TiVo 2010 Annual Report Download - page 24

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The following tables present reconciliations of financial assets measured at fair value using significant unobservable inputs (Level 3) during the twelve
months ended January 31, 2011 and January 31, 2010 (in thousands):
Auction Rate
Securities Asset-backed
Securities Total
Balance, January 31, 2010 $ 4,112 $ — $ 4,112
Transfer into Level 3 — — —
Purchases — 2,498 2,498
Sales (1,715) — (1,715)
Total unrealized losses included in accumulated other comprehensive loss 93 — 93
Balance, January 31, 2011 $ 2,490 $ 2,498 $ 4,988
Auction Rate Securities
Balance, January 31, 2009 $ 3,944
Transfer into Level 3 —
Total unrealized gains included in accumulated other comprehensive loss 168
Balance, January 31, 2010 $ 4,112
Marketable securities measured at fair value using Level 3 inputs are comprised of asset-backed and auction rate securities. Asset-backed securities
values are based on non-binding broker provided price quotes and may not have been corroborated by observable market data. Although auction rate
securities would typically be measured using Level 2 inputs, the failure of auctions and the lack of market activity and liquidity required that these securities
be measured using Level 3 inputs. The underlying assets of the Company’s auction rate securities are collateralized primarily by student loans guaranteed by
the U.S. government. The fair value of its auction rate securities was determined using a pricing model that market participants would use that considered
projected cash flows for the issuing trusts, underlying collateral and expected yields. Projected cash flows were estimated based on the underlying loan
principal, bonds outstanding, and payout formulas. The weighted-average life over which cash flows were projected considered the collateral composition of
the securities and related historical and projected prepayments. The discount rates that were applied to the pricing model were based on market conditions and
rates for comparable or similar term asset-backed securities as well as other fixed income securities. There were no transfers in and out of Level 1 or 2.
TiVo also has a direct investment in a privately-held company accounted for under the cost method, which is periodically assessed for other-than-
temporary impairment. If the Company determines that an other-than-temporary impairment has occurred, TiVo will write-down the investment to its fair
value. The fair value of a cost method investment is not evaluated if there are no identified events or changes in circumstances that may have a significant
adverse effect on the fair value of the investment. However, if such significant adverse events were identified, the Company would estimate the fair value of
its cost method investment considering available information at the time of the event, such as pricing in recent rounds of financing, current cash position,
earnings and cash flow forecasts, recent operational performance and any other readily available data. The carrying amount of the Company’s cost method
investment was $3.4 million as of January 31, 2011 and January 31, 2010. No
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