Fair Value Measurements

6 Months Ended

Jun. 30, 2017

In accordance with ASC 820, Fair Value Measurements and Disclosures ("ASC 820"), certain of the Company's assets and liabilities, which are carried at fair value, are classified in one of the following three categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market-based inputs, other than Level 1, or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data and reflect the Company’s own assumptions.

The fair value hierarchy of the Company’s assets and liabilities carried at fair value and measured on a recurring basis was as follows (in thousands):



			Fair value measurements at the reporting date using
	June 30, 2017		Quoted prices in active markets using identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Cash equivalents: money market and other funds	$	10,799	$	—	$	10,799	$	—
Total assets at fair value	$	10,799	$	—	$	10,799	$	—
Acquisition-related contingent consideration liability	$	2,599	$	—	$	—	$	2,599
Total liabilities at fair value	$	2,599	$	—	$	—	$	2,599



			Fair value measurements at the reporting date using
	December 31, 2016		Quoted prices in active markets using identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Cash equivalents:
U.S government securities	$	2,749	$	—	$	2,749	$	—
Money market and other funds	4,090		—		4,090		—
Commercial paper	1,999		—		1,999		—
Taxable municipal bonds	1,301		—		1,301		—
Total cash equivalents	10,139		—		10,139		—
Available-for-sale investments:
Debt securities:
U.S. government securities	2,000		—		2,000		—
Commercial paper	1,998		—		1,998		—
Time deposits	807		—		807		—
Taxable municipal bonds	2,296		—		2,296		—
Total debt securities	7,101		—		7,101		—
Total assets at fair value	$	17,240	$	—	$	17,240	$	—

Acquisition-related contingent consideration liability	$	3,421	$	—	$	—	$	3,421
Total liabilities at fair value	$	3,421	$	—	$	—	$	3,421

A reconciliation of Level 3 items measured at fair value on a recurring basis is as follows (in thousands):



Acquisition-related contingent consideration liability:
Balance as of December 31, 2016	$	3,421
Payment	(946		)
Foreign currency transaction loss	124
Balance as of June 30, 2017	$	2,599

The contingent consideration liability is related to the Company's 2015 acquisition of SimpleTax. The full contractual obligation under the contingent consideration arrangement was accrued during the year ended December 31, 2016. Payments are contingent upon product availability and revenue performance over a three-year period ending December 31, 2018 and are expected to occur annually over that period. The first payment was made in the first quarter of 2017 and classified as a financing activity on the consolidated statements of cash flows. The remaining payments are expected through 2019. The foreign currency transaction loss was included in "Other loss, net" on the consolidated statements of comprehensive income. As of June 30, 2017, $1.3 million of the contingent consideration liability was included in "Accrued expenses and other current liabilities" and $1.3 million in "Other long-term liabilities" on the consolidated balance sheets.

The contractual maturities of the debt securities classified as available-for-sale at December 31, 2016 were less than one year.

The cost and fair value of available-for-sale investments were as follows (in thousands):



	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
Balance as of December 31, 2016	$	7,102	$	—	$	(1	)	$	7,101

The Company had non-recurring Level 3 fair value measurements in 2017 and 2016 related to the redemption and repurchase of its Convertible Senior Notes. See "Note 7: Debt" for details.

- 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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