| 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, 2014 and 2013, the carrying amounts of cash and cash equivalents, accounts and other 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, 2014 |
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December 31, 2013 |
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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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Sirius XM Canada Holdings Inc. ("Sirius XM Canada") - investment (a) |
$ |
246,500 |
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— |
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— |
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$ |
246,500 |
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$ |
432,200 |
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— |
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— |
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$ |
432,200 |
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Sirius XM Canada - fair value of host contract of debenture (b) |
$ |
— |
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— |
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— |
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$ |
— |
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$ |
— |
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— |
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3,641 |
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$ |
3,641 |
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Sirius XM Canada - fair value of embedded derivative of debenture (b) |
$ |
— |
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— |
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— |
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$ |
— |
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$ |
— |
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— |
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57 |
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$ |
57 |
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Liabilities: |
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Debt (c) |
$ |
— |
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4,613,044 |
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— |
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$ |
4,613,044 |
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$ |
— |
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4,066,755 |
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— |
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$ |
4,066,755 |
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Share Repurchase Agreement (d) |
$ |
— |
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— |
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— |
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$ |
— |
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$ |
— |
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15,702 |
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— |
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$ |
15,702 |
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(a) |
This amount approximates fair value. The carrying value of our investment in Sirius XM Canada was $2,654 and $26,972 as of December 31, 2014 and 2013, respectively.
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(b) |
As of December 31, 2013, we held an investment in CAD $4,000 face value of 8% convertible unsecured subordinated debentures issued by Sirius XM Canada for which the embedded conversion feature was bifurcated from the host contract. Sirius XM Canada redeemed and converted the debentures during the year ended December 31, 2014.
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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 14 for information related to the carrying value of our debt as of December 31, 2014 and December 31, 2013.
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(d) |
The final installment under the share repurchase agreement with Liberty Media was settled on April 25, 2014. The fair value of the derivative associated with the share repurchase agreement was determined using observable inputs, including the U.S. spot LIBOR curve and other available market data and was recorded in our consolidated balance sheets in Related party current liabilities, with changes in fair value recorded to our statements of comprehensive income. |
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