FAIR VALUE MEASUREMENTS AND AUCTION RATE SECURITIES

As of June 30, 2012 and December 31, 2011, Acacia held investment grade auction rate securities with a par value totaling $1,975,000 and $2,425,000, respectively, consisting of auction rate investments backed by student loans, issued under programs such as the Federal Family Education Loan Program, which are classified as available-for-sale and reflected at fair value. Auction rate securities are classified as noncurrent for the periods presented. Contractual maturity dates range up to 35 years, with reset dates every 7 days to 63 days. The fair values of these securities are estimated utilizing an analysis of certain unobservable inputs (Level 3) and by reference to a discounted cash flow analysis as of June 30, 2012. These analyses considered, among other items, the underlying structure of each security, the collateral underlying the security investments, the creditworthiness of the counterparty, the present value of future principal and contractual interest payments discounted at rates considered to be reflective of current market conditions, consideration of the probabilities of default, continued auction failure, or repurchase or redemption at par for each period, and estimates of the time period over which current liquidity related issues will be resolved. Observable market data for instruments with similar characteristics to Acacia’s auction rate securities was also considered, when possible.

As of June 30, 2012 and December 31, 2011, the net other-than-temporary loss on auction rate securities collateralized by student loan portfolios totaled $469,000. The following table presents the auction rate securities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the interim periods presented (in thousands):



	Three Months Ended June 30,					Six Months Ended June 30,
	2012			2011		2012			2011

Balance as of April 1 and January 1, respectively	$	1,956		$	1,975	$	1,956		$	2,001
Total gains (realized or unrealized):
Recognized gains included in earnings ⁽¹⁾	—			—		—			9
Settlements	(450		)	—		(450		)	(35		)
Balance as of June 30	$	1,506		$	1,975	$	1,506		$	1,975

(1) Total realized gains on redemptions or partial redemptions at par of auction rate securities for the periods presented.