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Fair value measurements | 12 Months Ended
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Dec. 31, 2012
Fair value measurements [Abstract] |
Fair value measurements | 2. Fair value measurements Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement hierarchy prioritizes the inputs to valuation techniques used to measure fair value as follows:
• |  | Level 1: Valuations based on inputs such as quoted prices for identical assets or liabilities in active markets that the entity has the ability to access.
• |  | Level 2: Valuations based on inputs other than level 1 inputs 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 data for substantially the full term of the assets or liabilities.
• |  | Level 3: Valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). A financial instrument’s fair value classification is based on the lowest level of any input that is significant in the fair value measurement hierarchy. Financial assets and financial liabilities measured at fair value on a recurring basis Investments in money market funds (as part of our cash and cash equivalents) have fair value measurements which are all based on quoted prices for identical assets or liabilities. Our available-for sale financial instruments consist of Dutch Treasury Certificates and deposits with the Dutch government. Dutch Treasury Certificates are traded in an active market and the fair value is determined based on quoted market prices for identical assets or liabilities. The fair value of deposits is determined with reference to quoted market prices for similar assets or discounted cash flow analysis. The principal market in which we execute our derivative contracts is the institutional market in an over-the-counter environment with a high level of price transparency. The market participants usually are large commercial banks. The valuation inputs for our derivative contracts are based on quoted prices and quoting pricing intervals from public data sources; they do not involve management judgement. The valuation technique used to determine the fair value of forward foreign exchange contracts (used for hedging purposes) approximates the Net Present Value technique (“NPV”) which is the estimated amount that a bank would receive or pay to terminate the forward foreign exchange contracts at the reporting date, taking into account current interest rates and current exchange rates. The valuation technique used to determine the fair value of interest rate swaps (used for hedging purposes) is the Net Present Value technique, which is the estimated amount that a bank would receive or pay to terminate the swap agreements at the reporting date, taking into account current interest rates. Our 5.75 percent senior notes due 2017 (“Eurobond”) serve as a hedged item in a fair value hedge relationship in which we hedge the variability of changes in the fair value of our Eurobond due to changes in market interest rates with interest rate swaps. The fair value changes of these interest rate swaps are recorded on the balance sheet under derivative financial instruments (within other current assets and other non-current assets) and the carrying amount of the Eurobond is adjusted for these fair value changes only. For the actual fair value, including credit risk considerations, see Note 14. The following table presents our financial assets and financial liabilities that are measured at fair value on a recurring basis:
As of December 31, 2012 (in thousands) |  | Level 1 EUR |  | Level 2 EUR |  | Level 3 EUR |  | Total EUR |
Assets |  |  |  |  |  |  |  |  |  |
Derivative financial instruments 1 |  | - |  | 151,748 |  | - |  |  | 151,748 |
Money market funds 2 |  | 385,420 |  | - |  | - |  |  | 385,420 |
Short-term investments 3 |  | 279,988 |  | 650,017 |  | - |  |  | 930,005 |
Total |  | 665,408 |  | 801,765 |  | - |  |  | 1,467,173 |
Liabilities |  |  |  |  |  |  |  |  |  |
Long-term debt 4 |  | - |  | 759,490 |  | - |  |  | 759,490 |
Derivative financial instruments 1 |  | - |  | 10,893 |  | - |  |  | 10,893 |
Total |  | - |  | 770,383 |  | - |  |  | 770,383 |
As of December 31, 2011 (in thousands) |  | Level 1 EUR |  | Level 2 EUR |  | Level 3 EUR |  | Total EUR |
Assets |  |  |  |  |  |  |  |  |  |
Derivative financial instruments 1 |  | - |  | 126,351 |  | - |  |  | 126,351 |
Money market funds 2 |  | 369,238 |  | - |  | - |  |  | 369,238 |
Total |  | 369,238 |  | 126,351 |  | - |  |  | 495,589 |
Liabilities |  |  |  |  |  |  |  |  |  |
Long-term debt 4 |  | - |  | 736,368 |  | - |  |  | 736,368 |
Derivative financial instruments 1 |  | - |  | 40,359 |  | - |  |  | 40,359 |
Total |  | - |  | 776,727 |  | - |  |  | 776,727 |
1 | Derivative financial instruments consist of forward foreign exchange contracts and interest rate swaps. See Note 3.
2 | Money market funds are part of our cash and cash equivalents.
3 | Short-term investments consist of Dutch Treasury Certificates and deposits with the Dutch government.
4 | Long-term debt mainly relates to our EUR 600.0 million Eurobond (fair value as at December 31, 2012: EUR 710.1 million (2011: EUR 695.6 million)) and excludes accrued interest. For further details see Note 14.
There were no transfers between levels during the years ended December 31, 2012 and December 31, 2011. Assets and liabilities measured at fair value on a nonrecurring basis In 2012, we recognized impairment charges of EUR 3.2 million (2011: EUR 12.3 million; 2010: EUR 8.6 million) on our property, plant and equipment, mainly relating to furniture, fixture and other equipment. Valuation of these assets is classified as Level 3 in the fair value hierarchy since their fair values were determined based on unobservable inputs. The impairment charge is determined based on the difference between the assets’ estimated fair value (being EUR 0.1 million) and their carrying amount. For further information, see Note 11. We did not recognize any impairment charges for goodwill and other intangible assets during 2012. See Notes 9 and 10 for more information.

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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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