Tesla 2016 Annual Report Download - page 61

Allofourcashequivalentsandcurrentrestrictedcash,whicharecomprisedprimarilyofmoneymarketfunds,areclassifiedwithinLevelIofthefairvalue
hierarchybecausetheyarevaluedusingquotedmarketpricesormarketpricesforsimilarsecurities.Ourrestrictedshort-termmarketablesecuritiesareclassified
withinLevelIofthefairvaluehierarchy.
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AsofDecember31,2015and2014,thefairvaluehierarchyforourfinancialassetsandfinancialliabilitiesthatarecarriedatfairvaluewasasfollows(in
thousands),andunrealizedgains(losses)onfinancialassetspresentedinthetablebelowforallperiodspresentedwerelessthan$1.0million:
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December 31, 2015 December 31, 2014
Fair Value Level I Level II Level III Fair Value Level I Level II Level III
Moneymarketfunds $ 297,810  $ 297,810  $ —  $ —  $ 1,275,346  $ 1,275,346  $ —  $ —
U.S.treasurybills  16,664   16,664   —   —   16,673   16,673   —   —
Total $ 314,474  $ 314,474  $ —  $ —  $ 1,292,019  $ 1,292,019  $ —  $ —
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AsofDecember31,2015,theestimatedfairvalueofour2018Notes,2019Notes,and2021Noteswas$1.29billion(parvalue$659.8million),$864.8
million(parvalue$920.0million),and$1.27billion(parvalue$1.38billion).AsofDecember31,2014theestimatedfairvalueofour2018Notes,2019Notes,
and2021Noteswas$1.22billion(parvalue$659.8million),$852.2million(parvalue$920.0million),and$1.25billion(parvalue$1.38billion).Thesefair
valuesrepresentLevelIIvaluations.Whendeterminingtheestimatedfairvalueofourlong-termdebt,weusedacommonlyacceptedvaluationmethodologyand
market-basedriskmeasurementsthatareindirectlyobservable,suchascreditrisk.AsofDecember31,2015,the$135.0millioncarryingvalueofourCredit
Agreementliabilityapproximatesthefairvalueoftheborrowingsbasedupontheborrowingrateavailabletousfordebtwithsimilartermsandconsiderationof
creditanddefaultriskusingLevelIIinputs.
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DerivativeFinancialInstruments
InNovember2015,weimplementedaprogramtohedgetheforeigncurrencyexposureriskrelatedtocertainforecastedinventorypurchasesdenominatedin
Japaneseyen.Thederivativeinstrumentsweuseareforeigncurrencyforwardcontractsandaredesignatedascashflowhedgeswithmaturitydatesof12monthsor
less.Wedonotenterintoderivativecontractsfortradingorspeculativepurposes.
Wedocumenteachhedgerelationshipandassessitsinitialeffectivenessattheinceptionofthehedgecontractandwemeasureitsongoingeffectivenesson
aquarterlybasisusingregressionanalysis.Duringthetermofaneffectivehedgecontract,werecordgainsandlosseswithinaccumulatedothercomprehensive
loss.Wereclassifythesegainsorlossestocostsofautomotivesalesintheperiodtherelatedfinishedgoodsinventoryissoldoroverthedepreciationperiodfor
thosesalesaccountedforasleases.Althoughourcontractsareconsideredeffectivehedges,wemayexperiencesmallamountsofineffectivenessduetotiming
differencesbetweenouractualinventorypurchasesandthesettlementdateoftherelatedforeigncurrencyforwardcontracts.Wehaverecordedzeroamountof
ineffectivenesswithinotherincome(expense),netinourConsolidatedStatementsofOperations,asofDecember31,2015.
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Thenetnotionalamountofthesecontractswas$322.6millionatDecember31,2015.Outstandingcontractsarerecognizedaseitherassetsorliabilitieson
theConsolidatedBalanceSheetatfairvaluewithinotherassetsorwithinaccruedliabilities,dependingonournetposition.Thenetgainof$7.3millionin
accumulatedothercomprehensivelossasofDecember31,2015isexpectedtoberecognizedtothecostbasisoffinishedgoodsinventoryinthenexttwelve
months.ThetotalfairvaluesofforeigncurrencycontractsdesignatedascashflowhedgesasofDecember31,2015is$7.3millionandwasdeterminedusingLevel
IIinputsandrecordedinprepaidexpensesandothercurrentassetsonourConsolidatedBalanceSheets.Noamountshavebeenreclassifiedtofinishedgoods
inventoryasofDecember31,2015.
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Note 4 - Inventory
AsofDecember31,2015and2014,ourinventoryconsistedofthefollowing(inthousands):
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 December 31, December 31,
2015 2014
Rawmaterials  $ 528,935 $ 392,292
Workinprocess   163,830   56,114
Finishedgoods   476,512   397,318
Serviceparts   108,561  107,951
Total  $ 1,277,838  $ 953,675
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Finishedgoodsinventoryincludesvehiclesintransittofulfillcustomerorders,newvehiclesavailableforimmediatesaleatourretailandservicecenter
locations,andpre-ownedTeslavehicles.Theincreaseinfinishedgoodsinventorywasprimarilyduetocustomerordersthatwereintransitfordeliveryatyear
end.
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