstract]  
Fair value measurements
Fair value measurements

ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.  This pronouncement 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.
 
ASC 820 recognizes three valuation techniques: the market approach, income approach, and cost approach.  Valuation techniques used for fair value measurements are based upon observable and unobservable inputs.  Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our internal market assumptions.  These two types of inputs create the following fair value hierarchy:
 
•
Level 1 – Valuations are based on quoted prices for identical assets or liabilities in an active market.
•
Level 2 – Valuations are based on quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations for which all significant inputs are observable or can be corroborated by observable market data.
•
Level 3 – Assets or liabilities whose significant inputs are unobservable.  Valuations are determined using pricing models and discounted cash flow models and include management judgment and estimation which may be significant.
 
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
E.ON contingent obligation
3
Quoted LME forward market, management’s estimates of the LME forward market prices for periods beyond the quoted periods and management’s estimate of future level of operations at CAKY
Primary aluminum sales contract
3
Management’s estimates of future U.S. Midwest premium and risk-adjusted discount rates
Midwest premium contracts
3
Management’s estimates of future U.S. Midwest premium


(1)
Trust assets are currently invested in money market funds. These trust assets are held to fund the non-qualified supplemental executive pension benefit obligations for certain of our officers.  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
 
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.  Considerations 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 table sets forth our financial assets and liabilities that were accounted for at fair value on a recurring basis by the level of input within the ASC 820 fair value hierarchy.  As required by GAAP for fair value measurements and disclosures, 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. There were no transfers between Level 1 and 2 during the periods presented. There were no transfers into or out of Level 3 during the periods presented. It is our policy to recognize transfers into and transfers out of Level 3 as of the actual date of the event or change in circumstances that caused the transfer.
Recurring Fair Value Measurements
As of December 31, 2014
 
Level 1
Level 2
Level 3
Total
ASSETS:
 
 
 
 
Cash equivalents
$
137,712

$
—

$
—

$
137,712

Trust assets
8,067

—

—

8,067

Surety bonds
1,987

—

—

1,987

TOTAL
$
147,766

$
—

$
—

$
147,766

LIABILITIES:
 

 

 

 

E.ON contingent obligation – net (1)
$
—

$
—

$
—

$
—

TOTAL
$
—

$
—

$
—

$
—

Recurring Fair Value Measurements
As of December 31, 2013
 
Level 1
Level 2
Level 3
Total
ASSETS:
 
 
 
 
Cash equivalents
$
49,658

$
—

$
—

$
49,658

Trust assets
11,151

—

—

11,151

Surety bonds
2,002

—

—

2,002

Midwest premium contracts
—

—

140

140

TOTAL
$
62,811

$
—

$
140

$
62,951

LIABILITIES:
 

 

 

 

E.ON contingent obligation – net (1)
$
—

$
—

$
—

$
—

Primary aluminum sales contract
—

—

140

140

TOTAL
$
—

$
—

$
140

$
140

(1)
See Note 6 Debt for additional information about the E.ON contingent obligation.
Change in Level 3 Fair Value Measurements during the years ended December 31,
 
Derivative liabilities - net
 
2014
2013
Beginning balance, January 1,
$
—

$
(16,539
)
Total gain (loss) included in earnings
(940
)
16,539

Settlements
940

—

Ending balance, December 31,
$
—

$
—

Amount of gain included in earnings attributable to the change in unrealized losses relating to assets and liabilities held at December 31,
$
—

$
16,539


 
The net gain (loss) on our derivative assets and liabilities is recorded in our consolidated statements of operations under net gain (loss) on forward and derivative contracts.  See Note 5 Derivative and hedging instruments for the location of our Level 3 derivative assets and liabilities within our consolidated balance sheets.

Certain Financial Instruments

Certain of our financial instruments are reported at their carrying amount. We disclose the fair value measurements of our financial instruments which are reported at carrying amount. See Note 1 Summary of significant accounting policies for information about these financial instruments. The fair value of our 7.5% Notes due 2021 and our 7.5% Notes due 2014 was measured based on the latest available trading data as of the date presented. Although we use quoted market prices for identical debt instruments, the markets on which they trade are not considered active and are therefore considered Level 2 fair value measurements.