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FAIR VALUE ACCOUNTING
 3 Months Ended
Mar. 31, 2013
FAIR VALUE ACCOUNTING  
FAIR VALUE ACCOUNTING

NOTE 10   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 the fair value of the Company’s financial assets and liabilities 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 March 31, 2013

 

 

 

Total

 

Level 1

 

Level 2

 

Level 3

 

 

 

(in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

45,122

 

$

45,122

 

$

—

 

$

—

 

 

 

$

45,122

 

$

45,122

 

$

—

 

$

—

 

Liabilities:

 

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

12,645

 

$

—

 

$

12,645

 

$

—

 

 

 

$

12,645

 

$

—

 

$

12,645

 

$

—

 

 

 

 

Fair Value as at December 31, 2012

 

 

 

Total

 

Level 1

 

Level 2

 

Level 3

 

 

 

(in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

70,921

 

$

70,921

 

$

—

 

$

—

 

 

 

$

70,921

 

$

70,921

 

$

—

 

$

—

 

Liabilities:

 

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

21,235

 

$

—

 

$

21,235

 

$

—

 

Litigation settlement liability

 

3,830

 

3,830

 

—

 

—

 

 

 

$

25,065

 

$

3,830

 

$

21,235

 

$

—

 

 

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 carrying value of this balance approximates its fair value 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 fair value of accounts payable and accrued liabilities approximates its carrying value due to their short-term nature.

 

The litigation settlement liability at December 31, 2012 represented the fair value of the 1,000,000 shares of the Company’s common stock that were required to be issued as part of the settlement with TNR Gold Corp. Since the Company’s common stock is quoted on an active market, the liability was classified within Level 1 of the fair value hierarchy.