ServiceMagic 2011 Annual Report Download - page 94

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IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 9—FAIR VALUE MEASUREMENTS (Continued)
Auction rate securities
The Company's auction rate securities are valued by discounting the estimated future cash flow streams of the securities over the lives of the
securities. Credit spreads and other risk factors are also considered in establishing fair value. During the first quarter of 2011, one of the auction
rate securities was redeemed at its par value of $5.0 million. The cost basis of the auction rate securities is $10.0 million and $15.0 million at
December 31, 2011 and December 31, 2010, respectively, with gross unrealized losses of $4.1 million and $1.9 million at December 31, 2011
and December 31, 2010, respectively. The unrealized losses are included in "Accumulated other comprehensive (loss) income" in the
accompanying consolidated balance sheet. At December 31, 2011, the remaining auction rate security is rated A/WR and matures in 2035. The
Company does not consider the auction rate security to be other-than-temporarily impaired at December 31, 2011, due to its high credit rating
and because the Company does not intend to sell this security and it is not more likely than not that the Company will be required to sell this
security before the recovery of its amortized cost basis, which may be maturity.
Contingent consideration arrangement
See Note 5 for information regarding the contingent consideration arrangement related to the OkCupid acquisition.
NOTE 10—FINANCIAL INSTRUMENTS
The fair values of the financial instruments listed below have been determined by the Company using available market information and
appropriate valuation methodologies.
The carrying value of cash equivalents approximates fair value due to their short-term maturity. The fair value of notes receivable is based
on discounting the expected future cash flow streams using yields of the underlying credit. The fair value of long-term debt is estimated using
quoted market prices or indices for similar liabilities and taking into consideration other factors such as credit quality and maturity. The carrying
value and fair value of the guarantee of the equity method investee's debt
88
December 31, 2011
December 31, 2010
Carrying
Value
Fair
Value
Carrying
Value
Fair
Value
(In thousands)
Assets:
Cash and cash equivalents
$
704,153
$
704,153
$
742,099
$
742,099
Marketable securities
165,695
165,695
563,997
563,997
Auction rate securities
5,870
5,870
13,100
13,100
Long
-
term marketable equity securities
74,691
74,691
—
—
Notes receivable
3,424
3,058
3,316
2,818
Liabilities:
Contingent consideration arrangement
(10,000
)
(10,000
)
—
—
Long
-
term debt
(95,844
)
(93,339
)
(95,844
)
(83,363
)
Guarantee of an equity method investee's debt
(5,000
)
(5,000
)
—
—
Letters of credit and surety bond
N/A
(312
)
N/A
(362
)