Company: LGIH
Filing Date: 2025-02-26
Form Type: 10-K
Source: 0001580670-25-000016
Chunk: 274

Company: LGI Homes, Inc.
Filing Date: 2025-02-26
Form: 10-K
Item: Item 1
Chunk 274
---
 an entity’s principal market, if any. The principal market is the market in which the reporting entity would sell the asset or transfer the liability with the most significant volume and level of activity, regardless of whether it is the market in which the entity will ultimately transact for a particular asset or liability or if a different market is potentially more advantageous. Accordingly, this exit price concept may result in a fair value that differs from the transaction price or market price of the asset or liability.

68

ASC 820 provides a framework for measuring fair value under GAAP, expands disclosures about fair value measurements, and establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of the fair value hierarchy are summarized as follows:Level 1 - Fair value is based on quoted prices in active markets for identical assets or liabilities.Level 2 - Fair value is determined using significant observable inputs, generally either quoted prices in active markets for                similar assets or liabilities, or quoted prices in markets that are not active.Level 3 - Fair value is determined using one or more significant inputs that are unobservable in active markets at the                 measurement date, such as a pricing model, discounted cash flow, or similar technique.We utilize fair value measurements to account for certain items and account balances within our consolidated financial statements. Fair value measurements may also be utilized on a nonrecurring basis, such as for the impairment of long-lived assets. The fair value of financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and certain accrued liabilities, approximate their carrying amounts due to the short-term nature of these instruments. As of December 31, 2024, the Credit Agreement’s carrying value approximates market value since it has a floating interest rate, which increases or decreases with market interest rates and our leverage ratio.In order to determine the fair value of each of the 2028 Senior Notes, the 2029 Senior Notes and the 2032 Senior Notes, the future contractual cash flows are discounted at our estimate of current market rates of interest, which were determined based upon the average interest rates of similar senior notes within the homebuilding industry (Level 2 measurement).The following table below shows the level and measurement of liabilities at December 31, 2024 and 2023 (in thousands):December 31, 2024December 31, 2023Fair Value HierarchyCarrying ValueEstimated Fair ValueCarrying ValueEstimated Fair Value202