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FAIR VALUE ACCOUNTING
 6 Months Ended
Jun. 30, 2012
FAIR VALUE ACCOUNTING  
FAIR VALUE ACCOUNTING

NOTE 12   FAIR VALUE ACCOUNTING

 

Fair value accounting establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.  The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).  The three levels of the fair value hierarchy are described below:

 

Level 1                  Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

 

Level 2                  Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and

 

Level 3                  Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

 

The following table identifies certain of the Company’s assets and liabilities measured at fair value on a recurring basis by level within the fair value hierarchy.  As required by accounting guidance, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

 

 

 

Fair Value as at June 30, 2012

 

 

 

Total

 

Level 1

 

Level 2

 

Level 3

 

 

 

(in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

23,398

 

$

23,398

 

$

—

 

$

—

 

Marketable equity securities

 

486

 

447

 

39

 

—

 

 

 

$

23,884

 

$

23,845

 

$

39

 

$

—

 

Liabilities:

 

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

8,223

 

$

—

 

$

8,223

 

$

—

 

 

 

 

Fair Value as at December 31, 2011

 

 

 

Total

 

Level 1

 

Level 2

 

Level 3

 

 

 

(in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

13,416

 

$

13,416

 

$

—

 

$

—

 

Short-term investments

 

3,933

 

3,933

 

—

 

—

 

Marketable equity securities

 

1,480

 

897

 

583

 

—

 

 

 

$

18,829

 

$

18,246

 

$

583

 

$

—

 

Liabilities:

 

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

5,612

 

$

—

 

$

5,612

 

$

—

 

 

 

The Company’s cash and cash equivalents is classified within Level 1 of the fair value hierarchy because it is valued using quoted market prices.  The fair value of this balance approximates the carrying amounts due to its short-term nature and historically negligible credit losses.  The cash equivalent instruments that are valued based on quoted market prices in active markets are primarily money market securities.

 

The Company’s marketable equity securities which are exchange traded are valued using quoted market prices in active markets and as such are classified within Level 1 of the fair value hierarchy.  The fair value of the marketable equity securities is calculated as the quoted market price of the marketable equity security multiplied by the quantity of shares held by the Company.  The other portion of the Company’s marketable equity securities, which are comprised of share purchase warrants not listed on a public exchange, are valued using option pricing models.  Valuation models require a variety of inputs, including strike price, contractual terms, market prices, measures of volatility and interest rate.  Because the inputs are derived from observable market data, the other portion of the marketable equity securities is classified within Level 2 of the fair value hierarchy.

 

The fair value of accounts payable and accrued liabilities approximates the carrying amounts due to their short-term nature.