Overstock.com 2014 Annual Report Download - page 83

Table of Contents
We classify all highly liquid instruments, including money market funds with a remaining maturity of three months or less at the time of purchase, as
cash equivalents. Cash equivalents were $135.1 million and $58.1 million at December 31, 2014 and 2013, respectively.
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We consider cash that is legally restricted and cash that is held as a compensating balance for letter of credit arrangements as restricted cash.
Restricted cash was $580,000 and $1.6 million at December 31, 2014 and 2013, respectively.
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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 fair-value hierarchy below. This hierarchy requires us to minimize the use of unobservable inputs
and to use observable market data, if available, when determining fair value.
• 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.
Under GAAP, certain assets and liabilities are required to be recorded at fair value on a recurring basis. Our assets and liabilities that are adjusted to
fair value on a recurring basis are investments in money market mutual funds, trading securities, derivative instruments, and deferred compensation liabilities.
The fair values of our investments in money market mutual funds, trading securities, and deferred compensation liabilities are determined using
quoted market prices from daily exchange traded markets on the closing price as of the balance sheet date and are classified as Level 1. The fair values of our
derivative instruments are determined using standard valuation models. The significant inputs used in these models are readily available in public markets, or
can be derived from observable market transactions, and therefore have been classified as Level 2. Inputs used in these standard valuation models for
derivative instruments include the applicable forward rates, interest rates and discount rates. Included in the fair value of derivative instruments is an
adjustment for nonperformance risk. The adjustment for nonperformance risk did not have a significant impact on the estimated fair value of our derivative
instruments. For additional disclosures related to our derivative instruments, see  below.
The following tables summarize our assets and liabilities measured at fair value on a recurring basis using the following levels of inputs as of
December 31, 2014 and December 31, 2013 as indicated (in thousands):
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Assets:
Cash equivalents - Money market mutual funds $ 135,092
$ 135,092
$ —
$ —
Trading securities held in a “rabbi trust” (1) 90
90
—
—
Total assets $ 135,182
$ 135,182
$ —
$ —
Liabilities:
Derivatives (2) $ 1,008
$ —
$ 1,008
$ —
Deferred compensation accrual “rabbi trust” (3) 94
94
—
—
Total liabilities $ 1,102
$ 94
$ 1,008
$ —
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