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FAIR VALUE MEASUREMENTS | 12 Months Ended
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Sep. 30, 2012
FAIR VALUE MEASUREMENTS |
FAIR VALUE MEASUREMENTS |
14. FAIR VALUE MEASUREMENTS Assets and Liabilities Measured at Fair Value on a Recurring Basis Barnwell does not have any assets and liabilities that are required to be remeasured on a recurring basis. Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis Certain of our assets and liabilities are reported at fair value in the accompanying balance sheets on a nonrecurring basis; that is, the assets and liabilities are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances. The following tables provide carrying value and fair value measurement information for nonrecurring fair value measurements recorded during the years ended September 30, 2012 and 2011: Year ended September 30, 2012:
|  |  |  | Fair Value Measurements Using*: |  |  |
|  | Carrying |  | Quoted |  | Significant |  |  |  | Total Reduction of |
|  | Amount |  | Prices in |  | Other |  | Significant |  | Carrying Value |
|  | as of |  | Active |  | Observable |  | Unobservable |  | for the |
|  | September 30, |  | Markets |  | Inputs |  | Inputs |  | year ended |
|  | 2012 |  | (Level 1) |  | (Level 2) |  | (Level 3) |  | September 30, 2012 |
Real estate held for sale |  | $ | 5,309,000 |  | $ | - |  | $ | 5,309,000 |  | $ | - |  | $ 1,854,000 |
Investment in joint ventures |  | $ | - |  | $ | - |  | $ | - |  | $ | - |  | $ 1,754,000 |
Lot acquisition rights – Mauka Lands |  | $ | - |  | $ | - |  | $ | - |  | $ | - |  | $ 488,000 |
Year ended September 30, 2011:
|  |  |  | Fair Value Measurements Using*: |  |  |
|  | Carrying |  | Quoted |  | Significant |  |  |  | Total Reduction of |
|  | Amount |  | Prices in |  | Other |  | Significant |  | Carrying Value |
|  | as of |  | Active |  | Observable |  | Unobservable |  | for the |
|  | September 30, |  | Markets |  | Inputs |  | Inputs |  | year ended |
|  | 2011 |  | (Level 1) |  | (Level 2) |  | (Level 3) |  | September 30, 2011 |
Real estate held for sale |  | $ | 12,640,000 |  | $ | - |  | $ | 12,640,000 |  | $ | - |  | $ | 418,000 |
Investment in residential parcels |  | $ | 2,331,000 |  | $ | - |  | $ | 2,331,000 |  | $ | - |  | $ | 689,000 |
Investment in joint ventures |  | $ | 1,754,000 |  | $ | - |  | $ | - |  | $ | 1,754,000 |  | $ | 121,000 |
* The fair values included in the tables above represent only those assets whose carrying values were adjusted to fair value in each respective period. The fair value of real estate held for sale for the year ended September 30, 2012 was based on the sales price of the home sold, which is similar and located adjacent to the remaining home. This fair value measurement has been classified as a Level 2 valuation. Due to recent uncertainty regarding the financial condition of the joint venture entities in which the Company has passive interests and the duration of current economic conditions and the corresponding impact of such conditions on the Company’s ability to recover its investment within the Company’s currently estimated holding period, the Company wrote off its remaining $1,754,000 investment in joint ventures in fiscal 2012 as management has concluded that there has been an other-than-temporary impairment of these investments. Due to recent heightened uncertainty regarding the likelihood of development of the Mauka Lands, and accordingly, the corresponding impact of such conditions on the Company’s ability to recover its investment in lot acquisition rights, the Company wrote off its remaining $488,000 investment in lot acquisition rights in fiscal 2012. For the year ended September 30, 2011, in determining the fair value of Barnwell’s real estate held for sale and investment in residential parcels, prices for comparable sales transactions were used by an independent real estate consulting and appraisal firm to estimate fair value. Such fair value measurements have been classified as Level 2 valuations. Kona Village Resort sustained considerable damage as a result of the March 2011 tsunami and subsequently shut down indefinitely. As a result of the resort’s shutdown, Barnwell determined that the fair value of its investment in Kona Village Resort was zero and wrote off its investment in Kona Village Investors, LLC. Barnwell estimates the fair value of asset retirement obligations based on the projected discounted future cash outflows required to settle abandonment and restoration liabilities. Such an estimate requires assumptions and judgments regarding the existence of liabilities, the amount and timing of cash outflows required to settle the liability, what constitutes adequate restoration, inflation factors, credit adjusted discount rates, and consideration of changes in legal, regulatory, environmental and political environments. Abandonment and restoration cost estimates are determined in conjunction with Barnwell’s reserve engineers based on historical information regarding costs incurred to abandon and restore similar well sites, information regarding current market conditions and costs, and knowledge of subject well sites and properties. Asset retirement obligation fair value measurements in the current period were Level 3 fair value measurements. As further described in Note 7, the Company recognizes the fair value of a liability for an asset retirement obligation in the period in which it is incurred if a reasonable estimate of fair value can be made. Asset retirement obligations are not measured at fair value subsequent to initial recognition. Fair Value of Financial Instruments The carrying values of cash and cash equivalents, accounts receivable, accounts payable, accrued current liabilities and payables to joint interest owners approximate their fair values due to the short-term nature of the instruments. The carrying value of long-term debt approximates fair value as the terms approximate current market terms for similar debt instruments of comparable risk and maturities.

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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 16 -URI http://asc.fasb.org/extlink&oid=7491637&loc=d3e13504-108611 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 15C, 15D -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. 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Reference 6: 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=7491637&loc=d3e13433-108611 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 159 -Paragraph 17-22, 27, 28 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. 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