8.	Financial Instruments

Derivative Financial Instruments

During the years ended December 31, 2011, 2010 and 2009, Procurian utilized average rate currency options with quarterly expirations to mitigate the risk of currency fluctuations at Procurian's operations in the United Kingdom, Europe, Asia and South America. The net mark-to-market adjustments recognized by Procurian are detailed in the table below and represent the premiums paid for the options by Procurian, as well as the change in value of the options related to the fluctuation of exchange rates during the relevant period.

In 2010, Procurian entered into an interest rate swap hedge agreement with PNC Bank to mitigate the risk of fluctuations in the variable interest rate related to Procurian's term loan with PNC Bank. The net mark-to-market adjustments recognized by Procurian are detailed in the table below and represent the change in value of the swap related to the fluctuations in the applicable interest rates during the relevant periods. This instrument is set to mature in 2015. See Note 10, "Debt."

From February 2006 to July 2010, ICG managed its exposure to price fluctuations of Blackboard through the use of cashless collar contracts. Although these instruments were derivative securities, their economic risks were similar to, and managed on the same basis as, the risks associated with the Blackboard common stock held by ICG. The cashless collar contracts were marked to market through earnings each period, the impact of which is detailed in the table below. The income or loss was primarily driven by the change in the closing price of Blackboard common stock from the beginning to the end of the relevant quarter. The mark-to-market impact was generally expense if Blackboard's stock price rose, or income if Blackboard's stock price declined, during the relevant quarter. During the years ended December 31, 2010 and 2009, ICG incurred costs of $0.2 million and $0.5 million, respectively, to terminate cashless collar contracts underlying a total of 1,250,000 shares of Blackboard common stock and recorded losses in those amounts, which are included in the line item "Other income (loss)" on ICG's Consolidated Statements of Operations in the respective periods. Additionally, two other cashless collar contracts underlying a total of 375,000 shares of Blackboard common stock expired during the year ended December 31, 2010. Since the value of the matured hedges was zero, there was no gain or loss associated with the expiration of those contracts. There were no cashless collar contracts outstanding as of December 31, 2011 or 2010.

The following table presents the classifications and fair values of our derivative instruments as of December 31, 2011 and 2010:


Consolidated Balance Sheets
Derivative	Classification	December 31, 2011			December 31, 2010
		(in thousands)
Interest rate swap	Accrued expenses	$	(36	)	$	(12	)

The following table presents the mark-to-market impact on earnings resulting from ICG's hedging activities for the years ended December 31, 2011, 2010 and 2009, respectively:


Consolidated Statements of Operations
		Year ended December 31,
Derivative	Classification	2011			2010			2009
		(in thousands)
Average rate currency options	Other income (loss), net	$	(195	)	$	(60	)	$	(33	)
Interest rate swap	Interest expense	$	(24	)	$	(12	)	$	—
Cashless collar contracts	Other income (loss), net	$	—		$	547		$	(7,098	)

Fair Value Measurements

Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. There are three levels of inputs that may be used to measure fair value, which are as follows:

Level 1—Observable inputs such as quoted market prices for identical assets and liabilities in active public markets.

Level 2—Observable inputs other than Level 1 prices based on quoted prices in markets with insufficient volume or infrequent transactions, or valuations in which all significant inputs are observable for substantially the full term of the asset or liability.

Level 3—Unobservable inputs to the valuation techniques that are significant to the fair value of the asset or liability.

Assets and liabilities are measured at fair value based on one or more of the following three valuation techniques:

Market Approach—Fair value is determined based on prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities.

Income Approach—Fair value is determined by converting relevant future amounts to a single present amount, based on market expectations (including present value techniques and option pricing models).

Cost Approach—Fair value represents the amount that currently would be required to replace the service capacity of the relevant asset (often referred to as replacement cost).

The fair value hierarchy of ICG's financial assets measured at fair value on a recurring basis was as follows (in thousands):


	Asset (liability) at December 31, 2011			Valuation Technique (Approach)		Level 1		Level 2			Level 3
Cash equivalents (money accounts market and commercial paper investments)	$	111,775			Market	$	111,775	$	—		$	—
Hedges of interest rate risk (1)		(36	)		Market		—		(36	)		—
Acquisition contingent consideration obligations		(1,197	)		Income		—		—			(1,197	)

	$	110,542				$	111,775	$	(36	)	$	(1,197	)



	Asset (liability) at December 31, 2010			Valuation Technique (Approach)		Level 1		Level 2			Level 3
Cash equivalents (money market accounts)	$	81,205			Market	$	81,205	$	—		$	—
Hedges of marketable securities (1)		(12	)		Market		—		(12	)		—

	$	81,193				$	81,205	$	(12	)	$	—

(1)

ICG's counterparties under these arrangements provide ICG with quarterly statements of the market values of these instruments based on significant inputs that are observable or can be derived principally from, or corroborated by, observable market data for substantially the full term of the asset or liability.

As discussed in Note 3, "Goodwill and Intangibles, net," ICG's non-financial assets measured on a non-recurring basis using the market approach were as follows (in thousands):


	As of December 31,
	2011		2010
	(in thousands)
Significant unobservable inputs (Level 3):
Goodwill (annual impairment assessment)	$	22,538	$	20,317
Acquired intangible assets (periodic assessment, as necessary)		14,431		13,832

	$	36,969	$	34,149