Fair Value Measurement

12 Months Ended

Dec. 31, 2012

Fair Value Disclosures [Abstract]

Fair Value Measurement

Fair Value Measurement

The valuation hierarchy for disclosure of assets and liabilities reported at fair value prioritizes the inputs for such valuations into three broad levels:

• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

• Level 2: quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument; or

• Level 3: unobservable inputs based on the Company’s own assumptions used to measure assets and liabilities at fair value.

A financial asset's or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

The following tables provide the assets and liabilities carried at fair value and measured on a recurring basis:

				Fair Value Measurements at Reporting Date Using:
(in thousands)	December 31, 2012			Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets
Cash equivalents	$	206,979		$	206,979	$	—		$	—
Short-term investments	$	452		$	—	$	452		$	—
Liabilities
Contingent consideration	$	(6,436	)	$	—	$	—		$	(6,436	)
Deferred compensation	$	(1,394	)	$	—	$	—		$	(1,394	)
Foreign currency future	$	(240	)	$	—	$	(240	)	$	—

				Fair Value Measurements at Reporting Date Using:
(in thousands)	December 31, 2011			Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Cash equivalents	$	182,530		$	181,198	$	1,332	$	—
Short-term investments	$	576		$	—	$	576	$	—
Liabilities
Contingent consideration	$	(9,571	)	$	—	$	—	$	(9,571	)
Deferred compensation	$	(2,073	)	$	—	$	—	$	(2,073	)

The cash equivalents in the preceding tables represent money market mutual funds and time deposits.

The short-term investments in the preceding tables represent deposits held by certain foreign subsidiaries of the Company. The deposits have fixed interest rates with maturity dates ranging from three months to one year. There were no unrealized gains or losses associated with these deposits for the years ended December 31, 2012 and 2011.

In August 2012, the Company entered into a foreign currency futures contract with a third-party U.S. financial institution, which will be settled in July 2013. The purpose of this contract is to mitigate the Company's exposure to foreign exchange risk arising from intercompany receivables from a United Kingdom subsidiary. As of December 31, 2012, the Company's foreign exchange future is in a liability position of $240,000. The foreign exchange future is measured at fair value each reporting period, with gains or losses recognized in other expense in the Company's consolidated statements of income.

On August 1, 2011, the Company completed its acquisition of Apache, a leading simulation software provider for advanced, low-power solutions in the electronics industry. The merger agreement includes a contingent consideration arrangement that requires additional payments of up to $12.0 million to be paid by the Company in equal installments to the Apache stockholders and holders of vested Apache options on each of the first three anniversaries of the closing of the acquisition. To receive these payments, a key member of Apache’s management must remain an employee of ANSYS on each of the first three anniversaries of the acquisition closing date. Management estimated that it was probable that all three payments would be made, and recorded the fair value of the contingent payments as a liability on the date of acquisition. The portion of contingent payments attributable to the key member of Apache management was determined to be deferred compensation, and is accounted for outside of the business combination. The Company paid the first $4.0 million installment for these contingent payments on August 1, 2012. A liability of $1.4 million for deferred compensation was recorded as of December 31, 2012 based on the net present value of the expected remaining payments. The portion of the contingent payments attributable to other shareholders was determined to be contingent purchase price consideration and was estimated to be $6.4 million based on the net present value of the expected remaining payments as of December 31, 2012. The net present value calculations for the deferred compensation and contingent consideration include a significant unobservable input in the assumption that the two remaining payments will be made, and therefore the liabilities were classified as Level 3 in the fair value hierarchy.

The following table presents the changes during the year ended December 31, 2012 in the Company’s Level 3 liabilities for contingent consideration and deferred compensation that are measured at fair value on a recurring basis:

	Fair Value Measurement Using Significant Unobservable Inputs
(in thousands)	Contingent Consideration			Deferred Compensation
Balance as of January 1, 2012	$	9,571		$	2,073
Contingent payments	(3,288		)	(712		)
Interest expense included in earnings	153			33
Balance as of December 31, 2012	$	6,436		$	1,394

The Company had no transfers of amounts between Level 1 or Level 2 fair value measurements during the year ended December 31, 2012.

The carrying values of cash, accounts receivable, accounts payable, accrued expenses, other accrued liabilities and short-term obligations approximate their fair values because of their short-term nature. The carrying value of long-term debt approximates its fair value due to the variable interest rate underlying the Company’s credit facility.