Incredimail 2010 Annual Report Download - page 99

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INCREDIMAIL LTD AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The fair value of the Company's stock options granted to employees and directors was estimated using the following
weighted average assumptions:
The Company uses derivatives instruments to protect against foreign currency fluctuations. These instruments were not
designated as cash flow hedge as defined by ASC 815, "Derivative and Hedging", and therefore the Company recognized
the changes in fair value of these instruments to the statements of income as financial income or expense, as incurred.
The carrying amounts of financial instruments carried at cost, including cash and cash equivalents, trade receivables and
trade payables approximate their fair value due to the short-term maturities of such instruments.
The Company adopted the provisions of ASC 820, "Fair Value Measurements and Disclosures", effective January 1, 2008.
Under this standard, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability
(i.e., the "exit price") in an orderly transaction between market participants at the measurement date.
In determining fair value, the Company uses various valuation approaches. ASC 820 establishes a hierarchy for inputs
used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by
requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants
would use in pricing the asset or liability developed based on market
data obtained from sources independent of the
Company. Unobservable inputs are inputs that reflect the Company's assumptions about the assumptions market
participants would use in pricing the asset or liability developed based on the best information available in the
circumstances. The hierarchy is broken down into three levels based on the observability of inputs as follows:
NOTE 2:
-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Year ended December 31,
2008
2009
2010
Risk free interest rate
3.18
%
2
.73
%
1.62
%
Dividend yield
0
%
0%
-
13.82
%
0%
-
7.83
%
Weighted average Dividend yield
0
%
13.01
%
5.65
%
Expected volatility
50.24%-
7
3.1
3
%
55.41%-
74.67
%
62.77%-
64.56
%
Weighted average volatility
61.69
%
65.04
%
63.67
%
Expected term (years)
6.194
3.915
4.600
r.
Derivatives instruments:
s.
Fair value of financial instruments:
•
• •
•
Level 1
-
Valuations based on quoted prices in active markets for identical assets that the Company has the ability to
access. Valuation adjustments and block discounts are not applied to Level 1 instruments. Since valuations are
based on quoted prices that are readily and regularly available in an active market, valuation of these products does
not entail a significant degree of judgment.
•
• •
• Level 2-
Valuations based on one or more quoted prices in markets that are not active or for which all significant
inputs are observable, either directly or indirectly.
•
• •
•
Level 3-Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
F
-
16