Overstock.com 2011 Annual Report Download - page 103
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Table of Contents
Overstock.com, Inc.
Notes to Consolidated Financial Statements (Continued)
2. ACCOUNTING POLICIES (Continued)
Fair value of financial instruments
Our financial instruments, including cash, cash equivalents, accounts receivable, accounts payable and accrued liabilities are carried at cost, which
approximates their fair value because of the short-term maturity of these instruments. We are party to a Financing Agreement with U.S. Bank dated
December 22, 2009 (as amended to date, the "Financing Agreement"). Our Financing Agreement is also carried at face value, which approximates its fair
value due to its variable interest rate.
We account for our assets and liabilities using a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are
observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market
assumptions. These two types of inputs have created the following fair-value hierarchy:
Level 1—Quoted prices for identical instruments in active markets;
Level 2—Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active,
and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and
Level 3—Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
This hierarchy requires us to minimize the use of unobservable inputs and to use observable market data, if available, when determining fair value.
The fair value of these financial instruments was determined using the following levels of inputs as of December 31, 2011 (in thousands):
Fair Value Measurements at
December 31, 2011:
Total Level 1 Level 2 Level 3
Assets:
Cash equivalents and restricted cash—Money market mutual funds $ 83,195 $ 83,195 $ — $ —
Trading securities held in a "rabbi trust"(1) 302 302
Total assets $ 83,497 $ 83,497 $ — $ —
Liabilities:
Deferred compensation accrual "rabbi trust"(3) $ 302 $ 302 $ — $ —
F-7
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