Clearwire 2008 Annual Report Download - page 114

d
es
i
gnate t
h
e
i
nterest rate swap contracts as
h
e
d
ges. We are not
h
o
ldi
ng t
h
ese
i
nterest rate swap contracts
f
or tra
di
n
g
or specu
l
at
i
ve purposes an
d
cont
i
nue to
h
o
ld
t
h
ese
d
er
i
vat
i
ves to o
ff
set our exposure to
i
nterest rate r
i
s
k
.
T
he followin
g
table sets forth information re
g
ardin
g
our interest rate swap contracts as of December 31, 200
8
(in thousands)
:
Type o
f
D
e
ri
va
ti
ve
N
otional
Amount Maturity Dat
e
R
eceive
I
n
de
x
Ra
t
e
P
a
y
Fix
ed
R
a
t
e
F
air Marke
t
V
a
l
u
e
Swa
p
...............
.
$
300,000 3/5/2010 3-month LIBOR 3.50%
$(
7,847
)
Swa
p
...............
.
$
300,000 3/5/2011 3-month LIBOR 3.62% $
(
13,744
)
Th
e
f
a
i
rva
l
ue o
f
t
h
e
i
nterest rate swaps are reporte
d
as ot
h
er
l
ong-term
li
a
bili
t
i
es
i
n our conso
lid
ate
db
a
l
anc
e
s
heet at December 31, 2008. In accordance with SFAS No. 157, we computed the fair value of the swaps usin
g
observed LIBOR rates and unobservable market interest rate swa
p
curves which are deemed to be Level 3 in
p
uts in
t
he fair value hierarchy (see Note 12)
.
S
i
nce t
h
e
i
nterest rate swaps are un
d
es
ig
nate
d
as
h
e
dg
es as o
f
Decem
b
er 31, 2008, we reco
g
n
i
ze
d
t
h
e ent
i
re
ch
an
g
e
i
n
f
a
i
rva
l
ue
i
n our conso
lid
ate
d
statement o
f
operat
i
ons w
i
t
h
no port
i
on
h
e
ld i
n accumu
l
ate
d
ot
h
e
r
c
omprehensive income (loss). The loss on the interest rate swaps recognized in our consolidated statement o
f
operations for the year ended December 31, 2008 was
$
6.1 million, which is recorded in other income (expense),
n
et
.
T
he interest rate swaps are in a liabilit
y
position to our counterparties as of December 31, 2008. We monitor the
r
isk of nonperformance of the Company and that of its counterparties on an ongoing basis
.
12. Fa
i
r Value Measurement
s
As defined in SFAS No. 157, fair value is the price that would be received to sell an asset or paid to transfer a
liabilit
y
in an orderl
y
transaction between market participants at the measurement date. In determinin
g
fair value,
w
e use var
i
ous met
h
o
d
s
i
nc
l
u
di
ng mar
k
et, cost an
di
ncome approac
h
es. Base
d
on t
h
ese approac
h
es, we ut
ili
z
e
c
erta
i
n assumpt
i
ons t
h
at mar
k
et part
i
c
i
pants wou
ld
use
i
npr
i
c
i
ng t
h
e asset or
li
a
bili
ty,
i
nc
l
u
di
ng assumpt
i
ons a
b
ou
t
r
isk. Based on the observabilit
y
of the inputs used in the valuation techniques, we are required to provide th
e
following information according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliabilit
y
o
f
t
h
e
i
n
f
ormat
i
on use
d
to
d
eterm
i
ne
f
a
i
r
v
a
l
ues. F
i
nanc
i
a
l
assets an
dd
e
b
t
i
nstruments carr
i
e
d
at
f
a
i
r
v
a
l
ue
will be
cl
ass
ifi
e
d
an
ddi
sc
l
ose
di
n one o
f
t
h
e
f
o
ll
ow
i
n
g
t
h
ree cate
g
or
i
es
:
Level 1: Quoted market
p
rices in active markets for identical assets or liabilitie
s
Level 2: Observable market based inputs or unobservable inputs that are corroborated by market dat
a
Leve
l
3: Uno
b
serva
bl
e
i
nputs t
h
at are not corro
b
orate
dby
mar
k
et
d
at
a
We maximize the use of observable inputs and minimize the use of unobservable inputs when developin
g
fai
r
value measurements. If listed prices or quotes are not available, fair value is based upon internally develope
d
m
o
d
e
l
st
h
at pr
i
mar
il
y use, as
i
nputs, mar
k
et-
b
ase
d
or
i
n
d
epen
d
ent
l
y source
d
mar
k
et parameters,
i
nc
l
u
di
ng
b
ut not
li
m
i
te
d
to
i
nterest rate
yi
e
ld
curves, vo
l
at
ili
t
i
es, equ
i
t
y
or
d
e
b
tpr
i
ces, an
d
cre
di
t curves. We ut
ili
ze certa
i
n
assumptions that market participants would use in pricin
g
the financial instrument, includin
g
assumptions about
r
isk, such as credit, inherent and default risk. The degree of management judgment involved in determining the fai
r
va
l
ue o
f
a
fi
nanc
i
a
li
nstrument
i
s
d
epen
d
ent upon t
h
eava
il
a
bili
t
y
o
f
quote
d
mar
k
et pr
i
ces or o
b
serva
bl
e mar
k
e
t
p
arameters. For financial instruments that trade activel
y
and have quoted market prices or observable market
p
arameters, there is minimal
j
ud
g
ment involved in measurin
g
fair value. When observable market prices an
d
p
arameters are not
f
u
ll
yava
il
a
bl
e, management
j
u
d
gment
i
s necessary to est
i
mate
f
a
i
rva
l
ue. In a
ddi
t
i
on, c
h
anges
i
n
m
arket conditions ma
y
reduce the availabilit
y
and reliabilit
y
of quoted prices or observable data. In these instances
,
w
e use certain unobservable inputs that cannot be validated b
y
reference to a readil
y
observable market or exchan
ge
d
ata an
d
re
l
y, to a certa
i
n extent, on our own assumpt
i
ons a
b
out t
h
e assumpt
i
ons t
h
at a mar
k
et part
i
c
i
pant wou
ld
us
e
10
2
C
LEARWIRE
CO
RP
O
RATI
O
N AND
SU
B
S
IDIARIE
S
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —
(
Continued
)