World Fuel Services 2008 Annual Report Download - page 94

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WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
inputs are recognized as other expense/income. Realized and unrealized gains and losses of our short-term
investments measured at fair value on a recurring basis that utilized Level 3 inputs are recognized as other
expense/income.
Derivative instruments can have bid and ask prices that may be observed in the marketplace. Bid prices
reflect the highest price that a market participant is willing to pay and ask prices reflect the lowest price that a
market participant is willing to accept. Our policy is to consistently apply mid-market pricing for valuation of our
derivative instruments.
Fair value of derivative instruments is derived using forward prices that take into account commodity prices,
interest rates, credit risk ratings, option volatility and currency rates. In accordance with FAS No. 157, the impact
of our credit risk rating is also considered when measuring the fair value of liabilities. The fair value of derivative
instruments may be based on a combination of valuation inputs that are on different hierarchy levels. The fair
value disclosures are determined based on the lowest level input that is significant to the fair value measurement
in its entirety. The nature of inputs that are considered Level 3 are modeled inputs. Factors that could warrant a
Level 2 input to move to a Level 3 input may include lack of observable market data because of a decrease in
market activity, a degradation of a short-term investment which requires us to value the investment based on a
Level 3 input, or a change in significance of a Level 3 input to the fair value measurement in its entirety.
There were no significant changes to our valuation techniques during 2008.
The following table presents information about our financial instruments measured at fair value on a
recurring basis as of December 31, 2008 (in thousands):
Level 1 Level 2 Level 3
Netting and
Collateral Total
Assets:
Short-term investments . . . . . . . . . . $— $ — $8,100 $ — $ 8,100
Derivatives . . . . . . . . . . . . . . . . . . . — 119,776 40 (49,732) 70,084
Hedged item inventories . . . . . . . . . — 781 — — 781
Hedged item commitments . . . . . . . — 2,176 — — 2,176
Total . . . . . . . . . . . . . . . . . . . . $— $122,733 $8,140 $(49,732) $81,141
Liabilities:
Derivatives . . . . . . . . . . . . . . . . . . . $351 $104,897 $6,478 $(56,393) $55,333
Hedged item inventories . . . . . . . . . — 1,637 — — 1,637
Hedged item commitments . . . . . . . — 10,671 298 — 10,969
Total . . . . . . . . . . . . . . . . . . . . $351 $117,205 $6,776 $(56,393) $67,939
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