LeapFrog 2013 Annual Report Download - page 60
Download and view the complete annual report
Please find page 60 of the 2013 LeapFrog annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.LEAPFROG ENTERPRISES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
2. Summary of Significant Accounting Policies − (continued)
In February 2013, the FASB issued ASU 2013-02, Comprehensive Income (Topic 220). The objective of this
guidance is to improve the reporting of reclassifications out of accumulated other comprehensive income by
requiring an entity to provide information about the amounts reclassified out of accumulated other
comprehensive income by component. This guidance became effective prospectively for reporting periods
beginning after December 15, 2012. The Company adopted this guidance on January 1, 2013. The adoption of
this guidance did not result in any material impact to the Company’s consolidated financial statements.
In July 2012, the FASB issued ASU 2012-02, Intangibles — Goodwill and Other (Topic 350). The objective of
this guidance is to simplify how an entity tests indefinite-lived intangible assets other than goodwill for
impairment by providing entities with an option to perform a qualitative assessment to determine whether
further impairment testing is necessary. This guidance became effective for annual and interim impairment
tests performed for fiscal years beginning after September 15, 2012. The Company adopted this guidance on
January 1, 2013. The adoption of this guidance did not result in any material impact to the Company’s
consolidated financial statements.
3. Fair Value of Financial Instruments and Investments
Fair value is defined by authoritative guidance as the exit price, or the amount that would be received to sell
an asset or paid to transfer a liability in an orderly transaction between market participants as of the
measurement date. The guidance 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 valuing the asset or liability and are developed based on market data obtained from sources
independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the
factors market participants would use in valuing the asset or liability. The guidance establishes three levels of
inputs that may be used to measure fair value:
• Level 1 includes financial instruments for which quoted market prices for identical instruments are
available in active markets. As of December 31, 2013, the Company’s Level 1 assets consist of
money market funds. These assets are considered highly liquid and are stated at cost, which
approximates market value.
• Level 2 includes financial instruments for which there are inputs other than quoted prices included
within Level 1 that are observable for the instrument. Such inputs could be quoted prices for similar
instruments in active markets, quoted prices for identical or similar instruments in markets with
insufficient volume or infrequent transactions (less-active markets), or model-driven valuations in
which significant inputs are observable or can be derived principally from, or corroborated by,
observable market data, including market interest rate curves, referenced credit spreads and
prepayment rates.
The Company’s Level 2 assets and liabilities consist of outstanding foreign exchange forward
contracts used to hedge its exposure to certain foreign currencies, including the British Pound,
Canadian Dollar, Euro and Mexican Peso. The Company’s outstanding foreign exchange forward
contracts, all with maturities of approximately one month, had notional values of $37,182 and
$53,577 at December 31, 2013 and 2012, respectively. The fair market values of these instruments,
based on quoted prices, as of the same periods were $6 and $(255), on a net basis, respectively. The
fair value of these contracts was recorded in prepaid expenses and other current assets for
December 31, 2013 and in accrued liabilities for December 31, 2012.
• Level 3 includes financial instruments for which fair value is derived from valuation techniques,
including pricing models and discounted cash flow models, in which one or more significant inputs,
including the Company’s own assumptions, are unobservable.
52