CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
evaluating whether a tax position has met the more-likely-than-not recognition threshold, the Company should presume that the position would be examined by the appropriate taxing authority that
would have full knowledge of all relevant information. The second step is measurement: A tax position that meets the more-likely-than-not recognition threshold is measured to determine the amount of benefit to recognize in the financial statements.
The tax position is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Differences between tax positions taken in a tax return and amounts recognized in the financial
statements result in (1) a change in a liability for income taxes payable or (2) a change in an income tax refund receivable, a deferred tax asset or a deferred tax liability or both (1) and (2). The Company accrues interest and
penalties on its uncertain tax positions as a component of income tax expense.
Segments For the years ended
December 31, 2011, 2012 and 2013, the Company managed its business under two reportable operating segments, U.S. markets and international markets. See Note 22.
Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of estimates and
assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. The Companys consolidated financial statements
include amounts that are based on managements best estimates and judgments. Actual results could differ from those estimates.
Foreign Currency Translations The assets and liabilities of the Companys foreign subsidiaries are translated into U.S. dollars at current exchange rates as of the balance sheet date,
and revenues and expenses are translated at average monthly exchange rates. The resulting translation adjustments are recorded in the consolidated balance sheets in accumulated other comprehensive loss. See Note 15 for a summary of the translation
adjustments recorded in accumulated other comprehensive loss for the years ended December 31, 2011, 2012 and 2013. The Company recognizes foreign currency transaction gains and losses when changes in exchange rates impact transactions, other
than intercompany transactions of a long-term investment nature, that have been denominated in a currency other than the functional currency.
Fair Value Measurements According to authoritative guidance, inputs used in fair value measurements fall into three different categories; Level 1, Level 2 and Level 3. Level 1 inputs are
quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. The Company has interest rate swap agreements and investments in marketable securities that are adjusted to fair
value on a recurring basis (quarterly). With respect to its interest rate swap agreements, the Company uses the income approach to determine the fair value of its interest rate swap agreements and under this approach, the Company uses projected
future interest rates as provided by the counterparties to the interest rate swap agreements and the fixed rates that the Company is obligated to pay under these agreements. Therefore, the Companys fair value measurements for its interest rate
swaps use significant unobservable inputs, which fall in Level 3. With respect to its investments in marketable securities, the Company uses quoted market prices, which fall under Level 1 of the hierarchy. There were no changes in valuation
techniques during the period and no transfers in or out of Level 1, Level 2 or Level 3 during the year ended December 31, 2013. See Note 13 for further discussion of the Companys interest rate swap agreements and Note 14 for further
discussion of the Companys fair value measurements. The Company also uses fair value measurements on a nonrecurring basis, primarily in the impairment evaluations for goodwill, intangible assets and other long-lived assets. See Goodwill and
Other Intangible Assets and Theatre Properties and Equipment included above for discussion of such fair value measurements.