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48
were reflected in "Accumulated other comprehensive income (loss)" in the consolidated balance sheets. As of December 31,
2013, HSNi estimates that approximately $1.1 million of unrealized losses included in accumulated other comprehensive
income (loss) related to this swap will be realized and reported in earnings within the next twelve months.
The fair value of the interest rate swap asset as of December 31, 2013 was $0.6 million and was recorded in "Other
non-current assets" in the consolidated balance sheets. The fair value of the interest rate swap liability as of December 31,
2012 was a liability of $0.8 million and was recorded in "Other long-term liabilities" in the consolidated balance sheets. See
Note 9 for discussion of of the fair value measurements concerning this interest rate swap.
NOTE 9—FAIR VALUE MEASUREMENTS
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. Fair value assumptions are made at a specific point in time and changes in underlying
assumptions could significantly affect these estimates. HSNi applies the following framework for measuring fair value which
is based on a three-level hierarchy:
Level 1—Valuations based on quoted prices for identical assets and liabilities in active markets.
Level 2—Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar
assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active,
or other inputs that are observable or can be corroborated by observable market data.
Level 3—Valuations based on unobservable inputs reflecting our own assumptions, consistent with reasonably available
assumptions made by other market participants. These valuations require significant judgment.
The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable approximate fair value
because of the short maturity of these items. The following table summarizes the fair value of HSNi's other financial assets and
liabilities which are measured at fair value on a recurring basis in the consolidated balance sheets (in thousands):
December 31, 2013
Total Fair Value
and Carrying
Value on Balance
Sheet
Fair Value Measurement Category
Level 1 Level 2 Level 3
Assets:
Interest rate swap. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 574 $ — $ 574 $ —
Liabilities:
Contingent consideration. . . . . . . . . . . . . . . . . . . . . 1,032 — — 1,032
December 31, 2012
Total Fair Value
and Carrying
Value on Balance
Sheet
Fair Value Measurement Category
Level 1 Level 2 Level 3
Liabilities:
Interest rate swap. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 755 $ — $ 755 $ —
Contingent consideration. . . . . . . . . . . . . . . . . . . . . 6,832 — — 6,832
HSNi's interest rate swap was carried on the balance sheet at fair value as of December 31, 2013 and December 31, 2012.
The swap was entered into for the purpose of hedging the variability of interest expense and interest payments on HSNi's long-
term variable rate debt. Because this swap is not actively traded, the fair value was based on a valuation model. Interest rate
yield curves and credit spreads are the significant inputs included in the valuation model. These inputs are observable in active
markets (level 2 criteria). HSNi considers credit risk associated with its own standing as well as the credit standing of any
counterparties involved in the valuation of its financial instruments.