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FAIR VALUE MEASUREMENTS
12 Months Ended
Sep. 30, 2013
FAIR VALUE MEASUREMENTS  
FAIR VALUE MEASUREMENTS

15.                            FAIR VALUE MEASUREMENTS

 

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 table provides carrying value and fair value measurement information for nonrecurring fair value measurements recorded during the year ended September 30, 2012 (there were no nonrecurring fair value measurements recorded during the year ended September 30, 2013):

 

 

 

 

 

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

 

 

The fair value of real estate held for sale was based on the sales price of the residence sold during the year ended September 30, 2012, which is similar and located adjacent to the remaining home. This fair value measurement has been classified as a Level 2 valuation.

 

Due to 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 concluded that there was an other-than-temporary impairment of these investments.

 

Due to 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.

 

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. 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. These assumptions represent Level 3 inputs. Asset retirement obligations are not subsequently measured at fair value; however revisions are recorded when information underlying the assumptions used to estimate the existing asset retirement obligation change.

 

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.