Annual report pursuant to Section 13 and 15(d)

Fair Value Measurements

v2.4.0.8
Fair Value Measurements
12 Months Ended
Dec. 31, 2013
Fair Value Disclosures [Abstract]  
Fair Value Measurements
Fair Value Measurements
A hierarchy for inputs used in measuring fair value is in place that distinguishes market data between observable independent market inputs and unobservable market assumptions by the reporting entity. The hierarchy is intended to maximize the use of observable inputs and minimize the use of unobservable inputs by requiring that the most observable inputs be used when available. Three levels within the hierarchy may be used to measure fair value:
Level 1: Inputs are unadjusted quoted prices in active markets for identical assets and liabilities.
Level 2: Inputs include data points that are observable such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs (other than quoted prices) such as interest rates and yield curves that are observable for the asset or liability, either directly or indirectly.
Level 3: Inputs are generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect an entity’s own estimates of assumptions that market participants would use in pricing the asset or liability.
The Company’s assets and liabilities measured at fair value on a recurring basis and the fair value hierarchy utilized to determine such fair values is as follows at December 31, 2013 and 2012 (in thousands):
 
 
 
Fair Value Measurements Using
 
Total Fair
Value at
December 31, 2013
 
Quoted Prices in
Active Markets
(Level 1)
 
Significant Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Assets:
 
 
 
 
 
 
 
     Certificates of deposit
$
13,233

 
$
13,233

 
$

 
$

     Foreign currency forward exchange contracts
14

 

 
14

 

Total assets
$
13,247

 
$
13,233

 
$
14

 
$


 
 
 
Fair Value Measurements Using
 
Total Fair
Value at
December 31, 2012
 
Quoted Prices in
Active Markets
(Level 1)
 
Significant Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Assets:
 
 
 
 
 
 
 
     Certificates of deposit
$
6,499

 
$
6,499

 
$

 
$

     Treasury bills
14,997

 
14,997

 

 

Total assets
$
21,496

 
$
21,496

 
$

 
$

Liabilities:
 
 
 
 
 
 
 
     Foreign currency forward exchange contracts
$
8

 
$

 
$
8

 
$

Total liabilities
$
8

 
$

 
$
8

 
$


Marketable securities are classified as Level 1 in the above table and are carried at fair value based on quoted market prices. The Company uses quoted market prices as all of the certificates of deposit and treasury bills have maturity dates within one year from the Company's date of purchase and trade in active markets.
Foreign currency forward exchange contracts are classified as Level 2 in the above table and are carried at fair value based on significant other observable market inputs, in this case, quoted foreign currency exchange rates. Such valuation represents the amount the Company would receive or pay to terminate the forward exchange contracts at the reporting date. The Company enters into forward foreign exchange contracts to hedge intercompany receivables primarily denominated in Euros arising from sales to its subsidiary in Germany. Gains or losses on forward foreign exchange contracts are calculated at each period end and are recognized in net income (loss) in the period in which they arose. The fair value of forward foreign exchange contracts are recorded in other current assets or other current liabilities depending on whether the net amount is a gain or loss. This treatment is based on the master netting arrangement under the Company's foreign exchange agreement which allows netting of asset and liability positions of outstanding foreign exchange contracts if settlement were required.
Assets and liabilities that are measured at fair value on a non-recurring basis
During the year ended December 31, 2012, the Company measured non-financial long-lived assets and liabilities at fair value in conjunction with the goodwill and intangible assets impairment. The Company used the income approach, specifically the discounted cash flow method, in concluding the fair value of the enterprise video content management software reporting unit and associated amount of impairment charges. The inputs used in the impairment fair value calculations fall within Level 3 inputs due to the significant unobservable inputs used to determine the fair value. See Note 8, “Goodwill and Intangible Assets,” for a discussion and fair value measurements related to the non-recurring fair value measurements.