Hasbro 2009 Annual Report Download - page 77

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At December 27, 2009 and December 28, 2008, the Company had the following assets measured at fair
value in its consolidated balance sheets:
Fair
Value
Quoted
Prices in
Active
Markets
for
Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Fair Value Measurements Using
December 27, 2009
Available-for-sale securities .................. $21,151 43 21,108 —
Derivatives .............................. 26,631 — 19,823 6,808
Total ................................... $47,782 43 40,931 6,808
December 28, 2008
Available-for-sale securities .................. $ 4,634 43 — 4,591
Derivatives .............................. 72,053 — 72,053 —
Total ................................... $76,687 43 72,053 4,591
For a portion of the Company’s available-for-sale securities, the Company is able to obtain quoted prices
from stock exchanges to measure the fair value of these securities. Certain other available-for-sale securities
held by the Company are valued at the net asset value which is quoted on a private market that is not active;
however, the unit price is predominantly based on underlying investments which are traded on an active
market. The Company’s derivatives consist primarily of foreign currency forward contracts. The Company uses
current forward rates of the respective foreign currencies to measure the fair value of these contracts. The
Company’s derivatives also include interest rate swaps used to adjust the amount of long-term debt subject to
fixed interest rates. The fair values of the interest rate swaps are measured based on the present value of future
cash flows using the swap curve as of the valuation date. The remaining derivative securities consist of
warrants to purchase common stock. The Company uses the Black-Scholes model to value these warrants. One
of the inputs used in the Black-Scholes model, historical volatility, is considered an unobservable input in that
it reflects the Company’s own assumptions about the inputs that market participants would use in pricing the
asset or liability. The Company believes that this is the best information available for use in the fair value
measurement. There were no changes in these valuation techniques during 2009.
The following is a reconciliation of the beginning and ending balances of the fair value measurements of
the Company’s warrants to purchase common stock that use significant unobservable inputs (Level 3):
2009 2008
Balance at beginning of year ........................................ $4,591 8,580
Loss from decrease in fair value ..................................... (776) (3,989)
Warrant modification .............................................. 2,993 —
Balance at end of year............................................. $6,808 4,591
In the second quarter of 2009, certain warrants held by the Company were modified in connection with
the amendment of an existing license agreement. The fair value of the modification was recorded as deferred
revenue and is being amortized to revenue over the term of the amended license agreement.
67
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (Continued)
(Thousands of Dollars and Shares Except Per Share Data)