Fair Value Measurements

12 Months Ended

Dec. 31, 2015

Fair Value Measurements

Fair Value Measurements

5. Fair Value Measurements

        Assets and liabilities subject to fair value measurements are required to be disclosed within a fair value hierarchy. The fair value hierarchy ranks the quality and reliability of inputs used to determine fair value. Accordingly, assets and liabilities carried at, or permitted to be carried at, fair value are classified within the fair value hierarchy in one of the following categories based on the lowest level input that is significant in measuring fair value:

Level 1—Fair value is determined by using unadjusted quoted prices that are available in active markets for identical assets and liabilities.

Level 2—Fair value is determined by using inputs other than Level 1 quoted prices that are directly or indirectly observable. Inputs can include quoted prices for similar assets and liabilities in active markets or quoted prices for identical assets and liabilities in inactive markets. Related inputs can also include those used in valuation or other pricing models such as interest rates and yield curves that can be corroborated by observable market data.

Level 3—Fair value is determined by using inputs that are unobservable and not corroborated by market data. Use of these inputs involves significant and subjective judgment.

        We account for certain assets and liabilities at fair value and rank these assets within a fair value hierarchy (Level 1, Level 2 or Level 3). Our other current assets and our other current liabilities have fair values that approximate their carrying values. Assets and liabilities subject to fair value measurements are as follows (in thousands):

	As of December 31, 2015
	Level 1		Level 2		Level 3		Balance
Assets
Money market funds(1)	$	496,434	$	—	$	—	$	496,434
Federally-sponsored and corporate debt securities(2)		—		159,830		—		159,830
Total assets	$	496,434	$	159,830	$	—	$	656,264
Liabilities
Convertible notes due 2016(3)	$	15,998	$	—	$	—	$	15,998
Contingent consideration(4)		—		—		9,400		9,400
Total liabilities	$	15,998	$	—	$	9,400	$	25,398

	As of December 31, 2014
	Level 1		Level 2		Level 3		Balance
Assets
Money market funds(1)	$	298,416	$	—	$	—	$	298,416
Federally-sponsored and corporate debt securities(2)		—		420,731		—		420,731
Total assets	$	298,416	$	420,731	$	—	$	719,147
Liabilities
Convertible notes due 2016(3)	$	388,153	$	—	$	—	$	388,153
Contingent consideration(4)		—		—		11,502		11,502
Total liabilities	$	388,153	$	—	$	11,502	$	399,655

(1)	Included in cash and cash equivalents on the accompanying consolidated balance sheets.
(2)	Included in current and non-current marketable investments on the accompanying consolidated balance sheets. The fair value of these securities is principally measured or corroborated by trade data for identical securities in which related trading activity is not sufficiently frequent to be considered a Level 1 input or comparable securities that are more actively traded. See also Note 4—Investments—Marketable Investments—Held-to-Maturity Investments to these consolidated financial statements.
(3)	Included in convertible notes on the accompanying consolidated balance sheets. The fair value of our Convertible Notes is estimated using Level 1 observable inputs since our Convertible Notes are trading with sufficient frequency such that we believe related pricing can be used as the primary basis for measuring their fair value. As of December 31, 2015 and December 31, 2014, the fair value of the Convertible Notes was substantially higher than their book value. This was primarily due to the excess conversion value of the notes compared to the notes' par value, and the fact that any such excess would be paid in shares of our common stock.
(4)	Included in other liabilities on the accompanying consolidated balance sheets. The fair value of contingent consideration has been estimated using probability weighted discounted cash flow models (DCF). The DCF incorporates Level 3 inputs including estimated discount rates that we believe market participants would consider relevant in pricing and the projected timing and amount of cash flows, which are estimated and developed, in part, based on the requirements specific to each acquisition agreement. We analyze and evaluate these fair value measurements quarterly to determine whether valuation inputs continue to be relevant and appropriate or whether current period developments warrant adjustments to valuation inputs and related measurements.