Buffalo Wild Wings 2009 Annual Report Download - page 79

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BUFFALO WILD WINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 27, 2009 and December 28, 2008
(Dollar amounts in thousands, except per-share amounts)
(2) Fair Value Measurements
On December 29, 2008, we adopted new guidance for fair value measurements, related to nonfinancial assets and liabilities.
Our nonfinancial assets relate primarily to long-lived assets and goodwill. We adopted the guidance for fair value measurements
related to financial assets and liabilities on December 31, 2007, the beginning of fiscal 2008.
The guidance for fair value measurements establishes the authoritative definition of fair value, sets out a framework for
measuring fair value and outlines the required disclosures regarding fair value measurements. Fair value is the price that would be
received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or
liability in an orderly transaction between market participants at the measurement date. We use a three-tier fair value hierarchy based
upon observable and non-observable inputs as follows:
• Level 1 – Observable inputs such as quoted prices in active markets;
• Level 2 – Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
• Level 3 – Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own
assumptions.
The following table summarizes the financial instruments measured at fair value in our consolidated balance sheet as of
December 27, 2009:
Fair Value Measurements
Level 1 Level 2 Level 3 Total
Assets
Marketable securities (1) $ 3,618 24,307 — 27,925
Derivatives — 11 — 11
(1) We classified a portion of our marketable securities as available-for-sale and trading securities which were
reported at fair market value, using the “market approach” valuation technique. The “market approach” valuation
method used prices and other relevant information observable in market transactions involving identical or
comparable assets. Our trading securities are valued using the Level 1 approach. Our available-for-sale
marketable securities are valued using the Level 2 approach.
Our financial assets and liabilities requiring a fair-value measurement on a non-recurring basis were not significant as of
December 27, 2009.
Assets and liabilities that are measured at fair value on a recurring basis
At December 27, 2009, we did not have any significant nonfinancial assets or liabilities that required a fair-value measurement
on a recurring basis.
Assets and liabilities that are measured at fair value on a non-recurring basis
The test for goodwill impairment is performed at least annually. Fair value is determined using a combination of income-based
and market-based approaches utilizing widely accepted valuation techniques. Under the income approach, we use the discounted cash
flow method to derive fair value by calculating the present value of estimated after-tax cash flows. Our market approach is based on
analysis of comparable company market multiples. The inputs, and values derived under both methods, are categorized as Level 3.
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Source: BUFFALO WILD WINGS INC, 10-K, February 26, 2010 Powered by Morningstar® Document Research℠