Note 8. Fair Value Measurement
The Company utilizes the accounting guidance for fair value measurements and discloses for all financial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis during the reporting period.
The fair value is an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability. ASC 820, "Fair Value Measurements and Disclosures", establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers are defined as follows:
Level 1 - Observable inputs such as quoted market prices in active markets.
Level 2 - Inputs other then quoted prices in active markets that are either directly or indirectly observable.
Level 3 - Unobservable inputs about which little or no market data exists, therefore requiring an entity to develop its own assumptions.
As of October 31, 2012, the Company held certain financial instruments that are measured at cost on a recurring basis. These consisted of a note receivable from ARG of $75,000 and non-marketable securities of $75,000. The cost of the non-marketable securities and note receivable from ARG approximate their fair value and are categorized as Level 3.