Company: EHC
Filing Date: 2025-02-28
Form Type: 10-K
Source: 0000785161-25-000009
Chunk: 39

Company: Encompass Health Corp
Filing Date: 2025-02-28
Form: 10-K
Item: Item 16
Chunk 39
---
-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:•Level 1 – Observable inputs such as quoted prices in active markets;•Level 2 – Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and•Level 3 – Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.Assets and liabilities measured at fair value are based on one or more of three valuation techniques. The three valuation techniques are as follows:•Market approach – Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities;•Cost approach – Amount that would be required to replace the service capacity of an asset (i.e., replacement cost); and•Income approach – Techniques to convert future cash flows to a single present amount based on market expectations (including present value techniques, option-pricing models, and lattice models).Our financial instruments consist mainly of cash and cash equivalents, restricted cash, restricted marketable securities, accounts receivable, accounts payable, letters of credit, and long-term debt. The carrying amounts of cash and cash equivalents, restricted cash, accounts receivable, and accounts payable approximate fair value because of the short-term maturity of these instruments. The fair value of our letters of credit is deemed to be the amount of payment guaranteed on our behalf by third-party financial institutions. We determine the fair value of our long-term debt using quoted market prices, when available, or discounted cash flows based on various factors, including maturity schedules, call features, and current market rates.On a recurring basis, we are required to report our restricted marketable securities at fair value. The fair values of our restricted marketable securities are determined based on quoted market prices in active markets or quoted prices, dealer quotations, or alternative pricing sources supported by observable inputs in markets that are not considered to be active.In addition, there are assets and liabilities that are not required to be reported at fair value on a recurring basis. However, these assets may be recorded at fair value as a result of impairment charges or other adjustments made to the carrying value of the applicable assets. The fair value of our property and equipment is determined using discounted cash flows and significant unobservable inputs, unless there is an offer to purchase such assets, which could be the basis for determining fair value. The fair value of our intangible assets, excluding goodwill, is determined using discounted cash flows and significant unobservable inputs. The fair value of our goodwill is determined using discounted projected