Mattel 2014 Annual Report Download - page 101

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December 31, 2013
Level 1 Level 2 Level 3 Total
(In thousands)
Assets:
Foreign currency forward exchange contracts (a) .............. $ — $ 2,310 $ — $ 2,310
Auction rate security (b) ................................. — — 28,895 28,895
Total assets ........................................... $ — $ 2,310 $28,895 $31,205
Liabilities:
Foreign currency forward exchange contracts (a) .............. $ — $14,613 $ — $14,613
(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 security 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 auction rate security measured and reported at fair
value on a recurring basis using significant Level 3 inputs:
Level 3
(In thousands)
Balance at December 31, 2011 ..................................................... $ 15,630
Unrealized gain ................................................................. 3,626
Balance at December 31, 2012 ..................................................... $ 19,256
Unrealized gain ................................................................. 9,639
Balance at December 31, 2013 ..................................................... $ 28,895
Unrealized gain ................................................................. 2,065
Balance at December 31, 2014 ..................................................... $ 30,960
The unrealized gains and losses recognized relating to the auction rate security 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 the second
quarter of 2013, Mattel changed its brand strategy for Polly Pocket, which includes a more focused allocation of
resources to support the Polly Pocket brand in specific markets, resulting in a reduction of the forecasted future
cash flows of the brand. As a result, Mattel recognized an impairment charge of approximately $14 million,
which reduced the value of the intangible asset to approximately $99 million, as more fully described in “Note 2
to the Consolidated Financial Statements—Goodwill and Other Intangibles.”
During 2014, 2013, and 2012, Mattel did not have any other assets or liabilities measured and reported at
fair value on a non-recurring basis in periods subsequent to initial recognition.
Other Financial Instruments
Mattel’s financial instruments include cash and equivalents, accounts receivable and payable, short-term
borrowings, and accrued liabilities. The carrying value of these instruments approximate their fair value because
of their short-term nature and are classified as Level 2 within the fair value hierarchy.
95