FAIR VALUE MEASUREMENTS AND ASSETS HELD FOR SALE |
12 Months Ended |
|---|---|
Dec. 31, 2015 | |
| Fair Value Measurement and Assets Held-for-sale [Abstract] | |
| FAIR VALUE MEASUREMENTS AND ASSETS HELD FOR SALE |
FAIR VALUE MEASUREMENTS AND ASSETS HELD FOR SALE
Recurring fair value measurements and financial instruments - The carrying amounts that we have reported for financial instruments, including cash and cash equivalents, accounts receivables and accounts payables approximate their fair values.
Assets held for sale - We measure and record assets held for sale at the lower of their carrying amount or fair value less cost to sell. The determination of fair value can require the use of significant judgment and can vary on the facts and circumstances.
Assets held for sale at December 31, 2015 consist of equipment that was subsequently sold during the first quarter of 2016. We estimated the fair value as the actual cash proceeds received less costs incurred to sell. We recorded an impairment of $0.6 million related to this equipment during the fourth quarter of 2015.
Assets held for sale at December 31, 2014 consisted of a partially constructed topside, related valves, piping and equipment that we acquired from a customer following its default under a contract for a deepwater project in 2012. We previously determined a fair value $10.3 million for these assets with the assistance of third party valuation specialists, relying primarily on the cost approach and applied the market approach where comparable sales transaction information was readily available. The cost approach is based on current replacement or reproduction costs of the subject assets less depreciation attributable to physical, functional, and economic factors. The market approach involves gathering data on sales and offerings of similar assets in order to value the subject assets. This approach also includes an assumption for the measurement of the loss in value from physical, functional, and economic factors.
To date, we have not sold, licensed, or leased any of this equipment. While we have not discontinued our programs to identify buyers for our assets held for sale, our ability to effectively market these assets held for sale has been significantly limited due to the sustained downturn in the energy sector. In addition, during the third quarter, we learned that a potential buyer is no longer expressing interest in the assets. As a result, we reassessed our estimate of fair value and recorded an impairment of $6.6 million, and reclassified the asset’s net realizable value of $3.7 million to inventory based on the estimated scrap value of these materials during the third quarter of 2015. We intend to use this inventory on future construction projects at our various fabrication facilities. Inventory consists of materials and production supplies and is stated at the lower of cost or market.
During the fourth quarter of 2014, management determined that its previous estimate of $13.5 million for the fair value of assets held for sale had declined to $10.3 million and we recorded an impairment charge of $3.2 million for the year ended December 31, 2014.
We have determined that our impairments of assets held for sale and inventory are non-recurring fair value measurements that fall within Level 3 of the fair value hierarchy.
|