FAIR VALUE MEASUREMENTS

12 Months Ended

Dec. 31, 2015

NOTE 12—FAIR VALUE MEASUREMENTS

The following table presents the financial instruments outstanding as of December 31, 2015 and 2014 that are measured at fair value on recurring basis and financial instruments that are not measured at fair value on a recurring basis.

	December 31, 2015
	Carrying Amount			Fair Value			Level 1		Level 2			Level 3
	(In thousands)
Recurring
Forward contracts	$	(28,784	)	$	(28,784	)	$	-	$	(28,784	)	$	-
Non-recurring
Cash and cash equivalents		664,844			664,844			664,844		-			-
Restricted cash and cash equivalents		116,801			116,801			116,801		-			-
Debt		(843,883	)		(777,634	)		-		(707,492	)		(70,142	)

	December 31, 2014
	Carrying Amount			Fair Value			Level 1		Level 2			Level 3
	(In thousands)
Recurring
Forward contracts	$	(46,912	)	$	(46,912	)	$	-	$	(46,912	)	$	-
Non-recurring
Cash and cash equivalents		665,309			665,309			665,309		-			-
Restricted cash and cash equivalents		187,585			187,585			187,585		-			-
Debt		(864,469	)		(737,980	)		-		(641,487	)		(96,493	)

See Note 1, Basis of Presentation and Significant Accounting Policies—Impairment Review, for a description of significant Level 3 inputs used in development of fair value of nonfinancial assets.

We used the following methods and assumptions in estimating our fair value disclosures for our other financial instruments:

Cash and cash equivalents and restricted cash and cash equivalents. The carrying amounts that we have reported in the accompanying consolidated balance sheets for cash, cash equivalents and restricted cash and cash equivalents approximate their fair values and are classified as Level 1 within the fair value hierarchy.

Short-term and long-term debt. The fair value of debt instruments valued using a market approach based on quoted prices for similar instruments traded in active markets is classified as Level 2 within the fair value hierarchy.

Quoted prices are not available for Amortizing Notes and NO 105 Construction Financing. The income approach was used to value these instruments based on the present value of future cash flows discounted at estimated borrowing rates for similar debt instruments or on estimated prices based on current yields for debt issues of similar quality and terms. These instruments are classified as Level 3 within the fair value hierarchy.

Forward contracts. The fair value of forward contracts is classified as Level 2 within the fair value hierarchy and is valued using observable market parameters for similar instruments traded in active markets. Where quoted prices are not available, the income approach is used to value forward contracts, which discounts future cash flows based on current market expectations and credit risk.

Fair Value Disclosure of Non-financial Instruments

In accordance with ASC 360-10, Property, Plant and Equipment, one of our vessels, the DB101, which was held and used in our ASA segment, was written down to a fair value of $14 million, resulting in a non-cash impairment charge of $4 million in the first quarter of 2015, which related to our plan to decommission this vessel in the second quarter of 2015. In the second quarter of 2015, we disposed of the asset and recognized an additional loss of $3 million. Impairment loss on this asset has been included in restructuring expenses.

In the second quarter of 2015, we abandoned a marine pipelay welding system project and recognized a $7 million non-cash impairment charge, which equaled the carrying value of that asset.

In June 2014, we cancelled a pipelay system originally intended for the CSV 108, which resulted in approximately $11 million improvement to the cancellation cost estimate included in the $38 million of vessel-impairment charges recognized in 2013.

During 2014, we determined that certain of our intangible assets were fully impaired and, in 2014, we recorded an impairment charge of approximately $2 million.

Based on market conditions and expected future utilization of our entire marine fleet, we recognized impairment charges totaling approximately $38 million during 2013 in our Consolidated Statements of Operations related to the cancellation of in-progress upgrades to one of our existing marine vessels and the deferral of a portion of the scope of work relating to one of our marine vessels under construction. We used appraised values and discounted future cash flows associated with the assets to determine the impairment amounts. Appraised values and discounted cash flows involve significant management judgments.

We recorded a goodwill impairment charge of approximately $47 million in the fourth quarter of 2013 in our Consolidated Statements of Operations. This amount represented the total amount of our goodwill, which was primarily related to a 2007 acquisition.

- 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.

+ References + Details