Marketable Investments | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Marketable Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Marketable Investments |
Note 4 — Marketable Investments
The following table summarizes the Company’s marketable investments (in thousands):
Realized gains and losses on securities are included in earnings and are determined using the
specific identification method. Realized gains or losses on the sale of the Company’s federal
agency, state, municipal and corporate obligations were not material in the three and nine months
ended September 30, 2011 or 2010.
The following table summarizes the maturity periods of the marketable securities in the Company’s
portfolio as of September 30, 2011. In February 2008, certain auction rate securities (“ARS”) that
Forrester held experienced failed auctions that limited the liquidity of these securities. These
auction failures have continued and based on current market conditions, it is likely that auction
failures will continue. The following table reflects the ARS at their contractual maturity dates of
between
2024 and 2034 (in thousands).
The following table shows the gross unrealized losses and market value of Forrester’s
available-for-sale securities with unrealized losses that are not deemed to be
other-than-temporary, aggregated by investment category and length of time that individual
securities have been in a continuous unrealized loss position (in thousands):
Fair Value
The Company measures certain financial assets at fair value on a recurring basis, including cash
equivalents, available-for-sale securities and trading securities. The fair values of these
financial assets have been classified as Level 1, 2 or 3 within the fair value hierarchy as
described in the accounting standards for fair value measurements.
Level 1 — Fair value based on quoted prices in active markets for identical assets or liabilities.
Level 2 — Fair value based on inputs other than Level 1 inputs that are observable, either
directly or indirectly, 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 — Fair value based on unobservable inputs that are supported by little or no market
activity and such inputs are significant to the fair value of the assets or liabilities.
The following table represents the Company’s fair value hierarchy for its financial assets (cash
equivalents and investments) measured at fair value on a recurring basis as of September 30, 2011
and December 31, 2010 (in thousands):
Level 2 assets consist of the Company’s entire portfolio of federal, state,
municipal and corporate bonds, excluding those municipal bonds described below with an auction
reset feature. Level 2 assets have been initially valued at the transaction price and subsequently
valued, at the end of each reporting period, typically utilizing third party pricing services or
other market observable data. The pricing services utilize industry standard valuation methods,
including both income and market based approaches and observable market inputs to determine value.
These observable market inputs include reportable trades, benchmark yields, credit spreads,
broker/dealer quotes, bids, offers, current spot rates and other industry and economic events.
Level 3 assets at September 30, 2011 consist entirely of municipal bonds with an auction reset
feature (ARS). Prior to 2008, the fair value of the ARS investments approximated par value due to
the frequent resets through the auction process. While the Company continues to earn interest on
its ARS investments at the contractual rate, these investments trade infrequently and therefore do
not have a readily determinable market value. Accordingly, the estimated fair value of the ARS no
longer approximates par value. At September 30, 2011, the Company held ARS with one investment
advisor. The Company values the ARS using a discounted cash flow model that includes estimates of
interest rates, timing and amount of cash flows, credit and liquidity premiums and expected holding
periods of the securities, which is considered a Level 3 valuation. The valuation resulted in an
unrealized loss recorded in other comprehensive loss in the Consolidated Balance Sheets of $1.5
million at September 30, 2011 and $1.9 million at December 31, 2010. The Company believes that the
loss is temporary due to the strong underlying credit rating of the securities and the fact that
the Company does not intend to sell the securities and is not likely to be required to sell the
securities. The assumptions used in valuing the ARS are volatile and subject to change as the
underlying sources of these assumptions and market conditions change.
Through July 1, 2010, the Company also held ARS with UBS AG (UBS). Historically, UBS provided a
valuation utilizing Level 3 inputs for the ARS investments. UBS utilized a discounted cash flow
approach to arrive at its valuation, which was corroborated by a separate and comparable discounted
cash flow analysis prepared by the Company. The assumptions used in preparing the discounted cash
flow model included estimates, based on data available at each balance sheet date, of interest
rates, timing and amount of cash flows, credit and liquidity premiums, and expected holding periods
of the ARS. In November 2008, the Company accepted an offer (the “Right”) from UBS entitling the
Company to sell at par value ARS originally purchased from UBS at any time during a two-year period
from June 30, 2010 through July 2, 2012. The Company valued the Right as an asset using a
discounted cash flow approach including estimates of interest rates and timing and amount of cash
flows, adjusted for any bearer risk associated with UBS’s financial ability to repurchase the ARS
beginning June 30, 2010, based on data available at each balance sheet date. The combined fair
value of the Right and the UBS ARS historically equaled the par value of the UBS ARS. The remaining
$5.4 million of par value UBS ARS at June 30, 2010 were sold to UBS at par under the Right on July
1, 2010.
The following table provides a summary of changes in fair value of the Company’s Level 3 financial
assets for the nine months ended September 30, 2011 and 2010 (in thousands):
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