Amtrak 2013 Annual Report Download - page 81

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National Railroad Passenger Corporation and Subsidiaries (Amtrak)
Notes to Consolidated Financial Statements (continued)
1411-1359280 42
8. Leasing Arrangements (continued)
Amtrak lease offices, operating areas, stations and other terminal space. These leases often
contain renewal options to enable the Company to retain the use of facilities. Some of the leases
contain escalation clauses that increase the rents based on a fixed or variable rate, such as an
inflation factor index. Under certain leases, the Company is obligated to pay additional amounts
based on the facility’ s operating expenses.
Most of the rights-of-way over which Amtrak operates are owned by other railroads. Amtrak
uses such trackage under contracts with these railroads. The terms of the agreements range up to
six years, although they may remain in effect longer if neither party seeks to renegotiate. Costs
incurred are based on usage. The total amount incurred for use of the other railroads’ rights-of-
way during fiscal years 2013 and 2012, totaled $131.4 million and $110.1 million, respectively,
and are reported in “Train operations” in the Consolidated Statements of Operations.
9. Fair Value Measurements
FASB ASC Topic 820, Fair Value Measurements and Disclosures, clarifies the definition of fair
value for financial reporting, establishes a framework for measuring fair value, and requires
additional disclosures about the use of fair value measurements. FASB ASC Topic 820
established a three-level valuation hierarchy for disclosure of fair value measurements. The
valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or
liability as of the measurement date. The three levels are defined as follows:
• Level 1 – observable market inputs that are unadjusted quoted prices for identical assets
or liabilities in active markets.
• Level 2 – other significant observable inputs (including quoted prices for similar
securities, interest rates, credit risk, etc.).
• Level 3 – significant unobservable inputs (including the Company’ s own assumptions in
determining the fair value of investments).