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Fair Value of Financial Instruments and Derivative Instruments | 12 Months Ended
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Dec. 31, 2016
Notes To Consolidated Financial Statements |
Fair Value of Financial Instruments and Derivative Instruments | 13. Fair Value of Financial Instruments and Derivatives Instruments Cash and cash equivalents and restricted cash, over-the-counter foreign exchange forward contracts and interest rate derivatives are recorded at fair value. The carrying values of the current financial assets and current financial liabilities are reasonable estimates of their fair value due to the short-term nature of these financial instruments. Cash and cash equivalents and restricted cash are considered Level 1 items as they represent liquid assets with short-term maturities. The fair values of the variable interest long-term debt approximate the recorded values, due to their variable interest rates. The fair value of the fixed interest long-term debt is estimated using prevailing market rates as of the period end. We believe the terms of our loans are similar to those that could be procured as of December 31, 2016. The fair values of the long-term debt are disclosed in Note 7. Derivative instruments The Company enters into interest rate swap transactions to manage interest costs and the risk associated with changing interest rates with respect to its variable interest rate loans and credit facilities. The Company, from time to time, may also enter into foreign exchange forward contracts to create economic hedges for its exposure to currency exchange risk on payments relating to acquisition of vessels and on certain loan obligations or for trading purposes. Foreign exchange forward contracts are agreements entered into with a bank to exchange, at a specified future date, currencies of different countries at a specif ic rate. As of December 31, 2015 and 2016, the Company had no outstanding derivative instruments relating to currency exchange contracts. The Company's interest rate swaps did not qualify for hedge accounting. The Company determines the fair market value of the interest rate swaps at the end of every period and accordingly records the resulting unrealized loss/gain during the period in the consolidated statement of operations. Information on the location and amounts of derivative fair values in the consolidated balance sheets and derivative gains/losses in the consolidated statements of operations are shown below:
Derivatives not designated as hedging instruments |  |  |  |  |  |  |
|  |  |  | Asset Derivatives |  | Liability Derivatives
Fair Values | Fair Values
Type of Contract |  | Balance sheet location |  | December 31, |  | December 31, |  | December 31, |  | December 31,
2015 | 2016 | 2015 | 2016
Interest Rate |  | Derivative assets /Non-current assets |  | $ | 181 |  | $ | 88 |  | $ | — |  | $ | —
Interest Rate |  | Derivative liabilities / Current liabilities |  |  | — |  |  | — |  |  | 318 |  |  | 17
Interest Rate |  | Derivative liabilities / Non-current liabilities |  |  | — |  |  | — |  |  | 360 |  |  | 157
|  | Total Derivatives |  | $ | 181 |  | $ | 88 |  | $ | 678 |  | $ | 174
|  | Amount of Loss Recognized on Derivatives
|  | Year ended December 31,
|  | 2015 |  | 2016
Interest Rate Contracts |  | $ | (1,676) |  | $ | (620)
Net Loss Recognized |  | $ | (1,676) |  | $ | (620)
The gain or loss is recognized in the consolidated statement of operations and is presented in Other (Expense)/Income – Loss on derivatives. The Company's interest rate derivative instruments are pay-fixed, receive-variable interest rate swaps based on the USD LIBOR swap rate. The fair value of the interest rate swaps is determined using a discounted cash flow approach based on market-based LIBOR swap yield curves and take into account the credit risk of the financial institutions that are counterparties in the interest rate swaps. LIBOR swap rates are observable at commonly quoted intervals for the full terms of the swaps and therefore are considered Level 2 items in accordance with the fair value hierarchy. The following table summarizes the valuation of the Company's financial ins truments as of December 31, 2015 and 201 6.
|  | Significant Other Observable Inputs |  |
(Level 2) |
|  | December 31, |  |
|  | 2015 |  | 2016 |  |
Derivative instruments – asset position |  | $ | 181 |  | $ | 88 |  |
Derivative instruments – liability position |  |  | 678 |  |  | 174 |  |
As of December 31, 2015 and 2016, no fair value measure ments for assets or liabilities under Level 3 were recognized in the Company's consolidated balance sheet. Interest Rate Derivatives Details of interest rate swap transactions entered into with certain banks in respect of certain loans and credit facilities as of December 31, 2015 and 2016 are presented in the table below:
|  |  |  |  |  |  |  | Notional amount
Loan or Credit |  | Inception |  | Expiry |  | Fixed |  | December 31, |  | December 31,
Facility (1) | Rate | 2015 | 2016
Pelea |  | December 15, 2011 |  | December 14, 2016 |  |  | 2.0500% |  |  | 28,122 |  |  | -
Maxdekatria |  | September 28, 2012 |  | September 28, 2017 |  |  | 0.9000% |  |  | 18,400 |  |  | 16,800
Marindou |  | January 14, 2013 |  | January 16, 2018 |  |  | 1.6000% |  |  | 24,321 |  |  | 21,215
Petra |  | January 18, 2013 |  | January 18, 2018 |  |  | 0.9800% |  |  | 14,000 |  |  | 14,000
Marinouki |  | March 05, 2013 |  | March 05, 2018 |  |  | 1.4800% |  |  | 20,789 |  |  | 19,035
Pemer |  | June 07, 2013 |  | March 07, 2018 |  |  | 0.9475% |  |  | 14,000 |  |  | 14,000
Avstes |  | July 18, 2013 |  | April 18, 2018 |  |  | 1.3500% |  |  | 14,000 |  |  | 14,000
Shikoku |  | August 28, 2013 |  | August 28, 2018 |  |  | 1.2500% |  |  | 14,933 |  |  | 13,067
Total |  |  |  |  |  |  |  |  | $ | 148,565 |  | $ | 112,117
(1) Under all above swap transactions, the bank effects quarterly floating-rate payments to the Company for the relevant amount based on the three-month USD LIBOR, and the Company effects quarterly payments to the bank on the relevant amount at the respective fixed rates. The notional amounts of the above transactions are reduced during the term of the swap transactions based on the expected principal outstanding under the respective facility. Asset Measured at Fair Value on a Non-recurring Basis Assets held for sale: As discussed in Notes 4 and 6, the vessels Stalo and Kypros Unity, classified as assets held for sale as of December 31, 2015, were measured at the lower of their carrying amount or fair value less the cost to sell. Details of the impairment charge for each vessel are noted in the table below.
|  | Significant Other Observable Inputs (Level 2) |  | Loss
|  |  | December 31, 2015 |  |  | December 31, 2015
M/V Stalo |  | $ | 10,000 |  | $ | 7,185
M/V Kypros Unity |  |  | 21,750 |  |  | 5,714
Total |  | $ | 31,750 |  | $ | 12,899
The fair value of each vessel was based on the Company's best estimate of the fair value of each vessel on a charter free basis, and were supported by vessel valuations obtained from independent third party shipbrokers as of December 31, 2015, which were mainly based on recent sales and purchase transactions of similar vessels. No assets were classified as assets held for sale as of December 31, 2016. Liability directly associated with assets held for sale: The fair value of the l iability directly associated with assets held for sale of $16,724 as of December 31, 2015, relates to the long-term debt, net of deferred financing costs, of vessel Kypros Unity, which approximated its carrying value, predominantly due to the variable interest rate. This long-term debt wa s considered Level 2 item in accordance with the fair value hierarchy.

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