SAE Annual Report 2011 - 42

SAE INTERNATIONAL
Notes to the Financial Statements (Continued) Note 1 - Summary of Significant Accounting Policies (Continued) M. Fair Value Measurements (Continued)

SAE applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement: Level 1 - Quoted prices in active markets for identical assets or liabilities. Level 2 - Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 - Inputs that are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. N. Income Taxes SAE is exempt from Federal income tax under Section 501(c)(3) of the IRC. SAE uses a two-step approach to recognizing and measuring uncertain tax positions accounted for in accordance with the asset and liability method. The first step is to evaluate the tax position for recognition by determining whether evidence indicates that it is more likely than not that a position will be sustained if examined by a taxing authority. The second step is to measure the tax benefit as the largest amount that is 50% likely of being realized upon settlement with a taxing authority. There were no amounts recorded at December 31, 2011 and 2010 related to uncertain tax positions. O. Recent Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board (FASB) issued updated guidance related to fair value measurements. These updates include clarifications regarding existing fair value measurement principles and disclosure requirements. The guidance also addresses items such as the measurement of instruments classified within stockholders’ equity and additional disclosures regarding the valuation processes used by the entity in Level 3 measurements. These updates are effective for interim and annual periods beginning after December 15, 2011. SAE does not expect the implementation of this guidance to have a material impact on its financial statements.

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SAE Annual Report 2011

Table of Contents for the Digital Edition of SAE Annual Report 2011