Harman Kardon 2010 Annual Report Download - page 100

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Harman International Industries, Incorporated and Subsidiaries
(Dollars in thousands, except per-share data and unless otherwise indicated)
We recognized less than $0.1 million and zero amount of ineffectiveness in our Consolidated Statements of
Operations for the years ended June 30, 2010 and 2009, respectively, and all components of each derivative’s
gain or loss were included in the assessment of hedge ineffectiveness, with the exception of forward points.
Derivatives Designated as Economic Hedges
The following summarizes gains from our derivative instruments that are not designated as hedging
instruments for the years ended June 30, 2010 and 2009:
Derivative Location of Derivative Gain/(Loss)
Years Ended
June 30,
2010 2009
Foreign exchange contracts ................. Other expense $3,357 —
Foreign exchange contracts ................. Cost of sales $ 311 $(287)
Note 11 – Fair Value Measurements
Pursuant to the accounting guidance for fair value instruments, fair value is defined as the price we would
receive to sell an asset or pay to transfer a liability in an orderly transaction with a market participant at the
measurement date. When determining the fair value measurements for assets and liabilities required to be
permitted to be recorded at fair value, we consider the principal or most advantageous market in which it would
transact and we consider assumptions that market participants would use when pricing the asset or liability
Fair Value Hierarchy
Under fair value accounting guidance, there is a three-tier fair value hierarchy to prioritize the inputs used in
measuring fair value. Observable inputs reflect market data obtained from independent sources, while
unobservable inputs reflect our market assumptions.
The hierarchy gives the highest priority to quoted prices in active markets (Level 1) and the lowest priority
to unobservable inputs (Level 3). The three levels are defined as follows:
Level 1: Observable inputs, such as unadjusted quoted market prices in active markets for the
identical asset or liability.
Level 2: Inputs that are observable for the asset or liability, either directly or indirectly through
market corroboration, for substantially the full term of the financial instrument.
Level 3: Unobservable inputs that reflect the entity’s own assumptions in measuring the asset or
liability at fair value.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
For assets and liabilities measured at fair value on a recurring basis, fair value is the price we would receive
to sell an asset or pay to transfer a liability in an orderly transaction with a market participant at the measurement
date. In the absence of active markets for the identical assets and liabilities, such measurements involve
developing assumptions based on market observable data, and in the absence of such data, internal information
that is consistent with what market participants would use in a hypothetical transaction that occurs at the
measurement date.
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