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At December 31, 2011 and 2010, corporate and auction rate debt securities were recorded as available-for-
sale. The corporate debt
securities primarily have fixed interest rates. There have been no significant changes in the maturity dates and average interest rates for the
Company’s investment portfolio and debt obligations subsequent to December 31, 2011. At December 31, 2011, j2 Global’s long-term available-
for-sale securities are carried at fair value, with the unrealized gains and losses reported as a component of stockholders’
equity. For the year
ended December 31, 2011, the Company recorded gains from the sale of investments of approximately $0.6 million which included a reversal of
unrealized gains from accumulated other comprehensive income of approximately $0.3 million. For the year ended December 31, 2010, the
Company recorded gains from the sale of investments of approximately $4.5 million which included a reversal of unrealized gains from
accumulated other comprehensive income of approximately $2.0 million.
Investments that have been in an unrealized loss position as of December 31, 2011 had a fair value of $46.2 million and have been in a
continuous unrealized loss for less than 12 months. No investments as of December 31, 2011 were in a continuous loss for greater than 12
months. Investments that have been in an unrealized loss position as of December 31, 2010 were not material to the financial statements.
Recognition and Measurement of Other-Than-Temporary Impairment
j2 Global regularly reviews and evaluates each investment that has an unrealized loss. An unrealized loss exists when the current fair
value of an individual security is less than its amortized cost basis. Unrealized losses that are determined to be temporary in nature are recorded,
net of tax, in accumulated other comprehensive income for available-for-sale securities, while such losses related to held-to-
maturity securities
are not recorded, as these investments are carried at their amortized cost.
Regardless of the classification of the securities as available-for-sale or held-to-
maturity, the Company has assessed each position for
impairment.
Factors considered in determining whether a loss is temporary include:
j2 Global’s review for impairment generally entails:
For these securities, a critical component of the evaluation for other-than-
temporary impairments is the identification of credit impairment,
where management does not expect to receive cash flows sufficient to recover the entire amortized cost basis of the security. Credit impairment
is assessed using a combination of a discounted cash flow model that estimates the cash flows on the underlying securities and a market
comparables method where the security is valued based upon indications from the secondary market of what discounts buyers demand when
purchasing similar securities. The cash flow model incorporates actual cash flows from the securities through the current period and then projects
the remaining cash flows using relevant interest rate curves over the remaining term. These cash flows are discounted using a number of
assumptions, some of which include
prevailing implied credit risk premiums, incremental credit spreads and illiquidity risk premium, among
others.
• the length of time and the extent to which fair value has been below cost;
•
the severity of the impairment;
• the cause of the impairment and the financial condition and near-term prospects of the issuer;
•
activity in the market of the issuer which may indicate adverse credit conditions; and
•
the Company
’
s ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery.
• identification and evaluation of investments that have indications of possible impairment;
•
analysis of individual investments that have fair values less than amortized cost, including consideration of the length of time
the investment has been in an unrealized loss position and the expected recovery period;
•
discussion of evidential matter, including an evaluation of factors or triggers that could cause individual investments to qualify
as having other
-
than
-
temporary impairment and those that would not support other
-
than
-
temporary impairment;
•
documentation of the results of these analyses, as required under business policies; and
• information provided by third-party valuation experts.
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