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Fair Value Measurements
 6 Months Ended
Jun. 30, 2011
Fair Value Measurements  
Fair Value Measurements
3. Fair Value Measurements

The Company records certain of its financial assets and liabilities at fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability, in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants at the measurement date.

The authoritative guidance establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. These levels are: Level 1 (inputs are quoted prices in active markets for identical assets or liabilities); Level 2 (inputs are other than quoted prices that are observable, either directly or indirectly through corroboration with observable market data); and Level 3 (inputs are unobservable, with little or no market data that exists, such as internal financial forecasts). The Company is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

 

The following table summarizes information regarding the Company's financial assets and financial liabilities that are measured at fair value on a recurring basis (in thousands):

 

Description    Balance at
June 30,
2011		     Level 1      Level 2     Level 3  

Financial Assets

          

Escrow account

    $ 2,726      $ 2,726       $ —        $ —     

Deferred compensation plan assets

      4,604        4,604         —          —     
  

 

 

    

 

 

     

 

 

    

 

 

  

Total Assets

    $ 7,330      $ 7,330       $ —        $ —     
  

 

 

    

 

 

     

 

 

    

 

 

  

Financial Liabilities

          

Derivatives

    $ (747 )    $ —         $ (747 )    $ —     
  

 

 

    

 

 

     

 

 

    

 

 

  
Description    Balance at
December 31,
2010		     Level 1      Level 2     Level 3  

Financial Assets

          

Escrow account

    $ 2,726      $ 2,726       $ —        $ —     

Deferred compensation plan assets

      4,560        4,560         —          —     
  

 

 

    

 

 

     

 

 

    

 

 

  

Total Assets

    $ 7,286      $ 7,286       $ —        $ —     
  

 

 

    

 

 

     

 

 

    

 

 

  

Financial Liabilities

          

Derivatives

    $ (622 )    $ —         $ (622 )    $ —     
  

 

 

    

 

 

     

 

 

    

 

 

  

The escrow account, consisting of a money market mutual fund, is valued using quoted market prices in active markets classified as Level 1 within the fair value hierarchy. The deferred compensation plan assets consists of cash and several publicly traded stock and bond mutual funds, valued using quoted market prices in active markets classified as Level 1 within the fair value hierarchy. The Company's derivatives consist of foreign currency cash flow hedges and are valued using various pricing models or discounted cash flow analyses that incorporate observable market parameters, such as interest rate yield curves and currency rates, and are classified as Level 2 within the valuation hierarchy. Derivative valuations incorporate credit risk adjustments that are necessary to reflect the probability of default by the counterparty or the Company.

The net carrying amounts of cash and cash equivalents, trade and other receivables, refundable income taxes, accounts payable, accrued liabilities and note payable to financial institution approximate fair value due to the short-term nature of these instruments. Similarly, the Company believes the carrying value of its long-term debt also approximates fair value in that the interest rates and scheduled maturities applicable of the outstanding borrowings approximate interest rates and terms available for the same or similar loans.

Financial Assets Measured and Recorded at Fair Value on a Non-Recurring Basis

We measure our financial assets, including notes receivable and non-marketable equity method investments, at fair value on a non-recurring basis when they are determined to be other-than-temporarily impaired. The fair value of these assets is determined using Level 3 unobservable inputs due to the absence of observable market inputs and the valuations requiring management judgment. During the three and six months ended June 30, 2011, we recognized $3.2 million of impairment charges on notes receivable. There were no impairment charges taken during the three and six months ended June 30, 2010. The impairment charges were included in other expense (income) in the consolidated statement of income. All notes receivable are categorized as Level 3 in the fair value hierarchy.