Fair Value Measurements

6 Months Ended

Jun. 30, 2013

3. Fair Value Measurements

U.S. GAAP defines a hierarchy which prioritizes the inputs in measuring fair value. The three levels of the fair value hierarchy are as follows: Level 1 inputs are quoted prices for identical assets or liabilities in active markets at the measurement date; Level 2 inputs are observable market-based inputs or unobservable inputs that are corroborated by market data at the measurement date; and Level 3 inputs are unobservable inputs reflecting management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. When applying the fair value principles in valuation of assets and liabilities, we are required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The carrying value of cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of the short-term maturity of these instruments.

At December 31, 2012 we held $2.8 million of certificates of deposit, which were considered a Level 2 asset, and no liabilities measured at fair value on a recurring basis. We did not hold any such assets or liabilities at June 30, 2013. The valuation technique used to measure fair value of certificates of deposit was based on quoted market prices or corroborated by observable market data.

There were no transfers between Level 1 and Level 2 measurements in the three and six months ended June 30, 2013 and 2012. The following table sets forth the reconciliation of beginning and ending balances for auction rate securities at fair value using significant unobservable inputs (Level 3) for the three and six months ended June 30, 2012 (dollars in thousands). The auction rate securities were redeemed prior to December 31, 2012.


	Three Months Ended				Six Months Ended
	June 30				June 30,
	2013		2012		2013		2012
Balance at beginning of period	$	—	$	882	$	—		902
Losses included in earnings		—		—		—		(11	)
Gains included in other comprehensive income		—		41		—		32

Balance as of June 30	$	—	$	923	$	—	$	923

- 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.

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