Home Shopping Network 2015 Annual Report Download - page 53

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51
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, 2015
Total Fair Value
and Carrying
Value on Balance
Sheet
Fair Value Measurement Category
Level 1 Level 2 Level 3
Liabilities:
Interest rate swap. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 169 $ — $ 169 $ —
December 31, 2014
Total Fair Value
and Carrying
Value on Balance
Sheet
Fair Value Measurement Category
Level 1 Level 2 Level 3
Assets:
Interest rate swap. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 208 $ — $ 208 $ —
HSNi's interest rate swap was carried on the balance sheet at fair value as of December 31, 2015 and December 31,
2014. 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. The fair value is based on a valuation model which utilizes interest rate yield curves and credit
spreads as the significant inputs to the 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.
The following table summarizes the fair value of HSNi’s financial assets and liabilities which are carried at cost (in
thousands):
December 31, 2015
Carrying
Value Fair Value
Fair Value Measurement Category
Level 1 Level 2 Level 3
Term loan expiring January 27, 2020 . . . . . . . . . . . $ 500,000 $ 500,000 $ — $ 500,000 $ —
Revolving credit facility . . . . . . . . . . . . . . . . . . . . . $ 140,000 $ 140,000 $ — $ 140,000 $ —
December 31, 2014
Carrying
Value Fair Value
Fair Value Measurement Category
Level 1 Level 2 Level 3
Term loan terminated January 27, 2015 . . . . . . . . . $ 228,126 $ 228,126 $ — $ 228,126 $ —
The fair value of the term loan was estimated by discounting expected cash flows at the rates currently offered to
HSNi for debt of the same remaining maturities (level 2 criteria).
During the third and fourth quarters of 2015, as a result of declines in operating performances at certain Cornerstone
brands, HSNi performed quantitative assessments of certain intangible assets and concluded fair value adjustments were
necessary. HSNi wrote off the remaining identified intangible assets related to its 2012 acquisition of Chasing Fireflies
resulting in impairment charges totaling $6.7 million . The impairment charges were recorded within the Cornerstone segment
and are included in "General and administrative" expense in the accompanying consolidated statements of operations. The fair
value of the intangible assets, consisting of trademarks and tradenames, was determined using the relief from royalty method.
Key inputs used in this calculation included revenue growth, discount, royalty and terminal growth rates.
HSNi measures certain assets, such as property and equipment and definite-lived intangible assets, at fair value on a
non-recurring basis. These assets are recognized at fair value if they are deemed to be impaired. There were no fair value
adjustments to the carrying values of HSNi's property and equipment and definite-lived intangible assets during the years ended
December 31, 2015 or 2014.