TiVo 2009 Annual Report Download - page 84

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Table of Contents
As of January 31, 2009
Less than 12 Months 12 Months or Greater Total
Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
(in thousands)
Auction rate securities $ 3,944 $ (1,056) $ — $ — $ 3,944 $ (1,056)
Total $ 3,944 $ (1,056) $ — $ — $ 3,944 $ (1,056)
As of January 31, 2010, the unrealized losses on the Company's available-for-sale investments were insignificant in relation to its total available-for-
sale portfolio. Substantially all of its unrealized losses on our available-for-sale marketable debt instruments can be attributed to fair value fluctuations in an
unstable credit environment that resulted in a decrease in the market liquidity for these debt instruments. The Company is not aware of any specific factors
indicating that the underlying issuers of these investments would not be able to pay interest as it becomes due or repay the principal at maturity. Therefore, the
Company believes that these changes in the estimated fair values of these marketable investments securities are related to temporary market fluctuations. As
of January 31, 2010, the estimated fair value of the Company's ARS was $888,000 lower than their cost. The Company has no intent to sell and it is more-
likely-than not that the Company will not be required to sell these ARS prior to recovery. Further, the total unrealized loss is primarily due to a liquidity
discount resulting from the failed auctions. Therefore, the Company will continue to treat the decline in fair values as temporary and recorded the unrealized
loss to accumulated other comprehensive income on the accompanying consolidated balance sheet as of January 31, 2010.
4. FAIR VALUE
Fair value is defined as the exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on
assumptions that market participants would use in pricing an asset or a liability. The Company's financial instruments are measured and recorded at fair value,
except for its cost method investment.
The three-tier fair value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value is:
Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 - Include other inputs that are directly or indirectly observable in the marketplace.
Level 3 - Unobservable inputs which are supported by little or no market activity.
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring
fair value. The Company's cash equivalents and marketable securities are classified within Level 1 or Level 2, with the exception of the investments in auction
rate securities. The Company's investments in auction rate securities are classified within Level 3 because they are valued using a discounted cash flow model.
Some of the inputs to this model are unobservable in the market and are significant.
80