Baskin Robbins 2011 Annual Report Download - page 84

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Financial assets and liabilities are categorized, based on the inputs to the valuation technique, into a three-level
fair value hierarchy. The fair value hierarchy gives the highest priority to the quoted prices in active markets for
identical assets and liabilities and lowest priority to unobservable inputs. Observable market data, when
available, is required to be used in making fair value measurements. When inputs used to measure fair value fall
within different levels of the hierarchy, the level within which the fair value measurement is categorized is based
on the lowest level input that is significant to the fair value measurement.
Financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2011 are
summarized as follows (in thousands):
Quoted prices
in active
markets for
identical assets
(Level 1)
Significant
other
observable
inputs
(Level 2)
Assets:
Mutual funds ............................ $2,777 —
Total assets .......................... $2,777 —
Liabilities:
Deferred compensation liabilities ............ $ — 6,856
Total liabilities ....................... $ — 6,856
The mutual funds and deferred compensation liabilities primarily relate to the Dunkin’ Brands, Inc.
Non-Qualified Deferred Compensation Plan (“NQDC Plan”), which allows for pre-tax salary deferrals for certain
qualifying employees (see note 17). Changes in the fair value of the deferred compensation liabilities are derived
using quoted prices in active markets of the asset selections made by the participants. The deferred compensation
liabilities are classified within Level 2, as defined under U.S. GAAP, because their inputs are derived principally
from observable market data by correlation to the hypothetical investments. The Company holds mutual funds, as
well as money market funds, to partially offset the Company’s liabilities under the NQDC Plan as well as other
benefit plans. The changes in the fair value of the mutual funds are derived using quoted prices in active markets
for the specific funds. As such, the mutual funds are classified within Level 1, as defined under U.S. GAAP.
The carrying value and estimated fair value of long-term debt at December 31, 2011 and December 25, 2010 was
as follows (in thousands):
December 31, 2011 December 25, 2010
Financial liabilities
Carrying
value
Estimated
fair value
Carrying
value
Estimated
fair value
Term loans ............................. $1,468,309 1,447,731 1,243,823 1,266,250
Senior notes ............................ — — 615,693 631,250
$1,468,309 1,447,731 1,859,516 1,897,500
The estimated fair values of our term loans and senior notes are estimated based on current bid and offer prices,
if available, for the same or similar instruments. Considerable judgment is required to develop these estimates.
(f) Inventories
Inventories consist of ice cream products. Cost is determined by the first-in, first-out method. Finished products
are valued at the lower of cost or estimated net realizable value. Raw materials are valued at the lower of actual
or replacement cost. Inventories are included within prepaid expenses and other current assets in the
accompanying consolidated balance sheets.
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