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NOTE I - FAIR VALUE MEASUREMENTS
Fair value measurements and disclosures require the use of valuation techniques to measure fair value that maximize the use of observable inputs and minimize use of unobservable inputs. These inputs are prioritized as follows:
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Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities.
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Level 2: Inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities or market corroborated inputs. |
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Level 3: Unobservable inputs for which there is little or no market data and which require the Company to develop our own assumptions about how market participants price the asset or liability. The valuation techniques that may be used to measure fair value are as follows: |
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Market approach–Uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. |
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Income approach–Uses valuation techniques to convert future amounts to a single present amount based on current market expectation about those future amounts. |
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Cost approach–Based on the amount that currently would be required to replace the service capacity of an asset (replacement cost). |
The Company would measure the fair value of certain assets and liabilities on a nonrecurring basis, when U.S. GAAP requires the application of fair value, including events or changes in circumstances that indicate that the carrying amounts of assets may not be recoverable. Assets subject to these measurements include intangible assets acquired in business combinations.
The Company’s financial instruments, other than cash, consist principally of accounts receivable and accounts payable. The fair value of such approximates the carrying value of these financial instruments because of their short-term nature. Borrowings under the Revolving Credit Facility approximate fair value due to the variable interest rate on the facility and the recent amendment during the year. The Company’s borrowings under the Revolving Credit Facility are carried at historical cost and adjusted for principal payments.
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