Toro 2011 Annual Report Download - page 68

Assets and liabilities measured at fair value on a recurring basis,
Fair Value
as of October 31, 2011 and 2010, respectively, are summarized
The company categorizes its assets and liabilities into one of three
below:
levels based on the assumptions (inputs) used in valuing the asset
or liability. Estimates of fair value for financial assets and financial
liabilities are based on the framework established in the accounting Fair
October 31, 2011 Value Level 1 Level 2 Level 3
guidance for fair value measurements. The framework defines fair
value, provides guidance for measuring fair value, and requires Assets:
Cash and cash equivalents $ 80,886 $ 80,886 – –
certain disclosures. The framework discusses valuation techniques
such as the market approach (comparable market prices), the Total assets $ 80,886 $ 80,886 – –
income approach (present value of future income or cash flow), Liabilities:
and the cost approach (cost to replace the service capacity of an Foreign exchange contracts $ 3,150 – $ 3,150 –
Deferred compensation
asset or replacement cost). The framework utilizes a fair value
liabilities 4,297 – 4,297 –
hierarchy that prioritizes the inputs to valuation techniques used to
Total liabilities $ 7,447 – $ 7,447 –
measure fair value into three broad levels. Level 1 provides the
most reliable measure of fair value, while Level 3 generally
Fair
requires significant management judgment. The three levels are October 31, 2010 Value Level 1 Level 2 Level 3
defined as follows:
Assets:
Level 1 – Unadjusted quoted prices in active markets for identi- Cash and cash equivalents $177,366 $177,366 – –
cal assets or liabilities.
Total assets $177,366 $177,366 – –
Level 2 – Observable inputs other than Level 1 prices, such as
Liabilities:
quoted prices for similar assets or liabilities in active markets;
Foreign exchange contracts $ 6,512 – $ 6,512 –
quoted prices for identical assets or liabilities in markets that are Deferred compensation liabilities 4,994 – 4,994 –
not active; or other inputs that are observable or can be corrobo-
Total liabilities $ 11,506 – $11,506 –
rated by observable market data for substantially the full term of
the assets or liabilities. Assets and liabilities measured at fair value on a nonrecurring
Level 3 – Unobservable inputs reflecting management’s assump- basis related to the company’s acquisitions of Lawn Solutions and
tions about the inputs used in pricing the asset or liability. Unique Lighting, as of October 31, 2011, are summarized below:
Cash and cash equivalents are valued at their carrying amounts
in the consolidated balance sheets, which are reasonable esti- Fair
mates of their fair value due to their short-term maturities. Foreign Value Level 1 Level 2 Level 3
currency forward exchange contracts are valued at fair market Assets:
value using the market approach based on exchange rates as of Trade name $ 1,500 – – $ 1,500
a
Patents 700 – – 700
a
the reporting date, which is the amount the company would receive
Non-compete agreements 3,100 – – 3,100
a
or pay to terminate the contracts. The unfunded deferred compen- Customer list 713 – – 713
b
sation liability is primarily subject to changes in fixed-income Developed technology 11,250 – – 11,250
a
investment contracts based on current yields. For accounts receiv- Total assets $17,263 – – $17,263
able and accounts payable, carrying amounts are a reasonable
Assets and liabilities measured at fair value are based on one or
estimate of fair value given their short-term nature.
more valuation techniques. The valuation techniques are identified
in the table above and are as follows:
(a) The company used an internally developed income-based
approach to value these assets. Inputs for this valuation
model were based on internally developed forecasts and
assumptions.
(b) The company used a replacement cost model to value
these assets. Inputs for this valuation model were based
on internal estimates of the cost to recreate these assets.
As of October 31, 2011, the estimated fair value of long-term
debt with fixed interest rates was $248,653 compared to its carry-
ing amount of $228,735. As of October 31, 2010, the estimated fair
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