| Fair Value Measurements |
Fair Value Measurements
The fair value of a financial instrument is the amount at which the instrument could be exchanged in an orderly transaction between market participants. As of December 31, 2017 and 2016, the carrying amounts of cash and cash equivalents, receivables, and accounts payable approximated fair value due to the short-term nature of these instruments. ASC 820, Fair Value Measurements and Disclosures, establishes a fair value hierarchy for input into valuation techniques as follows:
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i. |
Level 1 input: unadjusted quoted prices in active markets for identical instrument; |
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ii. |
Level 2 input: observable market data for the same or similar instrument but not Level 1, including quoted prices for identical or similar assets or liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and |
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iii. |
Level 3 input: unobservable inputs developed using management's assumptions about the inputs used for pricing the asset or liability. |
Investments are periodically reviewed for impairment and an impairment is recorded whenever declines in fair value below carrying value are determined to be other than temporary. In making this determination, we consider, among other factors, the severity and duration of the decline as well as the likelihood of a recovery within a reasonable timeframe.
Our assets and liabilities measured at fair value were as follows:
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December 31, 2017 |
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December 31, 2016 |
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Level 1 |
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Level 2 |
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Level 3 |
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Total Fair
Value |
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Level 1 |
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Level 2 |
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Level 3 |
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Total Fair
Value |
Assets: |
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Pandora - investment (a)
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$ |
— |
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480,472 |
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— |
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$ |
480,472 |
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$ |
— |
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— |
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— |
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$ |
— |
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Sirius XM Canada - investment (b)
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$ |
— |
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— |
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— |
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$ |
— |
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$ |
178,696 |
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— |
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— |
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$ |
178,696 |
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Liabilities: |
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Debt (c)
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— |
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$ |
6,987,473 |
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— |
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$ |
6,987,473 |
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— |
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$ |
6,008,205 |
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— |
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$ |
6,008,205 |
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(a) |
During the year ended December 31, 2017, Sirius XM completed a $480,000 investment in Pandora. We have elected the fair value option to account for this investment. Refer to Note 11 for information on this transaction.
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(b) |
During the year ended December 31, 2017, Sirius XM completed a recapitalization of Sirius XM Canada. Following this recapitalization, Sirius XM Canada ceased to be a publicly traded company. Refer to Note 11 for information on this transaction. The amount as of December 31, 2016 approximated fair value. The carrying value of our investment in Sirius XM Canada was $341,214 and $8,615 as of December 31, 2017 and 2016, respectively. Additionally, as part of this transaction we loaned Sirius XM Canada $130,794. The carrying value of the loan as of December 31, 2017 was $140,073 and approximated its fair value.
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(c) |
The fair value for non-publicly traded instruments is based upon estimates from a market maker and brokerage firm. Refer to Note 12 for information related to the carrying value of our debt as of December 31, 2017 and 2016.
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