Fair Value Measurements

9 Months Ended

Sep. 30, 2018

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs.

The three levels of inputs used to measure fair value are as follows:

• Level 1 – Quoted prices in active markets for identical assets and liabilities.

• Level 2 – Quoted prices in active markets for similar assets and liabilities, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

• Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

The following tables provide a summary of the fair value measurements at September 30, 2018, and December 31, 2017, for each major category of assets and liabilities measured at fair value on a recurring basis:

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total
Balance at September 30, 2018
U.S. non-qualified deferred compensation plan	$	21,013	$	—		$	—		$	21,013
Assets designated for retirement and pension plans	—		17,965			—			17,965
Pension benefit obligation	—		(23,089		)	—			(23,089		)
Acquisition earnout accruals	—		—			(10,490		)	(10,490		)
	$	21,013	$	(5,124	)	$	(10,490	)	$	5,399

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total
Balance at December 31, 2017
U.S. non-qualified deferred compensation plan	$	21,319	$	—		$	—		$	21,319
Assets designated for retirement and pension plans	—		18,590			—			18,590
Pension benefit obligation	—		(23,886		)	—			(23,886		)
Acquisition earnout accruals	—		—			(7,213		)	(7,213		)
	$	21,319	$	(5,296	)	$	(7,213	)	$	8,810

The Level 2 assets above are reinsurance contracts fair valued in accordance with BaFin - German Federal Financial Supervisory Authority guidelines, which utilize observable inputs including mortality tables and discount rates. The Level 3 liabilities include accruals for future earnout payments related to prior acquisitions, the values of which are determined based on discounted cash flow models. The Company considers the recorded value of its financial assets and liabilities, which consist primarily of cash and cash equivalents, accounts receivable, and accounts payable, to approximate the fair value of the respective assets and liabilities at September 30, 2018, and December 31, 2017, based upon the short-term nature of the assets and liabilities.

The following table provides a reconciliation of the beginning and ending balance of Level 3 assets and liabilities for the nine months ended September 30, 2018:

	Acquisition Earnout Accruals
Balance at December 31, 2017	$	(7,213	)
Acquisition earnouts (Note 8)	(3,054		)
Earnout accretion	(963		)
Philosophy IB earnout adjustment (1)	436
Foreign currency translation	304
Balance at September 30, 2018	$	(10,490	)

(1) During the three months ended September 30, 2018, the Company determined that the software and consulting revenue targets for the period from September 2017 to August 2018, or second installment, would not be achieved. As such, the Company reduced the second installment earnout accrual by $0.4 million.