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Note 1 - Nature of Business and Summary of Significant Accounting Policies: Fair Value of Financial Instruments (Policies)
9 Months Ended
Sep. 30, 2013
Policies  
Fair Value of Financial Instruments

Fair value of financial instruments

All financial instruments are carried at amounts that approximate estimated fair value.

The Company accounts for financial instruments under the guidance of ASC 820-10 – “Fair Value Measurements.” ASC 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering such assumptions, ASC 820 establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows:

 

Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 - Other inputs that are directly or indirectly observable in the marketplace.

Level 3 - Unobservable inputs which are supported by little or no market activity.

 

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

 

As of September 30, 2013, the Company’s derivatives, which include the embedded conversion feature on the convertible note payable, were considered level 2 financial instruments. See Note 10 for valuation technique and assumptions used. The respective carrying value of certain on-balance sheet financial instruments approximated their fair values. These financial instruments include cash, prepaid expenses and deposits, inventory, intellectual property rights, other assets, accounts payable, accrued liabilities, short-term notes payable and short-term convertible notes payable. Fair values for these items were assumed to approximate carrying values because of their short term nature or they are payable on demand. The Company did not have any level 3 instruments at September 30, 2013