Fair Value Measurements

9 Months Ended

Sep. 30, 2016

Fair Value Measurements

Fair Value Measurements

4.Fair Value Measurements

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 current liabilities have fair values that approximate their carrying values. Assets and liabilities subject to fair value measurements are as follows (in millions):

	As of September 30, 2016
	Level 1		Level 2		Level 3		Balance
Assets
Money market funds(1)	$	662.3	$	—	$	—	$	662.3
Federally-sponsored and corporate debt securities(2)	—		81.9		—		81.9
Total assets	$	662.3	$	81.9	$	—	$	744.2
Liabilities
Contingent consideration(4)	—		—		10.3		10.3
Total liabilities	$	—	$	—	$	10.3	$	10.3

	As of December 31, 2015
	Level 1		Level 2		Level 3		Balance
Assets
Money market funds(1)	$	496.4	$	—	$	—	$	496.4
Federally-sponsored and corporate debt securities(2)	—		159.8		—		159.8
Total assets	$	496.4	$	159.8	$	—	$	656.2
Liabilities
Convertible notes(3)	$	16.0	$	—	$	—	$	16.0
Contingent consideration(4)	—		—		9.4		9.4
Total liabilities	$	16.0	$	—	$	9.4	$	25.4

(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.

(3) Included in other current liabilities on the accompanying consolidated balance sheets. The Convertible Notes matured on September 15, 2016. The carrying value of the Convertible Notes as of December 31, 2015 was $5.4 million. The fair value of our Convertible Notes was estimated using Level 1 observable inputs since our Convertible Notes were trading with sufficient frequency such that we believed related pricing could be used as the primary basis for measuring their fair value. As of December 31, 2015, 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 DCFs incorporate 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.

Fair Value of Financial Instruments

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate fair value because of their short maturities. The fair values of our marketable investments and our Convertible Notes are reported above within the fair value hierarchy. Refer to Note 3—Investments—Marketable Investments and Note 8—Debt—Convertible Notes.