Clearwire 2008 Annual Report Download - page 68

I
n
d
eterm
i
n
i
n
gf
a
i
rva
l
ue, we use quote
d
pr
i
ces
i
n act
i
ve mar
k
ets w
h
ere suc
h
pr
i
ces are ava
il
a
bl
e, or we use
m
odels to estimate fair value usin
g
various methods includin
g
the market, income and cost approaches. For
i
nvestments w
h
ere we use mo
d
e
l
s to est
i
mate
f
a
i
rva
l
ue
i
nt
h
ea
b
sence o
f
quote
d
mar
k
et pr
i
ces, we o
f
ten ut
ili
ze
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
i
nvestment,
i
nc
l
u
di
ng assumpt
i
ons a
b
out r
i
s
k
and or the risks inherent in the inputs to the valuation technique. These inputs are readil
y
observable, market
c
orro
b
orate
d
, or uno
b
serva
bl
e Company
i
nputs.
We estimate the fair value of securities without quoted market prices usin
g
internall
yg
enerated pricin
g
model
s
th
at requ
i
re var
i
ous
i
nputs an
d
assumpt
i
ons. We
b
e
li
eve t
h
at our pr
i
c
i
ng mo
d
e
l
s,
i
nputs an
d
assumpt
i
ons are w
h
at
m
arket participants would use in pricin
g
the securities. We maximize the use of observable inputs to the pricin
g
m
odels where quoted market prices from securities and derivatives exchan
g
es are available and reliable. We
t
yp
i
ca
ll
y rece
i
ve externa
l
va
l
uat
i
on
i
n
f
ormat
i
on
f
or U.S. Treasur
i
es, ot
h
er U.S. Government an
d
Agency secur
i
t
i
es
,
as well as certain corporate debt securities, mone
y
market funds and certificates of deposit. We also use certain
unobservable inputs that cannot be validated b
y
reference to a readil
y
observable market or exchan
g
e data and rel
y
,
t
o a certa
i
n extent, on management’s own assumpt
i
ons a
b
out t
h
e assumpt
i
ons t
h
at mar
k
et part
i
c
i
pants wou
ld
use
in
p
ricin
g
the securit
y
. Our internall
yg
enerated pricin
g
models ma
y
include our own data and require us to use our
j
ud
g
ment in interpretin
g
relevant market data, matters of uncertaint
y
and matters that are inherentl
y
sub
j
ective i
n
n
ature. We use many
f
actors t
h
at are necessary to est
i
mate mar
k
et va
l
ues,
i
nc
l
u
di
ng,
i
nterest rates, mar
k
et r
i
s
k
s
,
m
ar
k
et sprea
d
s, an
d
t
i
m
i
n
g
o
f
cas
hfl
ows, mar
k
et
li
qu
idi
t
y
,an
d
rev
i
ew o
f
un
d
er
lyi
n
g
co
ll
atera
l
an
d
pr
i
nc
i
pa
l,
i
nterest and dividend pa
y
ments. The use of different
j
ud
g
ments and assumptions could result in different
p
resentations of pricing and security prices could change significantly based on market conditions
.
F
air Value Measurement
s
D
urin
g
2008, we adopted SFAS No. 157
,
F
air Va
l
ue Measurement
s
, which we refer to as SFAS No. 157, for our
financial assets and liabilities that are reco
g
nized or disclosed at fair value on an annual or more frequentl
y
recurrin
g
basis. These include our derivative instruments and our short-term and long-term investments.
As defined in SFAS No. 1
5
7, fair value is the
p
rice that would be received to sell an asset or
p
aid to transfer a
li
a
bili
ty
i
nanor
d
er
l
y transact
i
on
b
etween mar
k
et part
i
c
i
pants at t
h
e measurement
d
ate. In
d
eterm
i
n
i
ng
f
a
i
rva
l
ue,
we utilize certain assumptions that market participants would use in pricin
g
the asset or liabilit
y
, includin
g
assumptions about risk. These inputs can be readil
y
observable, market corroborated, or
g
enerall
y
unobservable
i
nputs. We ut
ili
ze va
l
uat
i
on tec
h
n
i
ques t
h
at max
i
m
i
ze t
h
e use o
f
o
b
serva
bl
e
i
nputs an
d
m
i
n
i
m
i
ze t
h
e use o
f
unobservable inputs. Based on the observabilit
y
of the inputs used in the valuation techniques, we are required t
o
p
rovide the followin
g
information accordin
g
to the fair value hierarch
y:
L
evel 1: Quoted market
p
rices in active markets for identical assets or liabilities
.
L
eve
l
2: O
b
serva
bl
e mar
k
et
b
ase
di
nputs or uno
b
serva
bl
e
i
nputs t
h
at are corro
b
orate
dby
mar
k
et
d
ata
.
L
eve
l
3: Uno
b
serva
bl
e
i
nputs t
h
at are not corro
b
orate
dby
mar
k
et
d
ata
.
I
n accordance with SFAS No. 157 and our polic
y
, it is our practice to maximize the use of observable inputs and
m
inimize the use of unobservable inputs when developin
g
fair value measurements. When available, we use quoted
m
arket prices to measure fair value. If listed prices or quotes are not available, fair value is based on internall
y
d
eve
l
ope
d
mo
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
ncludin
g
but not limited to interest rate
y
ield curves, volatilities, equit
y
or debt prices, and credit curves. I
n
e
stimatin
g
fair values, we utilize certain assumptions that market participants would use in pricin
g
the financial
i
nstrument,
i
nc
l
u
di
ng assumpt
i
ons a
b
out r
i
s
k
.T
h
e
d
egree o
f
management
j
u
d
gment
i
nvo
l
ve
di
n
d
eterm
i
n
i
ng t
h
e
f
a
i
r
5
6
C
LEARWIRE
CO
RP
O
RATI
O
N AND
SU
B
S
IDIARIE
S
MANA
G
EMENT’
S
DI
SCUSS
I
O
N AND ANALY
S
I
SO
F FINAN
C
IAL
CO
NDITI
O
N
AND RESULTS OF OPERATIONS —
(
Continued
)