Mattel 2012 Annual Report Download - page 98

Download and view the complete annual report

Please find page 98 of the 2012 Mattel annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 128

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128

December 31, 2011
Level 1 Level 2 Level 3 Total
(In thousands)
Assets:
Foreign currency forward exchange contracts (a) .............. $ — $31,896 $ — $31,896
Auction rate securities (b) ................................ — — 15,630 15,630
Total assets ........................................... $ — $31,896 $15,630 $47,526
Liabilities:
Foreign currency forward exchange contracts (a) .............. $ — $ 4,312 $ — $ 4,312
(a) The fair value of the foreign currency forward exchange contracts is based on dealer quotes of market
forward rates and reflects the amount that Mattel would receive or pay at their maturity dates for contracts
involving the same notional amounts, currencies, and maturity dates.
(b) The fair value of the auction rate securities is estimated using a discounted cash flow model based on
(i) estimated interest rates, timing, and amount of cash flows, (ii) credit spreads, recovery rates, and credit
quality of the underlying securities, (iii) illiquidity considerations, and (iv) market correlation.
The following table presents information about Mattel’s assets measured and reported at fair value on a
recurring basis using significant Level 3 inputs:
Level 3
(In thousands)
Balance at December 31, 2009 ..................................................... $ —
Transfers to Level 3 .............................................................. 21,000
Balance at December 31, 2010 ..................................................... 21,000
Unrealized loss .................................................................. (5,370)
Balance at December 31, 2011 ..................................................... 15,630
Unrealized gain ................................................................. 3,626
Balance at December 31, 2012 ..................................................... $ 19,256
During 2010, Mattel adopted ASU 2010-11, Derivatives and Hedging (Topic 815): Scope Exception Related
to Embedded Credit Derivatives, and elected the fair value option under this standard, which resulted in an $8.7
million, net of tax, adjustment to beginning retained earnings relating to auction rate securities that contain
embedded credit derivatives, that were previously reported at amortized cost. The unrealized gains/losses
recognized relating to these auction rate securities are reflected within other non-operating income in the
consolidated statements of operations.
Non-Recurring Fair Value Measurements
Mattel tests its long-lived assets for impairment whenever events or changes in circumstances indicate that the
carrying value may not be recoverable or that the carrying value may exceed its fair value. During 2010, the right to
license a certain product line was not renewed resulting in a reduction of its estimated useful life. As a result, Mattel
recognized an impairment charge of approximately $8 million, which reduced the value of the intangible asset to
approximately $1 million. This intangible asset was fully amortized by the end of 2010. In addition, certain leasehold
improvements were fully impaired during 2010, resulting in an impairment charge of approximately $8 million.
These impairment charges are reflected within other selling and administrative expenses in the consolidated
statements of operations. The estimated fair values of the long-lived assets described above were based on
discounted cash flow analyses using Level 3 inputs.
86