Papa Johns 2014 Annual Report Download - page 80

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67
5. Fair Value Measurements and Disclosures
We are required to determine the fair value of financial assets and liabilities based on the price that would
be received to sell the asset or paid to transfer the liability to a market participant. Fair value is a market-
based measurement, not an entity specific measurement. The fair value of certain assets and liabilities
approximates carrying value because of the short-term nature of the accounts, including cash, accounts
receivable and accounts payable. The carrying value of our notes receivable net of allowances also
approximates fair value. The fair value of the amount outstanding under our revolving credit facility
approximates its carrying value due to its variable market-based interest rate. These assets and liabilities
are categorized as Level 1 as defined below.
Certain assets and liabilities are measured at fair value on a recurring basis and are required to be
classified and disclosed in one of the following categories:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market
data.
Level 3: Unobservable inputs that are not corroborated by market data.
Our financial assets and liabilities that were measured at fair value on a recurring basis as of December
28, 2014 and December 29, 2013 are as follows (in thousands):
Carrying
Value Level 1 Level 2 Level 3
December 28, 2014
Financial assets:
Cash surrender value of life insurance policies (a) 18,238$ 18,238$ -$ -$
Financial liabilities:
Interest rate swaps (b) 376 - 376 -
December 29, 2013
Financial assets:
Cash surrender value of life insurance policies (a) 16,798$ 16,798$ -$ -$
Financial liabilities:
Interest rate swap (b) 76 - 76 -
Fair Value Measurements
(a) Represents life insurance policies held in our non-qualified deferred compensation plan.
(b) The fair value of our interest rate swaps are based on the sum of all future net present value cash
flows. The future cash flows are derived based on the terms of our interest rate swaps, as well as
considering published discount factors, and projected London Interbank Offered Rates (“LIBOR”).
There were no transfers among levels within the fair value hierarchy during fiscal 2014 or 2013.