8x8 2012 Annual Report Download - page 56

Download and view the complete annual report

Please find page 56 of the 2012 8x8 annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 74

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74

3. FAIR VALUE MEASUREMENT
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. When determining the fair value measurements for assets and liabilities
required or permitted to be recorded at fair value, the Company considers the principal market or the most advantageous
market in which it would transact.
The accounting guidance for fair value measurement requires the Company to maximize the use of observable inputs and
minimize the use of unobservable inputs when measuring fair value. Observable inputs are inputs that reflect the assumptions
market participants would use in valuing the asset or liability and are developed based on market data obtained from sources
independent of the Company. Unobservable inputs are inputs that reflect the Company’ s assumptions about the factors that
market participants would use in valuing the asset or liability developed based on the best information available in the
circumstances.
The standard establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs
used to measure fair value by requiring that the most observable inputs be used when available. A financial instrument’ s
categ ization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value
measurement. The fair value hierarchy is as follows:
or
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or
liabilities that the Company has the ability to access at the measurement date.
•
• Level 2 applies to assets or liabilities for which there are inputs other than quoted prices included in Level 1 that are
observable for the asset or liability, either directly or indirectly, such as quoted prices for similar assets or liabilities in
active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent
transactions (less active markets).
• Level 3 applies to assets or liabilities for which fair value is derived from valuation techniques in which one or more
significant inputs are unobservable, including the Company’ s own assumptions.
The following table presents the Company’ s fair value hierarchy for assets and liabilities measured at fair value on a recurring
basis at March 31, 2012 and 2011 (in thousands):
Quoted Prices
in Active
Markets Other Significant
for Identical Observable Unobservable
Assets Inputs Inputs Balance at
(Level 1) (Level 2) (Level 3) 3/31/2012
Cash equivalents:
Money market funds $ 14,366 $ - $ - $ 14,366
Short-term investments:
Mutual funds (1) - 1,942 - 1,942
Total $ 14,366 $ 1,942 $ - $ 16,308
54