TiVo 2008 Annual Report Download - page 73

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Table of Contents
As of January 31, 2009, the Company also held $5.0 million (par) in auction rate securities of which $3.9 million is classified as long-term investments
and the Company has recorded an unrealized impairment loss of $1.1 million within accumulated other comprehensive income (Ioss) based upon an
assessment of the fair value of these auction-rate securities. The Company believes the $1.1 million of impairment we recorded is temporary as the Company
has both the ability and intent to hold these securities until anticipated recovery. Our ARS consist of investment-grade issuances, collateralized by student
loans guaranteed by the US government under the Federal Family Education Loan Program. The issuers additionally provide certain credit enhancements,
such as over-collateralization, reserve accounts, insurance, and excess spread, to further secure the value of the debt. The issuers provide a third-party
guarantee, such that if a student loan defaults, the guarantor is obligated to pay the issuer 100% of the outstanding principal and interest. The guarantor is then
able to submit a claim to the Federal Department of Education which guarantees payment of 97%-100% of outstanding amounts to the guarantor.
The breakdown of long-term investments with unrealized losses as of January 31, 2009 is as follows (in thousands):
In Loss Position for Less
Than 12 Months
In Loss Position for
12 Months or Greater Total
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Auction Rate Securities $ 5,000 $ (1,056) $ — $ — $ 5,000 $ (1,056)
4. FAIR VALUE
Effective February 1, 2008, the Company adopted SFAS 157, except as it applies to nonfinancial assets and nonfinancial liabilities subject to FSP SFAS
157-2. SFAS 157 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that
market participants would use in pricing an asset or a liability. SFAS 157 establishes a three- tier fair value hierarchy, which prioritizes the inputs used in the
valuation methodologies in measuring fair value:
Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 - Include other inputs that are directly or indirectly observable in the marketplace.
Level 3 - Unobservable inputs which are supported by little or no market activity.
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring
fair value. The Company's cash equivalents and marketable securities are classified within Level 1, with the exception of the investments in auction rate
securities. The Company's investments in auction rate securities are classified within Level 3 because they are valued using a discounted cash flow model.
Some of the inputs to this model are unobservable in the market and are significant. Assets and liabilities measured at fair value are summarized below (in
thousands):
Fair Value Measurement at January 31, 2009 Using
January 31,
2009
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Assets:
Money market funds $ 153,927 $ 153,927 $ — $ —
US Treasury Bills 44,991 44,991 — —
Auction rate securities 3,944 — — 3,944
$ 202,862 $ 198,918 $ — $ 3,944
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