Mattel 2011 Annual Report Download - page 98

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Mattel’s financial assets and liabilities include the following:
December 31, 2011
Level 1 Level 2 Level 3 Total
(In thousands)
Assets:
Foreign currency forward exchange contracts (a) ............. $ — $31,896 $ — $31,896
Auction rate securities (b) ................................ — — 15,630 15,630
Total assets ........................................... $ — $31,896 $15,630 $47,526
Liabilities:
Foreign currency forward exchange contracts (a) ............. $ — $ 4,312 $ — $ 4,312
December 31, 2010
Level 1 Level 2 Level 3 Total
(In thousands)
Assets:
Foreign currency forward exchange contracts (a) ............. $ — $17,578 $ — $17,578
Auction rate securities (b) ................................ — — 21,000 21,000
Total assets ........................................... $ — $17,578 $21,000 $38,578
Liabilities:
Foreign currency forward exchange contracts (a) ............. $ — $11,183 $ — $11,183
(a) The fair value of the foreign currency forward exchange contracts is based on dealer quotes of market
forward rates and reflects the amount that Mattel would receive or pay at their maturity dates for contracts
involving the same notional amounts, currencies, and maturity dates.
(b) The fair value of the auction rate securities is estimated using a discounted cash flow model based on
(i) estimated interest rates, timing, and amount of cash flows, (ii) credit spreads, recovery rates, and credit
quality of the underlying securities, and (iii) illiquidity considerations.
The following table presents information about Mattel’s assets measured and reported at fair value on a
recurring basis using significant Level 3 inputs:
Level 3
(In thousands)
Balance at December 31, 2009 ..................................................... $ —
Transfers to Level 3 ............................................................... 21,000
Balance at December 31, 2010 ..................................................... 21,000
Unrealized losses ................................................................. (5,370)
Balance at December 31, 2011 ..................................................... $15,630
During 2010, Mattel adopted ASU 2010-11, Derivatives and Hedging (Topic 815): Scope Exception Related
to Embedded Credit Derivatives, and elected the fair value option under this standard, which resulted in an $8.7
million, net of tax, adjustment to beginning retained earnings relating to auction rate securities that contain
embedded credit derivatives, that were previously reported at amortized cost. The unrealized losses recognized
during 2011 relating to these auction rate securities are reflected within other non-operating expense in the
consolidated statements of operations.
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