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FINANCIAL INSTRUMENTS AND OTHER FAIR VALUE DISCLOSURES | 12 Months Ended
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Dec. 31, 2013
FINANCIAL INSTRUMENTS AND OTHER FAIR VALUE DISCLOSURES [Abstract] |
FINANCIAL INSTRUMENTS AND OTHER FAIR VALUE DISCLOSURES | 18. FINANCIAL INSTRUMENTS AND OTHER FAIR VALUE DISCLOSURES The Company did not hold any material derivative instruments during 2012 and 2011, or as of December 31, 2012. In 2013 the Company received warrants as compensation for its contribution in coordinating the establishment of NAO. The warrants hold no material value, and have low associated risk. For further background and details related to the warrants please see Note 10. The majority of NAT and its subsidiaries' transactions, assets and liabilities are denominated in United States dollars, the functional currency of the Company. There is no significant risk that currency fluctuations will have a negative effect on the value of the Company's cash flows. The following methods and assumptions were used to estimate the fair value of each class of financial instruments and other financial assets.
- | The carrying value of cash and cash equivalents and marketable securities, is a reasonable estimate of fair value.
- | The estimated fair value for the working capital, cooperative arrangements is consider to be equal to the carrying values since it is not possible to estimate the time or period of repayment, and the effect of this discounting the outstanding balance is not expected to be material as compared to carrying value.
- | The estimated fair value for the long-term debt is considered to be equal to the carrying values since it bears variable interest rates.
- | The estimated fair value of the warrants in NAO was calculated based on a Black-Scholes model using comparative market data for other companies in the PSV segment to estimate volatility, and by assigning an estimated probability for achieving the exercise levels presented in Note 10.
The Company categorizes its fair value estimates using a fair value hierarchy based on the inputs used to measure fair value for those assets that are recorded on the balance sheet at fair value. The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value as follows: Level 1. Observable inputs such as quoted prices in active markets.
Level 2. | Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3. | Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
The carrying value and estimated fair value of the Company`s financial instruments at December 31, 2013 and 2012 are as follows:
All figures in USD '000 |  | Fair Value Hierarchy Level |  |  | 2013 Fair Value |  |  | 2013 Carrying Value |  |  | 2012 Fair Value |  |  | 2012 Carrying Value |
Cash and Cash Equivalents |  |  | 1 |  |  |  | 65,675 |  |  |  | 65,675 |  |  |  | 55,511 |  |  |  | 55,511 |
Marketable Securities |  |  | 1 |  |  |  | - |  |  |  | - |  |  |  | 549 |  |  |  | 549 |
Warrants in NAO |  |  | 3 |  |  |  | 915 |  |  |  | 915 |  |  |  | - |  |  |  | - |
Working capital, Related Party |  |  |  |  |  |  | - |  |  |  | - |  |  |  | 36,987 |  |  |  | 36,987 |
Credit Facility |  |  |  |  |  |  | (250,000 | ) |  |  | (250,000 | ) |  |  | (250,000 | ) |  |  | (250,000 | )
The valuation of vessels measured at fair value on a non-recurring basis as of the valuation date: In accordance with the provisions of relevant guidance, a long-lived asset held and used with a carrying amount of $41.4 million was written down to its fair value of $29.4 million as determined based on estimated discounted operating cashflow, using the income approach, resulting in an impairment charge of $12.0 million, which was included in the statement of operations for December 31, 2012. The input factors to the discounted cash flow model are similar to those used for the undiscounted cash flow when testing for impairment (see Note 2) and are significantly based on unobservable inputs (Level 3) assessed from the perspective of a willing market participant.

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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 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=28364263&loc=d3e13537-108611 Reference 2: 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=28364263&loc=d3e13433-108611 Reference 3: 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 4: 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=25499696&loc=d3e19207-110258 Reference 5: 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 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=28364263&loc=d3e13504-108611 + Details
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