World Fuel Services 2011 Annual Report Download - page 105

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Fair value of commodity contracts and hedged item commitments is derived using forward prices that
take into account commodity prices, basis differentials, interest rates, credit risk ratings, option volatility
and currency rates. Fair value of hedged item inventories is derived using spot commodity prices and
basis differentials. Fair value of foreign currency forwards is derived using forward prices that take into
account interest rates, credit risk ratings, and currency rates.
For our derivative related contracts, we may enter into master netting, collateral and offset agreements
with counterparties. These agreements provide us the ability to offset a counterparty’s rights and
obligations, request additional collateral when necessary or liquidate the collateral in the event of
counterparty default. We net fair value cash collateral paid or received against fair value amounts
recognized for net derivative related positions executed with the same counterparty under the same
master netting or offset agreement.
As of December 31, 2011, included within netting and collateral in the above table, the amounts
recognized for the obligation to return cash collateral and the right to reclaim cash collateral that have
been offset against fair value assets and fair value liabilities were $1.0 million and $0.8 million,
respectively. As of December 31, 2010, there were no amounts recognized for the obligation to return
cash collateral and the right to reclaim cash collateral that have been offset against fair value assets and
fair value liabilities.
The following table presents information about our assets and liabilities that are measured at fair value
on a recurring basis that utilized Level 3 inputs for the periods presented (in thousands):
Change in
Unrealized
Realized Gains
and Relating to
Beginning Unrealized End of Instruments
of Period, Gains Period, Still Held
Assets Included Assets at end
(Liabilities) in Earnings Settlements (Liabilities) of Period
Commodity contracts, net $ 90 $ — $(90) $ — $ —
Earn-out (5,012) 818 — (4,194) 818
$(4,922) $ 818 $(90) $(4,194) $ 818
2010
Commodity contracts, net $ (2) $ 90 $ 2 $ 90 $ 90
Foreign currency contracts, net (152) — 152 — —
Earn-out (6,728) 1,716 — (5,012) 1,716
$(6,882) $1,806 $154 $(4,922) $1,806
Our policy is to recognize transfers between Level 1, 2 or 3 as of the beginning of the reporting period in
which the event or change in circumstances caused the transfer to occur. There were no transfers
between Level 1, 2 or 3 during the periods presented. In addition, there were no Level 3 purchases,
sales or issuances for the periods presented.
81
2011