corresp
June 22, 2011
BY EDGAR Submission
U.S. Securities and Exchange Commission
Division of Corporate Finance
100 F Street, N.E., Stop 4631
Washington, D.C. 20549
Attention: Tracey McKoy, Staff Accountant
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Forrester Research, Inc.
Form 10-K for the Fiscal Year Ended December 31, 2010
Filed March 14, 2011
File No. 000-21433 |
Ladies and Gentlemen:
On behalf of Forrester Research, Inc. (the Company or Forrester), this letter is in response to
the letter dated June 9, 2011 from Terence OBrien, Accounting Branch Chief, on behalf of the Staff
(the Staff) of the U.S. Securities and Exchange Commission to George F. Colony, Forresters Chief
Executive Officer. The response is keyed to the numbering of the comments and the headings used in
the Staffs letter.
Form 10-K for the Fiscal Year Ended December 31, 2010
Revenue Recognition page 16
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We have read your response to prior comment 1 from our letter dated April 21, 2011. You
state that you allocate the discount on multiple element orders ratably to research and data
products only, since at any point, undelivered advisory and event services can be refunded at
100% of list price. In future filings please disclose your method for accounting for
discounts and your justification for applying the discount to certain elements, rather than
all elements. |
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Response |
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We acknowledge the Staffs comment. In future filings, we will provide more disclosure of our
method for accounting for discounts and our justification for applying the discount to certain
elements, rather than all elements. The disclosure will be consistent with our response to
prior comment 1 from our letter dated May 19, 2011. |
Note 4 Marketable Investments page F-17
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We have read your response to prior comment 4 from our letter dated April 21, 2011.
We note that you concluded that the nature of the estimates and assumptions did not rise
to the level requiring disclosure based on the guidance in Section 501.14 of the Financial
Reporting Codification because (1) your non-ARS investments consist solely of high credit
quality corporate and municipal bonds, with a weighted average credit rating of double A (2)
these bonds are straightforward instruments that do not include difficult to value features
(3) the majority of your investments are in large capital corporate notes and (4) neither the
Company nor your investment managers modify the pricing received from the pricing services. It
appears that factors listed in 1-3 are your basis for utilizing pricing information that
consists of one price per instrument for your fair value determination under ASC 820-10-35 and
your statement that you have not adjusted prices obtained from your investment managers for
your non-ARS portfolio, which is relevant information for an investor. We continue to believe
clear and transparent MD&A disclosure regarding your application of ASC 820, including the
underlying estimates and assumptions would be useful to an investors understanding of how
management fair values the Level 2 assets, which represents 38% and 27% of current and
non-current assets, respectively, as of December 31, 2010. We urge you to disclose the
following; |
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That you utilize the pricing information obtained from your investment managers,
which consists of one price per instrument, for your fair value determination under ASC
820-10-35. |
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That you do not obtain pricing or quotes from brokers directly and historically you
have not adjusted prices obtained from your investment managers for your non-ARS
portfolio. |
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That you verify the pricing information obtained from your investment managers by
obtaining both an understanding of the pricing methodology and inputs utilized by the
pricing services to value your particular investments and an understanding of the
controls and procedures utilized by your investment managers to both ensure the
accurate recording and to validate the pricing of your investments obtained from the
pricing services on an annual basis. |
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Please show us your proposed future disclosure. |
Response
The following represents an update of our critical accounting policy that was included in our
Form 10-K for the year ended December 31, 2010. We will include the updated disclosure in our
Form 10-Q for the quarterly period ending June 30, 2011. For convenience, we have underlined
the additional disclosure and have shown deleted text as strike-through. |
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Valuation and Impairment of Marketable Investments. Our investment portfolio may at any
time contain investments in U.S. Treasury and U.S. government agency securities, taxable
and/or tax exempt municipal notes (some of which may have an auction reset feature),
corporate notes and bonds, commercial paper and money market funds. The assessment of the
fair value of certain of the debt securities (e.g. those containing an auction reset
feature) can be difficult and subjective due in part to limited trading activity of
certain of these debt instruments. |
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In accordance with the accounting standard for fair value measurements, we have
classified our marketable investments as Level 1, 2 or 3 within the fair value hierarchy.
Fair values determined by Level 1 inputs utilize quoted prices in active markets for
identical assets. Fair values determined by Level 2 inputs utilize data points that are
observable, either directly or indirectly, such as quoted prices for similar assets, quoted
prices in markets that are not active or other inputs that are observable or can be
corroborated by observable market data for substantially the full term of the assets. Fair
values determined by Level 3 inputs utilize unobservable data points. |
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As of December 31, 2010 June 30, 2011, we held municipal bonds with a fair value of
$X.X million ($11.0 million at par value) with an auction reset feature (auction rate
securities or ARS). The fair value of the ARS was determined by utilizing a discounted
cash flow approach, which is considered a Level 3 valuation. The assumptions used in
preparing the discounted cash flow model include estimates, based on data available at
December 31, 2010 June 30, 2011, of interest rates, timing and amount of cash flows,
credit and liquidity premiums, and expected holding periods of the ARS. The assumptions used
in valuing the ARS are volatile and subject to change as the underlying sources of these
assumptions and market conditions change, which may lead us in the future to record
additional losses for these securities. We classified these ARS as
available-for-sale securities and determined that the losses were not considered
other-than-temporary and were not due to credit losses. Accordingly, changes in the market
value of the ARS have been recorded in other comprehensive loss in the Consolidated Balance
Sheets during for the years ended December 31, 2010 and
2009 three and six month
periods ended June 30, 2011 and 2010. If the market conditions deteriorate further, we
may be required to record unrealized losses in other comprehensive loss or impairment
charges within the Consolidated Statements of Income. We may not be able to liquidate these
investments unless the issuer calls the security, a successful auction occurs, a buyer is
found outside of the auction process, or the security matures. |
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At June 30, 2011, we held $XXX.X million of marketable investments, excluding ARS, that
were valued using Level 2 inputs. Level 2 investments are initially valued at the
transaction price and subsequently |
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valued, at the end of each reporting period, by our investment managers utilizing third
party pricing services, which consists of one price per instrument. We do not obtain
pricing or quotes from brokers directly and historically we have not adjusted prices
obtained from our investment managers for our non-ARS portfolio. We verify the pricing
information obtained from our investment managers by obtaining an understanding of the
pricing methodology and inputs utilized by the pricing services to value our particular
investments, as well as an understanding of the controls and procedures utilized by our
investment managers to both ensure the accurate recording and to validate the pricing of our
investments obtained from the pricing services on an annual basis. Our marketable
investments consist solely of high credit quality corporate and municipal bonds with a
weighted average credit rating AA and do not include difficult to value features. The
majority of our marketable investments are in large corporate notes. |
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We conduct periodic reviews to identify and evaluate each investment that has an unrealized
loss, in accordance with the meaning of other-than-temporary impairment and its application
to certain investments, as required under current accounting standards. An unrealized loss
exists when the current fair value of an individual security is less than its amortized cost
basis. Unrealized losses on available-for-sale securities that are determined to be
temporary, and not related to credit loss, are recorded, net of tax, in accumulated other
comprehensive loss. |
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For available-for-sale debt securities with unrealized losses, management performs an
analysis to assess whether we intend to sell or whether we would more likely than not be
required to sell the security before the expected recovery of the amortized cost basis.
Where we intend to sell a security, or may be required to do so, the securitys decline in
fair value would be deemed to be other-than-temporary and the full amount of the unrealized
loss would be recorded within gains (losses) on investments, net in the Consolidated
Statements of Income. Regardless of our intent to sell a security, we perform additional
analysis on all securities with unrealized losses to evaluate losses associated with the
creditworthiness of the security. Credit losses are identified where we do not expect to
receive cash flows sufficient to recover the amortized cost basis of a security and are
recorded within gains (losses) on investments, net in the Consolidated Statements of Income. |
The Company acknowledges that:
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the Company is responsible for the adequacy and accuracy of the disclosure in the
filing; |
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Staff comments or changes to disclosure in response to staff comments do not
foreclose the Commission from taking any action with respect to the filing; and |
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the Company may not assert staff comments as a defense in any proceeding initiated
by the Commission or any person under the federal securities laws of the United States. |
If you require additional information, please telephone either the undersigned at 617-613-6181,
Scott Chouinard, Chief Accounting Officer, at 617-613-6060, or Gail Mann, Chief Legal Officer, at
617-613-6078.
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Sincerely,
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/s/ Michael A. Doyle
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Chief Financial Officer and Treasurer |
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George F. Colony
Gail S. Mann |
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