THQ 2010 Annual Report Download - page 66

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Additionally, pursuant to the UBS Agreement, we have the ability to borrow up to 75% of the market value of
the ARS (as determined by UBS) at any time, on a no net interest basis, to the extent that such ARS
continue to be illiquid or until June 30, 2010 (see “Note 10—Secured Credit Lines”) and in return, we agreed
to release UBS from certain potential claims related to the ARS in certain specified circumstances. The credit
line is secured by certain of our ARS held with UBS, which have a par value of $23.0 million and a fair value
of $21.0 million at March 31, 2010. At March 31, 2010, we had $13.2 million in borrowings outstanding under
the UBS Agreement.
4. Fair Value
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants on the measurement date. Valuation techniques used to measure
fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. There is
a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and
the last unobservable, that may be used to measure fair value. We used the following methods and
assumptions to estimate the fair value of our investment securities:
• Level 1—Quoted prices in active markets for identical assets or liabilities that the reporting entity
has the ability to access at the measurement date. We do not adjust the quoted prices for these
investments.
• Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as
quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar
assets or liabilities 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—Discounted cash flow analysis using unobservable inputs that are supported by little or
no market activity and that are significant to the fair value of the assets or liabilities, as discussed
further below.
Our policy is to recognize transfers between these levels of the fair value hierarchy as of the beginning of the
reporting period.
The following table summarizes our financial assets measured at fair value on a recurring basis as of
March 31, 2010 (in thousands):
Level 1
Level 2
Level 3
Total
Cash equivalents:
Money market funds............................ $21,049 $— $— $21,049
Negotiable certificates of deposit ...... — 28,545 — 28,545
Corporate securities............................. — 8,439 — 8,439
Municipal securities.............................. — 14,175 — 14,175
Short-term investments:
Municipal securities.............................. — 17,241 — 17,241
Corporate securities............................. — 64,354 — 64,354
Negotiable certificates of deposit ...... — 1,346 — 1,346
Short-term investments, pledged:
Student loan ARS................................ — — 21,036 21,036
Put option ............................................. — — 1,738 1,738
Long-term investments:
Municipal securities.............................. — — 1,851 1,851
Other long-term assets, net:
Investment in Yuke’s ........................... 5,564 — — 5,564
Total
.................................................. $
$26,613
$134,100
$24,625
$185,338