Comfort Inn 2013 Annual Report Download - page 95

Table of Contents
portion of their salary and invest these amounts in a selection of available diversified investment options. As of December 31, 2013 and 2012, the Company
had recorded a deferred compensation liability of $13.7 million and $11.2 million, respectively related to these deferrals. Compensation expense is recorded in
SG&A expense on the Company’s consolidated statements of income based on the change in the deferred compensation obligation related to earnings credited to
participants as well as changes in the fair value of diversified investments. The net increase (decrease) in compensation expense recorded in SG&A for the
years ended December 31, 2013, 2012 and 2011 were $1.7 million, $0.7 million and $(0.5) million, respectively.
The diversified investments held in the trusts were $12.3 million and $10.2 million as of December 31, 2013 and 2012, respectively, and are recorded
at their fair value, based on quoted market prices. These investments are considered trading securities and therefore the changes in the fair value of the
diversified assets are included in other gains and losses in the accompanying consolidated statements of income. The Company recorded investment gains
(losses) during the years ended December 31, 2013, 2012 and 2011 of $1.3 million, $0.8 million and $(0.5) million, respectively. In addition, the Non-
Qualified Plan held shares of the Company’s common stock with a market value of $1.4 million and $1.0 million at December 31, 2013 and 2012,
respectively.
 
The Company estimates the fair value of its financial instruments utilizing a three-tier fair value hierarchy, which prioritizes the inputs used in
measuring fair value. The following summarizes the three levels of inputs, as well as the assets that the Company values using those levels of inputs.
: Quoted prices in active markets for identical assets and liabilities. The Company’s Level 1 assets consist of marketable securities (primarily
mutual funds) held in the Company’s EDCP and Non-Qualified Plan deferred compensation plans.
: Observable inputs, other than quoted prices in active markets for identical assets and liabilities, such as quoted prices for similar assets and
liabilities; quoted prices in markets that are not active; or other inputs that are observable. The Company’s Level 2 assets consist of money market funds held
in the Company’s EDCP and Non-Qualified Plan deferred compensation plans and those recorded in cash and cash equivalents.
: Unobservable inputs, supported by little or no market data available, where the reporting entity is required to develop its own assumptions to
determine the fair value of the instrument. The Company does not currently have any assets whose fair value was determined using Level 3 inputs.
The Company's policy is to recognize transfers in and transfers out of the three levels of the fair value hierarchy as of the end of each quarterly reporting
period. There were no transfers between Level 1, 2 and 3 assets during the year ended December 31, 2013. During the year ended December 31, 2012, the
Company sold approximately $11.8 million of mutual funds (Level 1 assets) held in the employee benefit plan trusts. Approximately $8.4 million of these
assets were distributed from the irrevocable trust with the remaining $3.4 million transferred to the money market funds (Level 2 assets).
As of December 31, 2013 and 2012 , the Company had the following assets measured at fair value on a recurring basis:








Money market funds, included in cash and cash equivalents 
 

 
Mutual funds(1) 



Money market funds(1) 






 

Money market funds, included in cash and cash equivalents $20,001
$ —
$20,001
$ —
Mutual funds(1) 11,884
11,884
—
—
Money market funds(1) 4,357
—
4,357
—
$ 36,242
$11,884
$ 24,358
$ —
____________________________
(1) Included in Investments, employee benefit plans at fair value on consolidated balance sheets.
Other Financial Instruments
The Company believes that the fair values of its current assets and current liabilities approximate their reported carrying amounts due to the short-term
nature of these items. In addition, the interest rates of the Company’s New Credit Facility adjust frequently based on current market rates; accordingly its
carrying amount approximates fair value.
The Company estimates the fair value of notes receivable which approximate their carrying value, utilizing an analysis of future cash flows and credit
worthiness for similar types of arrangements. Based upon the availability of market data, the notes receivable have been classified as Level 3 inputs. The
primary sensitivity in these calculations is based on the selection of appropriate interest and discount rates. For further information on the notes receivable see
Note 3.
The fair value of the Company's $250 million and $400 million senior notes are classified as Level 2 as the significant inputs are observable in an
active market. At December 31, 2013 and 2012, the $250 million senior notes had an approximate