NVE CORP /NEW/ Fair Value Disclosure

NOTE 3. FAIR VALUE OF FINANCIAL INSTRUMENTS

Our corporate bonds and money market funds are classified as available-for-sale securities and carried at estimated fair value. Unrealized holding gains and losses are included in accumulated other comprehensive income in the statement of shareholders’ equity. Corporate bonds with remaining maturities less than one year are classified as short-term, and those with remaining maturities greater than one year are classified as long-term. We consider all highly-liquid investments with maturities of three months or less when purchased, including money market funds, to be cash equivalents. Gains and losses on marketable security transactions are reported on the specific-identification method.

 

The fair value of our available-for-sale securities as of March 31, 2022 by maturity were as follows:

 

Total				<1 Year				1–3 Years				3–5 Years
$	51,910,887			$	27,596,676			$	24,314,211			$	-

 

Total available-for-sale securities represented approximately 67% of our total assets. Marketable securities as of March 31, 2022 had remaining maturities between 11 weeks and 36 months.

 

Generally accepted accounting principles establish a framework for measuring fair value, provide a definition of fair value, and prescribe required disclosures about fair-value measurements. Generally accepted accounting principles define fair value as the price that would be received to sell an asset or paid to transfer a liability. Fair value is a market-based measurement that should be determined using assumptions that market participants would use in pricing an asset or liability. Generally accepted accounting principles utilize a valuation hierarchy for disclosure of fair value measurements. The categorization within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement. The categories within the valuation hierarchy are described as follows:

 

Level 1 – Financial instruments with quoted prices in active markets for identical assets or liabilities.

 

Level 2 – Financial instruments with quoted prices in active markets for similar assets or liabilities. Level 2 fair value measurements are determined using either prices for similar instruments or inputs that are either directly or indirectly observable, such as interest rates.

 

Level 3 – Inputs to the fair value measurement are unobservable inputs or valuation techniques.

 

Money market funds are included on the balance sheets in “Cash and cash equivalents.” Corporate bonds are included on the balance sheets in “Marketable securities, short term” and “Marketable securities, long term.”

 

The following table shows the estimated fair value of assets that were accounted for at fair value on a recurring basis:

 

		As of March 31, 2022												As of March 31, 2021
		Level 1				Level 2				Total				Level 1				Level 2				Total
Money market funds		$	6,756,993			$	-			$	6,756,993			$	10,143,196			$	-			$	10,143,196
Corporate bonds			-				45,153,894				45,153,894				-				54,717,626				54,717,626
Total		$	6,756,993			$	45,153,894			$	51,910,887			$	10,143,196			$	54,717,626			$	64,860,822

 

Our available-for-sale securities as of March 31, 2022 and 2021, aggregated into classes of securities, were as follows:

 

		As of March 31, 2022																As of March 31, 2021
		Amortized Cost				Gross Unrealized Holding Gains				Gross Unrealized Holding Losses				Estimated Fair Value				Amortized Cost				Gross Unrealized Holding Gains				Gross Unrealized Holding Losses				Estimated Fair Value
Money market funds		$	6,756,993			$	-			$	-			$	6,756,993			$	10,143,196			$	-			$	-			$	10,143,196
Corporate bonds			45,561,114				230,085				(637,305	)			45,153,894				53,308,105				1,570,195				(160,674	)			54,717,626
Total		$	52,318,107			$	230,085			$	(637,305	)		$	51,910,887			$	63,451,301			$	1,570,195			$	(160,674	)		$	64,860,822

 

The following table shows the gross unrealized holding losses and fair value of our available-for-sale securities with unrealized holding losses, aggregated by class of securities and length of time that individual securities had been in a continuous unrealized loss position as of March 31, 2022 and 2021.

 

		Less Than 12 Months								12 Months or Greater								Total
		Estimated Fair Value				Gross Unrealized Holding Losses				Estimated Fair Value				Gross Unrealized Holding Losses				Estimated Fair Value				Gross Unrealized Holding Losses
As of March 31, 2022
Corporate bonds		$	6,306,750			$	(23,727	)		$	9,738,338			$	(613,578	)		$	16,045,088			$	(637,305	)
Total		$	6,306,750			$	(23,727	)		$	9,738,338			$	(613,578	)		$	16,045,088			$	(637,305	)
As of March 31, 2021
Corporate bonds		$	10,322,539			$	(160,674	)		$	-			$	-			$	10,322,539			$	(160,674	)
Total		$	10,322,539			$	(160,674	)		$	-			$	-			$	10,322,539			$	(160,674	)

 

We did not consider any of our available-for-sale securities to be impaired as of March 31, 2022. None of the securities were impaired at acquisition, and subsequent declines in fair value are not attributed to declines in credit quality. When evaluating for impairment we assess indicators that include, but are not limited to, earnings performance, changes in underlying credit ratings, market conditions, bona fide offers to purchase or sell, and ability to hold until maturity. Because we believe it is more likely than not we will recover the cost basis of our investments, we did not consider any of our marketable securities to be impaired as of March 31, 2022.