Enom 2014 Annual Report Download - page 92

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y Level 2—valuations for assets and liabilities traded in less active dealer, or broker markets, such as quoted prices for
similar assets or liabilities or quoted prices in markets that are not active. Level 2 includes U.S. Treasury, U.S.
government and agency debt securities, and certain corporate obligations. Valuations are usually obtained from third-party
pricing services for identical or comparable assets or liabilities.
y Level 3—valuations for assets and liabilities that are derived from other valuation methodologies, such as option pricing
models, discounted cash flow models and similar techniques, and not based on market exchange, dealer, or broker traded
transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to
such assets or liabilities.
In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of
unobservable inputs to the extent possible and consider counterparty credit risk in our assessment of fair value.
We chose not to elect the fair value option for our financial assets and liabilities that had not been previously carried at fair
value. Therefore, material financial assets and liabilities not carried at fair value, such as trade accounts receivable and payables, are
reported at their carrying values.
The carrying amounts of our financial instruments, which include cash and cash equivalents, accounts receivable, receivables
from domain name registries, restricted cash, accounts payable, accrued liabilities and customer deposits, approximate fair value
because of their short maturities. The carrying amount for amounts outstanding under our Term Loans or Revolving Loan Facility
approximates fair value because the loans bear interest at variable rates which approximate fair value. Our investments in marketable
securities are recorded at fair value.
Financial assets and liabilities carried at fair value on a recurring basis were as follows (in thousands):
Balance at December 31, 2014
Level 1 Level 2 Level 3 Total
Assets:
Cash equivalents (1) ........................................ $ 5,000 $ - $ - $ 5,000
Promissory note ............................................ - - 4,946 $ 4,946
$ 5,000 $ - $ 4,946 $ 9,946
(1) Comprises money market funds which are included in Cash and cash equivalents in the accompanying consolidated
balance sheet.
Balance at December 31, 2013
Level 1 Level 2 Level 3 Total
Assets:
Cash equivalents (1) ........................................ $ 4,034 $ - $ - $ 4,034
Marketable securities .................................... 902 - - $ 902
$ 4,936 $ - $ - $ 4,936
Liabilities:
Debt ............................................................... $ - $ 96,250 $ - 96,250
$ - $ 96,250 $ - $ 96,250
(1) Comprises money market funds which are included in Cash and cash equivalents in the accompanying consolidated
balance sheet.
For financial assets that utilize Level 1 and Level 2 inputs, we utilize both direct and indirect observable price quotes, including
quoted market prices (Level 1 inputs) or inputs that are derived principally from or corroborated by observable market data (Level 2
inputs).
Certain assets, including equity investments, investments held at cost, goodwill and intangible assets are also subject to
measurement at fair value on a nonrecurring basis, if they are deemed to be impaired as the result of an impairment review. Due to
unexpected revenue declines in the third quarter of 2014 attributable to lower traffic and monetization yield on certain of our Content
& Media websites, we lowered our future cash flow expectations. As a result of the decline in our cash flow forecast as well as a
sustained decline in our market capitalization, which remained at a level below the book value of our net assets for an extended period
of time, including as of September 30, 2014, we performed an interim assessment of impairment of the goodwill in our Content &