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FAIR VALUE MEASUREMENTS
 3 Months Ended
Mar. 31, 2013
FAIR VALUE MEASUREMENTS
14. FAIR VALUE MEASUREMENTS

The Company measures certain assets and liabilities at fair value. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company uses a fair value hierarchy, which gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of inputs used to measure fair value are:

 

Level 1 —   Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 —   Observable inputs other than Level 1 prices, 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.

The fair value of substantially all of the Company’s assets is based on observable inputs, including readily available quoted market prices, which meet the definition of a Level 1 or Level 2 input.

As of March 31, 2013 and December 31, 2012, the Company held certain financial assets that are measured at fair value on a recurring basis. These consisted of cash and cash equivalents. The monetary assets represented by these financial instruments are primarily located in Poland, Hungary and Russia. Consequently, they are subject to currency translation risk when reporting in U.S. dollars.

The Company does not have any financial assets measured at fair value on a recurring basis as Level 3. The Company has also certain financial liabilities which are measured at fair value on recurring basis for disclosure purposes only, namely, Convertible Senior Notes, Senior Secured Notes and Debt Security. The fair value of Convertible Senior Notes and Secured Senior Notes is determined based on quoted market prices in public markets and is categorized as Level 1. Fair value of Debt Security is determined based on the principal face value and accrued interest and is categorized as Level 3. The fair value of Convertible Senior Notes, Secured Senior Notes and Debt Security as of March 31, 2013 and December 31, 2012 is disclosed in Note 4 “Borrowings.” There were no transfers in or out of Level 1, Level 2 or Level 3 during the three months ended March 31, 2013 and during the annual period ended December 31, 2012.

Non-financial assets and liabilities, such as goodwill and long-lived assets, are accounted for at fair value on a nonrecurring basis. These items are tested for impairment on the occurrence of a triggering event or in the case of goodwill, on at least an annual basis. Management reviews long-lived assets for potential impairment whenever significant events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment exists when the carrying amount of the long-lived asset is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the estimated undiscounted cash flows expected to result from the use and eventual depletion of the asset. If an impairment exists, the resulting write-down would be the difference between the fair market value of the long-lived asset and the related net book value. As of the balance sheet date, the carrying value of its long-lived assets are recoverable and no impairment existed.

The following table sets forth by level, within the fair value hierarchy, the Company’s financial assets accounted for at fair value on a recurring and nonrecurring basis (cash and cash equivalents, goodwill, trademarks and customer relationships) as of March 31, 2013, and December 31, 2012:

 

            Fair value measurement on recurring basis  
     Total      Quoted Prices in
Activated Markets for
Identical Assets
(Level 1)		      Significant Other
Observable Inputs
(Level 2)		      Unobservable
Inputs
(Level 3)		  

March 31, 2013

            

Cash and cash equivalents

    $ 44,012       $ 44,012       $ 0       $ 0   

December 31, 2012

            

Cash and cash equivalents

    $ 84,729       $ 84,729       $ 0       $ 0   
            Fair value measurement on a non-recurring basis  
     Total      Quoted Prices in
Activated Markets
for Identical Assets
(Level 1)		      Significant Other
Observable Inputs
(Level 2)		      Unobservable
Inputs
(Level 3)		      Total loss  

December 31, 2012

               

Trademarks and Customer Relationship (1)

    $ 174,242       $ 0       $ 0       $ 174,242       $ 45,052   

Goodwill (2)

    $ 213,629       $ 0       $ 0       $ 213,629       $ 327,847   

 

  (1) In 2012 trademarks and customer relationships with a carrying amount of $219.3 million were written down to their fair value of $174.2 million, resulting in an impairment charge of $45.1 million, which was included in earnings for the period.
  (2) In 2012 goodwill with a carrying amount of $ 541.4 million was written down to its fair value of $213.6 million, resulting in an impairment charge of $327.8 million, which was included in earnings for the period.

The Company has other financial instruments, such as receivables, accounts payable, overdrafts, short term bank loans and other liabilities which have been excluded from the tables above. Due to the short-term nature of these instruments, the carrying value approximate their fair values. The Company did not have any other financial instruments with the scope of the fair value disclosure requirements as of March 31, 2013.