Fair Value Measurements

12 Months Ended

Dec. 31, 2011

Fair Value Disclosures [Abstract]

Fair Value Measurements

FAIR VALUE MEASUREMENTS

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 fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. LP is required to classify these financial assets and liabilities into two groups: recurring—measured on a periodic basis and non-recurring—measured on an as needed basis.

There are three levels of inputs that may be used to measure fair value:

Level 1 Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2 Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; or valuations based on models where the significant inputs are observable or can be corroborated by observable market data.

Level 3 Valuations based on models where significant inputs are not observable. Unobservable inputs are used when little or no market data is available and reflect the Company’s own assumptions about the assumptions market participants would use.

Assets measured at fair value on a recurring basis as of December 31, 2011 and 2010 is summarized in the following tables.

Dollar amounts in millions	December 31, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available for sale securities	$	0.7	$	—	$	—	$	0.7
Trading securities	2.7		2.7		—		—
Total	$	3.4	$	2.7	$	—	$	0.7

Dollar amounts in millions	December 31, 2010		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available for sale securities	$	15.4	$	—	$	3.8	$	11.6
Trading securities	2.6		2.6		—		—
Total	$	18.0	$	2.6	$	3.8	$	11.6

Due to the lack of observable market quotations on a portion of LP’s auction rate securities (ARS) portfolio, LP evaluates the structure of its ARS holdings and current market estimates of fair value, including fair value estimates from issuing banks that rely exclusively on Level 3 inputs. These inputs include those that are based on expected cash flow streams and collateral values, including assessments of counterparty credit quality, default risk underlying the security, discount rates and overall capital market liquidity. The valuation of LP’s ARS investment portfolio is subject to uncertainties that are difficult to predict. Factors that may impact LP’s valuation include changes to credit ratings of the securities as well as to the underlying assets supporting those securities, rates of default of the underlying assets, underlying collateral value, discount rates, counterparty risk and ongoing strength and quality of market credit and liquidity.

Trading securities consist of rabbi trust financial assets which are recorded in other assets in LP’s consolidated balance sheets. The rabbi trust holds the assets of the Louisiana-Pacific Corporation 2004 Executive Deferred Compensation Plan (EDC), a non-qualified deferred compensation plan which allows certain management employees to defer receipt of a portion of their compensation and contribute such amounts to one or more investment funds. The assets of the rabbi trust are invested in mutual funds and are reported at fair value based on active market quotations, which represent Level 1 inputs.

The following table summarizes assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the periods ended December 31, 2011 and 2010.

Dollar amounts in millions	Available for sale securities
Balance at December 31, 2009	$	26.3
Sale of ARS	(21.8		)
Total realized/unrealized gains (losses)
Reclass from Level 3 to Level 2 based upon market conditions	(3.8		)
Included in investment income	19.0
Included in other comprehensive income	(8.1		)
Balance at December 31, 2010	11.6
Sale of ARS	(19.7		)
Total realized/unrealized gains (losses)
Included in investment income	15.2
Included in other comprehensive income	(6.4		)
Balance at December 31, 2011	$	0.7
The amount of total losses for the period included in net loss attributable to the fair value of changes in assets still held at December 31, 2010	$	—
The amount of total losses for the period included in net loss attributable to the fair value of changes in assets still held at December 31, 2011	$	—

Carrying amounts reported on the balance sheet for cash, cash equivalents, receivables and accounts payable approximate fair value due to the short-term maturity of these instruments.

LP reviews the carrying values of long-lived assets to be held and used, for the impairment wherever events or changes in circumstances indicate possible impairment. An impairment loss is recognized when a long-lived asset's carrying value is not recoverable (given assumptions on housing starts and growth rates) and exceeds estimated fair value.

The following table summarizes long-lived assets measured on a nonrecurring basis for each of the three hierarchy levels presented below.

Dollar amounts in millions	December 31, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Long-lived assets held and used	$	82.8	$	—	$	—	$	82.8
Long-lived assets held for sale	25.6		—		25.6		—
Total	$	108.4	$	—	$	25.6	$	82.8

During the year ended December 31, 2011, LP determined that an impairment review was required of its LSL facility located in Houlton, Maine due to continued operating losses which were driven by the significant reductions in current and forecasted housing starts. As a result of this review, LP recognized a pre-tax, non-cash impairment charge of $62.0 million. The estimated fair value of long-lived assets was calculated based on the income approach using the discounted probability of weighted cash flows taking into account current expectations for asset utilization, housing starts and the remaining useful life of related assets. In addition, liquidation values were considered where appropriate, as well as indicated values from divestiture activities. These assets are included in LP's property, plant and equipment (long-lived assets) which are held and used.

During the year ended December 31, 2011, LP recorded an impairment charge of $6.9 million on various assets held for sale to reduce their carrying value to the estimated sales price less estimated selling costs. The valuation of these assets was determined based using level two inputs under the market approach. Also, LP recorded an impairment charge of $4.9 million on assets no longer used.

During the year ended December 31, 2010, LP recorded an impairment of $0.9 million to reduce the carrying value of assets held and used to their net realizable value. The valuation of these assets was determined using level two inputs under the market approach.

During the year ended December 31, 2010, LP recorded an Other-than-temporary impairment charge of $17.0 million to reduce the carrying value of an equity method investment to the estimated sales price. This sales price was based upon LP’s decision (based upon decisions by its joint venture partner) to sell this investment. The estimated net sales price of this investment was below the then current book value and therefore impairment was required. The valuation of these assets was determined using level two inputs under the market approach. During the year end December 31, 2011, this sale process was not completed. The joint venture's financial results continued to deteriorate and it was required to complete an impairment analysis of its goodwill. As part of this analysis, LP determined that LP's current book value exceed the enterprise (fair value) of the investment by $14.8 million. The valuation of these assets was determined using level three inputs under the market approach. The enterprise value was calculated based on the income approach using the discounted cash flows taking into account current expectations for asset utilization, housing starts and the remaining useful life of related assets. In addition, liquidation values were considered where appropriate.