Zynga 2013 Annual Report Download - page 87

Table of Contents
Changes in market interest rates and bond yields cause certain of our investments to fall below their cost basis, resulting in unrealized
losses on marketable securities. None of these securities were in a continuous unrealized loss position for more than 12 months.
As of December 31, 2013 and 2012, we did not consider any of our marketable securities to be other-than-temporarily impaired. When
evaluating our investments for other-than-temporary impairment, we review factors such as the length of time and extent to which fair value has
been below its cost basis, the financial condition of the issuer, our ability and intent to hold the security and whether it is more likely than not
that we will be required to sell the investment before recovery of its cost basis.
3. Fair Value Measurements
Our financial instruments consist of cash equivalents, short-term and long-term marketable securities, accounts receivable, long-term debt
and, at December 31, 2012, an interest rate swap. Accounts receivable, net and long-term debt are stated at their carrying value, which
approximates fair value.
Cash equivalents and short-term and long-
term marketable securities, consisting of money market funds, U.S. government and government
agency debt securities, municipal securities and corporate debt securities, are carried at fair value, which is defined as 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 knowledgeable and willing
market participants. Interest rate swaps are estimated using expected cash flows related to our interest rate swap agreement, appropriately
discounted considering the uncertainties associated with the terms of the loan agreement and interest rate swap agreement.
We determined the fair value of our interest rate swap as of December 31, 2012 by calculating the net present value of the fixed and
variable future cash flows of the swap agreement, which was based on the swap’s stated rate and current market interest rates, respectively.
Our non-financial assets, such as intangible assets and property, plant and equipment, are recorded at carrying value unless we determine
an asset to be impaired and recognize an impairment charge to adjust the asset to its fair value. In the third quarter of 2012, we made the decision
to discontinue development of certain games associated with technology and other intangible assets previously acquired from OMGPOP. Our
updated financial forecast as of September 30, 2012 indicated a reduction of undiscounted cash flows expected to be generated from these
intangible assets, and we therefore performed an impairment analysis. We determined the estimated fair value of these assets to be $95.5 million
lower than their carrying value as of September 30, 2012. Accordingly, we recorded this amount as an impairment charge in our consolidated
statements of operations and stated the related OMGPOP intangibles at their fair value of $5.3 million on our consolidated balance sheets as of
September 30, 2012. The impaired intangible assets were classified as Level 3 assets within the fair value hierarchy on September 30, 2012 due
to the unobservable inputs that were factored into our income-
based valuation analysis used to determine their fair value at the time. The primary
input used in determining the fair value of the intangible assets was the estimated undiscounted future cash flows associated with those assets as
of September 30, 2012. As of December 31, 2013 and December 31, 2012, OMGPOP intangibles were stated at their adjusted amortized basis of
$0 and $4.6 million, respectively, within our consolidated balance sheets.
83
December 31, 2013
December 31, 2012
Fair Value
Unrealized loss
Fair Value
Unrealized loss
U.S. government and government agency debt
securities
$
98,787
$
(51
)
$
43,404
$
(5
)
Corporate debt securities
142,071
(257
)
371,243
(170
)
Municipal securities
—
—
3,063
(1
)
Total
$
240,858
$
(308
)
$
417,710
$
(176
)