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Fair Value of Financial Instruments

12 Months Ended

Sep. 30, 2020

6. Fair Value of Financial Instruments

The Company’s financial instruments generally included cash and cash equivalents, an investment in debt security, a foreign currency forward contract, trade and financing receivables and accounts payable. Due to the short-term maturities of cash and cash equivalents, trade and financing receivables and accounts payable, the carrying amounts approximate fair value on the respective balance sheet dates. The valuation technique used to measure the fair value of the contingent consideration and investment in debt security was derived from models utilizing market observable inputs.

The Company measures its contingent consideration and foreign currency forward contracts at fair value on a recurring basis.

The following tables present the fair value of the Company’s contingent consideration and foreign currency forward contract by valuation hierarchy and input (in thousands):

AS OF SEPTEMBER 30, 2020

Quoted Prices

in Active

Markets for

Identical Assets

(Level 1)

Significant Other

Observable

(Level 2)

Significant

Unobservable

(Level 3)

Totals

Contingent consideration

—

(10,962

)

(10,962

)

	AS OF SEPTEMBER 30, 2019
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable (Level 2)			Significant Unobservable (Level 3)			Totals
Contingent consideration	$	—	$	—		$	(9,940	)	$	(9,940	)
Foreign currency forward contract		—		(4	)		—			(4	)
Total	$	—	$	(4	)	$	(9,940	)	$	(9,944	)

Assets and Liabilities Measured on a Nonrecurring Basis

The measurements utilized to determine the implied fair value of the Company’s long-lived assets as of September 30, 2020 represented significant unobservable inputs (Level 3).

The following table summarizes changes in the fair value of the Company’s Level 3 financial instruments for the fiscal years ended September 30, 2019 and 2020:

Balance at October 1, 2018	$	7,713
Business acquisition		4,342
Fair value adjustments		(2,115	)
Balance at September 30, 2019		9,940
Fair value adjustments		1,100
Payment of contingent consideration		(78	)
Balance at September 30, 2020	$	10,962

Adjustments to the fair value of the contingent consideration are based on Monte Carlo simulations utilizing inputs which include market comparable information and management assessments regarding potential future scenarios. The Company believes its estimates and assumptions are reasonable, however, there is significant judgement involved.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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