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Financial instruments | 12 Months Ended
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Dec. 31, 2011
Financial instruments | 21. Financial instruments Credit risk: The Company is not exposed to significant credit risk on its retail customer accounts as its policy is to cease supply of water to customers’ accounts that are more than 45 days overdue. The Company’s exposure to credit risk is concentrated on receivables from its Bulk water customers. Management considers these receivables fully collectible and therefore the Company has not recorded an allowance for these receivables. All other accounts receivable are current or an allowance has been made for collection as of December 31, 2011. Interest rate risk: Substantially all of the Company’s outstanding debt consists of fixed rate obligations and therefore the Company is not subject to interest-rate risk arising from fluctuations of LIBOR or prime lending rates. Foreign exchange risk: All relevant foreign currencies other than the Mexican peso and the Euro have fixed exchange rates to the United States dollar as detailed under the foreign currency accounting policy note. If any of these fixed exchange rates become floating exchange rates, the Company’s consolidated results of operations could be adversely affected. Fair values: As of December 31, 2011 and 2010, the carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and other liabilities and dividends payable approximate their fair values due to the short term maturities of these instruments. Management considers that the carrying amounts for loans receivable and long term debt as of December 31, 2011 approximate their fair value. Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The guidance also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability. The guidance establishes three levels of inputs that may be used to measure fair value: Level 1 — Quoted prices in active markets for identical assets or liabilities. Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurements. The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. The following table presents the Company’s fair value hierarchy for assets and liabilities measured at fair value as of December 31, 2011 and 2010:
|  | December 31, 2011 |
|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Recurring |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents |  | $ | 16,177,462 |  |  | $ | - |  |  | $ | - |  |  | $ | 16,177,462 |
Restricted cash |  |  | 7,500,000 |  |  |  | - |  |  |  | - |  |  |  | 7,500,000 |
Marketable securities |  |  | 8,496,372 |  |  |  | - |  |  |  | - |  |  |  | 8,496,372 |
Total Recurring |  | $ | 32,173,834 |  |  | $ | - |  |  | $ | - |  |  | $ | 32,173,834 |
Nonrecurring |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Investment in affiliate |  | $ | - |  |  | $ | - |  |  | $ | 6,634,598 |  |  | $ | 6,634,598 |
|  | December 31, 2010 |
|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Recurring |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents |  | $ | 27,413,838 |  |  | $ | - |  |  | $ | - |  |  | $ | 27,413,838 |
Nonrecurring |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Investment in affiliate |  | $ | - |  |  | $ | - |  |  | $ | 7,812,523 |  |  | $ | 7,812,523 |
A reconciliation of the beginning and ending balances for Level 3 investments for the year ended December 31, 2011:
Balance as of December 31, 2010 |  | $ | 7,812,523 |
Equity in earnings of OC-BVI |  |  | 838,652 |
Distribution of earnings from OC-BVI paid and accrued |  |  | (316,256 | )
Principal and interest payments received on loan receivable from OC-BVI |  |  | (1,700,321 | )
Balance as of December 31, 2011 |  | $ | 6,634,598

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- Definition The entire disclosure for financial instruments. This disclosure includes, but is not limited to, fair value measurements of short and long term marketable securities, international currencies forward contracts, and auction rate securities. Financial instruments may include hedging and non-hedging currency exchange instruments, derivatives, securitizations and securities available for sale at fair value. Also included are investment results, realized and unrealized gains and losses as well as impairments and risk management disclosures. + References No definition available. + Details
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