Polaris 2011 Annual Report Download - page 69

Level 2 — Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities;
quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by
observable market data for substantially the full term of the assets or liabilities.
Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to
the fair value of the assets or liabilities.
The Company utilizes the market approach to measure fair value for its non-qualified deferred
compensation assets, and the income approach for the interest rate swap agreements, foreign currency contracts
and commodity contracts. The market approach uses prices and other relevant information generated by market
transactions involving identical or comparable assets or liabilities and for the income approach the Company uses
significant other observable inputs to value its derivative instruments used to hedge interest rate volatility,
foreign currency and commodity transactions. Assets and liabilities measured at fair value on a recurring basis
are summarized below (in thousands):
Fair Value Measurements as of
December 31, 2011
Total Level 1 Level 2 Level 3
Asset (Liability)
Non-qualified deferred compensation assets ............. $3,639 $3,639 — —
Foreign exchange contracts .......................... 3,578 — $ 3,578 —
Commodity contracts ............................... (1,337) — (1,337) —
Total ............................................ $5,880 $3,639 $ 2,241 —
Fair Value Measurements as of
December 31, 2010
Total Level 1 Level 2 Level 3
Asset (Liability)
Non-qualified deferred compensation assets ............. $2,124 $2,124 — —
Interest rate swap agreements ........................ (126) — $ (126) —
Foreign exchange contracts .......................... (2,019) — (2,019) —
Commodity contracts ............................... 889 — 889 —
Total ............................................ $ 868 $2,124 $(1,256) —
Investment in finance affiliate: The caption Investment in finance affiliate in the consolidated balance sheets
represents Polaris’ 50 percent equity interest in Polaris Acceptance, a partnership agreement between GE
Commercial Distribution Finance Corporation (“GECDF”) and one of Polaris’ wholly-owned subsidiaries.
Polaris Acceptance provides floor plan financing to Polaris dealers in the United States. Polaris’ investment in
Polaris Acceptance is accounted for under the equity method, and is recorded as investments in finance affiliate
in the consolidated balance sheets. Polaris’ allocable share of the income of Polaris Acceptance and the
Securitized Receivables has been included as a component of income from financial services in the consolidated
statements of income. Refer to Note 7 for additional information regarding Polaris’ investment in Polaris
Acceptance.
Investment in other affiliates: The caption Investments in other affiliates in the consolidated balance sheets
for the period ended December 31, 2011 represents the Company’s October 2011 investment in Brammo, Inc., a
privately held manufacturer of electric motorcycles. This investment represents a minority interest in Brammo
and is accounted for under the cost method. The amount recorded as of December 31, 2010 represents the
Company’s 40 percent equity ownership in Robin Manufacturing, U.S.A. (“Robin”), which assembled engines in
the United States for recreational and industrial products. The Robin operations were closed during 2011 as the
production volumes of engines made by Robin had declined significantly in recent years.
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