FAIR VALUE MEASUREMENTS

12 Months Ended

Dec. 31, 2012

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

9. FAIR VALUE MEASUREMENTS

        We apply the provisions of FASB ASC 820, Fair Value Measurement which, among other things, defines fair value, requires disclosures about assets and liabilities carried at fair value and establishes a hierarchal disclosure framework based upon the quality of inputs used to measure fair value.

        Valuation techniques are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our own market assumptions. These two types of inputs create the following fair value hierarchy:

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  Level 1—Quoted prices for identical instruments in active markets.

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  Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model derived valuations whose inputs are observable or whose significant value drivers are observable.

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  Level 3—Instruments whose significant value drivers are unobservable.

        The carrying amounts for cash equivalents, accounts receivable and accounts payable approximate fair value because of the short maturity of those instruments. At December 31, 2012 and 2011, the estimated fair value of the ARLP Partnership's long-term debt, including current maturities, was approximately $834.3 million and $746.5 million, respectively, based on interest rates that it believes are currently available to it for issuance of debt with similar terms and remaining maturities (see Note 8). The fair value of debt, which is based upon interest rates for similar instruments in active markets, is classified as a Level 2 measurement under the fair value hierarchy.